DoJ file objection in TelexFree bankruptcy application
Yesterday saw the continuation of the first day hearings in TelexFree’s bankruptcy application. Barring any additional information being made public, it looks like the hearing saw three significant events take place:
- The DoJ have formally objected to KCC’s fees and compensation
- Some of KCC’s actions have been “troubling” to the Judge presiding over the application
- A “final hearing” date has been set for May 2nd, with no relief being granted in the interim
As demand for reliable updates on the case surges, below you’ll find my break down of the April 21st bankruptcy hearing and what’s next in the road ahead.
The objection to KCC’s fees and compensation
Revealed in documents filed by the Department of Justice is that Kurtzman Carson Consultants LLC (KCC), the firm handling TelexFree’s bankruptcy application, were paid a $350,000 retainer.
That payment, along with the application that the employment of KCC by TelexFree (which has to be acknowledged by the court first), is now being contested by the DoJ.
The objection is rooted not so much in that TelexFree shouldn’t be able to employ KCC to represent them in the application, but rather the manner in which they are going about it. Specifically, the DoJ have taken objection to the ‘terms and conditions set forth in the engagement agreement‘ between TelexFree and KCC.
On April 18, 2014, Debtors filed an Amended Declaration of Evan J. Gershbein that attached KCC’s fee structure.
Portions of the copy of the Engagement Agreement that was filed with the Gershbein Declaration and Amended Gershbein Declaration are illegible, including the section concerning limitations on the liability of and indemnification of KCC.
Quoting the declaration, this is the paragraph the DoJ have taken objection to:
Debtor (TelexFree) respectfully submits that KCC’s rates for its services in connection with the notice, claims processing, and solicitation services are competitive and comparable to the rates charged by their competitors for similar services.
In addition to the $350,000 retainer paid to KCC, the DoJ object to the nature of the relationship between KCC and TelexFree, as described in the declaration. One would assume it to be a contractor and/or employee/employer relationship, but that is not the case:
The Engagement Agreement also provides that KCC and the Debtors’ are independent contractors of each and that no employment relationship exists because of the Engagement Agreement.
Independent contractors of each other? Uh, what?
I can understand KCC being a contractor of TelexFree, but how is the same true in reverse?
The Engagement Agreement provides that KCC may open accounts as an agent
for the Debtors:
“At the Company’s request, KCC shall be authorized to establish accounts with financial institutions in the name of and as agent for the Company.”
Wait, hold up! So TelexFree go and pay KCC a huge-ass retainer, and then are trying to get an agreement passed in bankruptcy court that would permit KCC to open bank accounts for them?
Just how dodgy can these get?! And keep in mind all of this was filed on April 18th, just two days after a Judge in Massachusetts granted the SEC a temporary restraining order freezing TelexFree’s assets.
“Oh I know, we’ll just get our bankruptcy application guys to open new accounts for us, sweet!”
Expanding the scope of the agreement, should any further action be taken against TelexFree, the objection goes on to stipulate
The Application provides that Debtors and KCC may agree to expand the scope of KCC’s services with a corresponding increase in fees. The Application does not provide for Court approval of any change to the scope of KCC’s services.
So basically, it’s an open-ended agreement that seeks to enable TelexFree management to run the financials of the company through KCC as a proxy. Oh and nothing suss, but the money TelexFree pay KCC under this agreement should also be hush-hush and of no concern to the court:
The Debtors (TelexFree) respectfully submit that the fees and expenses that would be incurred by KCC under the Engagement Agreement would be
administrative in nature and, therefore, should not be subject to standard fee application procedures of professionals
TelexFree basically want to use KCC as an unregulated bank to circumvent the restrictions on the business as a result of the SEC complaint against them. That’s how TelexFree are “contractors” of KCC.
At this point you’re probably wondering why KCC would put themselves in such a position. Here’s the apparent answer:
The Engagement Agreement also provides that KCC shall be entitled to attorney’s fees, court costs and other expenses if it prevails in any legal action to enforce the Engagement Agreement.
In a nutshell, there’s an open check waiting for KCC should any of this nonsense actually get approved by the court.
The arguments the DoJ present are largely based on what first day orders in bankruptcy cases are supposed to be restricted to:
First, the requested relief should be limited to that which is minimally necessary to maintain the existence of the debtor, until such time as the debtor can affect appropriate notice to creditors and parties in interest. In particular, a first day order should avoid substantive rulings that irrevocably determine the rights of parties.
Second, first day orders must maintain a level of clarity and simplicity sufficient to allow reasonable confidence that an order will effect no unanticipated or untoward consequences.
Third, first day orders are not a device to change the procedural and substantive rights that the Bankruptcy Code and Rules have established.
Fourth, no first day order should violate or disregard the substantive rights of parties, in ways not expressly authorized by the Bankruptcy Code.
Points one and two are of particular interest here, as KCC being used as an unregulated proxy bank by TelexFree is obviously beyond the scope of what is “minimally necessary to maintain the existence of the debtor”, and the open-ended nature of the agreement between the two companies will undoubtedly have “unanticipated or untoward consequences” later on down the track.
The DoJ close out their objection by requesting that the bankruptcy court formally “take notice” of the SEC complaint recently lodged against TelexFree.
Because Application seeks Court approval to employ KCC pursuant to, inter alia, the terms of the Engagement Agreement, the Application should not be approved until Debtors file a legible copy of the Engagement Agreement.
Although the Application asserts that the KCC’s Fee Structure is competitive and comparable to the rates charged by their competitors for similar services, neither of the Gershbein declarations provide evidence to support this assertion.
The Application, including the Fee Structure, should not be approved until Debtors provide evidence that the proposed Fee Structure is competitive and comparable to the rates charged by KCC’s competitors for similar services.
In addition, the Application provides that Debtors and KCC may agree to expand the scope of KCC’s services with a corresponding increase in fees. However, neither the Application, supporting declarations, Engagement Agreement or Fee Structure provide an explanation of how the Fee Structure will increase if KCC’s scope of services are expanded.
The Application should not be approved until Debtors provide this information.
The list of objections goes on, primarily focusing on ensuring that KCC are only paid for their services in facilitating TelexFree’s bankruptcy application, and ensuring that they can’t do a runner from the case (meaning they will require court approval to withdraw as TelexFree’s agent in the matter).
Otherwise you have the prospect of TelexFree dumping large amounts of money with KCC (say the $300 million nobody seems to know the whereabouts of), KCC depositing this into secret bank accounts they set up for TelexFree, handing the keys to the bank accounts over to TelexFree and then withdrawing from the case.
To that end,
Emergency motions allowing the Debtors to make payments or utilize funds were continued by the Court and/or made subject to any temporary restraining order currently enjoining Debtors in other actions, including the S.E.C. Action.
The Application should be denied because it allows Debtors to use KCC as an agent to establish financial accounts for the Debtors.
Seeking to cover its bases, the DoJ also offers up proposed compromises should TelexFree’s application be miraculously granted:
The Application seeks permission for the Debtors to compensate KCC on a monthly basis without KCC being subject to the standard fee application procedures of professionals. However, the Court has already expressed both a concern regarding actions KCC has taken in these cases and a desire to review KCC’s fees.
Accordingly, if the Court grants the Application, KCC should be required to provide interim invoices to any official committee appointed in these cases and to the United States Trustee, to file a final application for approval of fees, and hold in trust twenty percent of its fees so that any fees ordered by the Court to be
disgorged are readily available.
In the event that KCC must seek employment under 11 U.S.C. § 327 for duties outside the context of 28 U.S.C. § 156(c), Section XI of the Engagement Agreement, which provides that KCC is an independent contractor that is not employed by the Debtors, will be inconsistent with KCC’s fiduciary duties as a retained professional.
Therefore Section XI should be removed from the Engagement Agreement or the Application should make clear that this section of the Engagement Agreement shall not apply if KCC ultimately must be employed pursuant to 11 U.S.C. § 327.
The retainer amount obtained by KCC should be drawn down and not be held as an evergreen retainer.
An “evergreen retainer” is an initial retainer ($350,000 in this case), that is replenished by the client. Basically the concern here is that TelexFree could use the retainer to launder/hide money to secret bank accounts KCC set up for them. KCC deposit money in the retainer into the accounts, TelexFree top up the account, KCC deposit that money, TelexFree top it up again etc., etc.
And to that end:
The section of the Engagement Agreement that grants KCC attorney’s fees and costs should be stricken. KCC’s compensation should be limited to the reasonable fees and costs for the services it performs.
Judge finds KCC’s actions “troubling”
Despite the nonsensical claims about five judges agreeing TelexFree was not a pyramid scheme (among other things), and that everything favourable towards TelexFree during last Thursday’s initial first day orders hearing, the reality differs significantly.
In addition to no relief being granted at this point in time, the declaration of Edward McDonald (DoJ trial attorney), filed on April 21st, notes
Certain (parts) of the First Day Motions were continued to May 2nd 2014, without any relief being granted, including
-the motion to honor credit card transactions
-the motion concerning adequate protection to utilities and
-the motion concerning the Debtor’s cash management system
In addition the court authorized but did not direct the Debtors (TelexFree) to pay certain taxes and wages subject to all other orders related to the assets of the Debtors, including, without limitation, a temporary restraining order in pending proceedings filed by the SEC.
That pending temporary restraining order has of course since been granted.
Used in support of the DoJ’s argument’s against KCC’s proposed fees and compensation, McDonald goes on to share an excerpt from the Judge discussing some of KCC’s actions thus far:
KCC jumped the gun a little here counsel. They set up a website and issued a press-release as if I had already entered an order authorizing them to do so. That’s troubling to me.
And I will tell you now just for the sake of making it clear for later, to the extent that those actions were taken before they were authorized to do so, if they seek compensation, that will be an issue for them at the time.
I’m not entirely sure what specific compensation the Judge is referring to, but it’s clear the shenanigans KCC have pulled are going to potentially come back to bite them in the ass.
And rightly so, that KCC press-release spawned a bunch of garbage YouTube videos and Portuguese/Spanish blog posts declaring victory in bankruptcy court, before the First Day hearings had even taken place.
Final hearing set for May 2nd
Looking forward, McDonald’s declaration observes that
A final hearing on the motion for joint administration is set for May 2nd, 2014.
In addition to this, as part of the ongoing SEC complaint, a permanent injunction against TelexFree is also expected to be granted on Thursday the 24th.
May 2nd gives all parties involved in the case twelve days to put forth their arguments. On TelexFree’s side that’s likely to involve a lot of backpedaling and explanation, and on the DoJ side of things I expect we’ll see more dodginess exposed and brought to light.
Boxes of evidence have been collected from TelexFree’s office following a raid, with regulators likely to have a field day in court come May 2nd.
I’m of course not an attorney, bankruptcy or otherwise, but I can’t see this application being granted. At the very least it’s an abuse of process in an attempt to use the bankruptcy court to negate Ponzi ROI liabilities incurred via the running of a Ponzi scheme for nearly two years.
At worst, well in addition to the DoJ’s detailing of the extreme shiftiness between KCC and TelexFree’s proposed agreement, there’s all the other crap the company has pulled over the last week.
That $37 million Joseph Craft was caught trying to smuggle out of TelexFree’s office, what’s the bet that was destined for secret offshore bank accounts set up by KCC?
The press-release put out by TelexFree LLC accusing the SEC and Homeland Security of lying? How’s that going to play out in court?
A hint of what’s to come and the court’s non-tolerance of it is evident in the Judge’s remarks about KCC’s premature press-release above. I’ll leave you for now by suggesting to expect more of that come May the 2nd.
Alot more. Piece by piece, this next part of the saga is where get to watch TelexFree’s intricate web of lies, deceit and attempts at judicial and financial manipulation come undone.
Footnote: Whilst I appreciate a lot of investors have lost money in TelexFree and are now panicking, BehindMLM is not the place to ask for investment advice – including how to go about recovering invested funds, how much might recovered and/or requests for individual financial advice.
Until a court sets up a mechanism for TelexFree investors to submit claims for their investments, we know as much as you do. As such, any comments asking about money being returned or how to go about getting a refund will be marked as spam.
Variations of this question and general investor concerns have already been addressed numerous times in previous articles, so I’d advise reading the comments on some of the more recent BehindMLM TelexFree articles for (preliminary and unofficial) answers.
Ponzi Tracker also has some additional information up which investors might find useful.
Concerning the footnote, I saw this Moses Apsan guy advice people who lost money to file a “Proof of Claim” with the bankruptcy court in order to get money back. His advice is here: http://news.jornal.us/article-681065.-Will-the-US-Bankruptcy-Laws-Protect-TelexFREE-.html
KCC website on TelexFree gives a link for a Proof of Claim form.
KCC are getting paid by TelexFree, to file a bankruptcy application that seeks to nullify all ROIs owed to affiliates.
You’re really going to trust anything they come up with?
Until a court orders some form of recovery procedural process be put together, I wouldn’t be sending anything to TelexFree or their consultants. Not withstanding any claims on TelexFree’s bankruptcy claims are a waste of time, seeing as there’s next to no chance it’s going to go through.
The regulators are all over it.
That’s right. I wouldn’t get the Proof of Claim form from KCC or contact them in any way.
Indeed, Apsan gives the download link for a sample form, which is not from KCC website. He also recommends those who lost money to file it directly with the Bankruptcy Court, in the district of Nevada. Not to send it to TelexFree or KCC or whoever is in their gang. He even gives the Court address.
All that is in the comments section of the page I gave in my last comment here.
I don’t know this Apsan guy, and I don’t know if his advice is really the best thing to do. It just came to my mind when I read the footnote here.
This thing is getting complicated and hard to follow. It seems like playing a chess game here. I am not familiar with zeekreward, but were they this smart?
I grew up In NYC, and I can tell you that he is a famous immigration lawyer. Anyway, you can google his name and you will know who he is.
Zeek Rewards didn’t put up a fight, Burks (CEO and owner) did not contest the SEC charges against him and Zeek (Rex Ventures Group).
Part of the problem with TelexFree I think is that they’ve been getting away with so much crap in Brazil’s courts the past year. The consequences thus far have been two punitive fines totalling less than $20,000 from memory.
They’ve lied about so much there (insurance contracts, voip, revenues, motives of the prosecutors, the relationship between TelexFree and Ympactus etc. etc.), yet Carlos Costa is still running with his YouTube camera crew.
I think Wanzeler and Merrill are figuring they pull the same sort of crap without much of a consequence in the US too. Sort of like “hey we’ll try to use the bankruptcy court to get out of this, and if that doesn’t work then we’ll address the SEC complaint”.
I don’t think they quite appreciate how this is probably going to turn out, let alone any future repercussions.
I mean hell, you only have to look at the recent “everybody is lying” press-release to figure out these guys think they are the Mexican cartel running things in the wildwest or some such.
I have it on good authority Labriola truly sees himself as an untouchable internet marketing rockstar, and I imagine this thinking is wrought throughout TelexFree management.
These guys will not imprisoned not?
Meanwhile while I’m well aware TelexFree’s case is taking away from whatever else is going on at the MLM industry at the moment, I’ll keep trying to cover as much of it as I can.
A Ponzi scheme trying to abuse the bankruptcy court is unheard of, and I think deserves to be documented for future reference.
And the leaders who Promovel it not going to happen with them?
I live in the city if the FBI knocks here will catch money laundering, false number of social
I understand that, but what I don’t understand is why the SEC is on the sideline, as if they are waiting for their turn to come in?
Lets say they pull this off, then what? The SEC will say we were too late! Game over. This is new to me.
You are saying that here is different but they are trying the same thing. The only reason they tried the shit in Brazil, it was to delay the case which it should be over by June or July there.
Remember.. There, they were trying to pull this shit in every state to delay the trial….
The KCC $350,000 sounds like a variation of the old “pay your fixed expenses and utility bills 2 years in advance and buy as many untraceable gift cards as you can get your hands on” bankruptcy strategy being used here.
If KCC is getting paid day by day, generally it starts when the judge accepts their appointment to be handling the bankruptcy. (and a smaller lump sum before that) By “jumping the gun”, KCC basicaly said “I started by posting the press release, start paying!” before judge even approved them.
Maybe not in the US, but in Canada, Pigeon King International’s Alan Galbraith declared bankruptcy before any authorities acted. It took local police 2 more years to determine it’s a Ponzi scheme, and only after CBC did a special investigation on the case.
People were hoping to get money from bankruptcy and were NOT cooperating with authorities trying to investigate it as a ponzi.
I think Dave “Scambusters” Thronton warned the world about PKI and was denigrated as “blackmailer”. It’s in my profile on PKI on my website.
The date for the hearing of the permanent injunction in the SEC case is the 24th, and it will likely be granted.
The TRO already granted (16th) saw the raiding of TelexFree offices by agents on the 17th. Financial assets were seized on that date along with who knows how much additional evidence (which is now being gone over).
The SEC aren’t sitting on the sidelines. Through the DoJ, the regulators have filed an objection against one aspect of TelexFree’s application (the agreement between the company and KCC).
The rest will likely be presented on the 2nd of May. After the bankruptcy application is dispensed with, all that’s left are the Securities Division and SEC complaints (pending additional complaints by other regulatory agencies investigating).
What will happen in addition to the permanent injunction being granted on the 24th I’m not sure, but as it stands now you have a bankruptcy application all but dead in the water, two major regulatory complaints bearing down on the company and a temporary crippling restraining order ceasing business operations.
The recovery of that missing $300M can’t be too far behind, and then it’s well and truly the final chapter of TelexFree’s judicial shenanigans. And even if TF stashed the money in somewhere like China, it’d still be well-within their power to withdraw it, which will be what the regulators will nail them on.
I don’t know the specifics but I’m sure there’s a charge in their somewhere if they refuse. The SEC have been granted permission to conduct depositions and serve discovery on TelexFree and the top-pimps, so it’s only a matter of time.
Bear in mind that as frustratingly slow as all of this can be to watch play out, it still needs to play out in the courts to be official. Anyone with half a clue could work out TelexFree were a Ponzi scheme just by looking at their business model, yet observe the amount of time it took for the SEC to file a complaint.
Such is the way things are unfortunately.
Nope, bankruptcy can be appealed.
Ah ok that makes sense. So basically if KCC approach the court about compensation from any date prior to the application being granted (which it hasn’t yet), they’re not going to get it.
The Canada case I wasn’t aware of, this is certainly the first MLM Ponzi scheme I’ve seen go the bankruptcy route.
It’s a bit before our times. For a TL;DR version:
Arlan Galbraith was sentenced to 7 years prison in March 2014.
People were pumping over a million into it? Bloody hell.
I don’t believe he has interpreted the case correctly. I believe he’s repeating some “standard advices” designed for individual creditors in a normal bankruptcy case.
Half on facilities (huge barns for thousands of pigeons) and half on pigeons and supplies and whatnot. He specifically targeted the religious communities like Amish, Mennonite, and so on. I assume that some communities pooled their resources.
7 years for $20 million Ponzi!! How many years can you get for over $1billion Ponzi in multiple countries??
I know Carlos costa is going to see his share of the pie in the Brazilian court.
Same thought here. He probably found some standard advice in his law school day sand repeated that. It’s not applicable to a fraudulent bankruptcy, which TelexFree is likely to be declared as by SEC and MA SecState.
A middle-of-road approach would be declaring that bankruptcy will be on hold while the SEC/MA case gets resolved. IMHO, that’s more likely than getting the entire bankruptcy tossed out, though KCC would likely be asked by submit a bill for “services rendered thus far” and return the rest of 350K not spent.
He deal with immigration laws. He was my lawyer.
He is very expensive too!! A consultation with him, back then, was $200.00. Around 10 years ago.
Well, 1) that’s in Canada, 2) The guy was a habitual liar, lied before, during, and after he declared bankruptcy 3) he’s also charged with bankruptcy fraud, and 4) showed ZERO remorse 5) has virtually NO money for restitution
A few similarities to note:
A) He blamed “fear mongers” and “people who don’t understand his plan/vision”. He claimed he is actually going to build a pigeon processing plant (which only proves the pigeons he “bought back” are simply sold back back out as “breeding pairs”, which means he lied first about them being sent to Middle East as “racing pigeons”, then to Asia as “food squabs”).
B) He went after religious people, esp. those who are naive, like the Amish and Mennonite communities which are more secluded from the general population, and allegedly laughed that he’s making money from those people, and called them “aliens” (i.e. easy targets) Even the judge called it “affinity fraud”.
See any similarities to TF? Sure you do…
Here’s the method suggested by Moses Apsan, mentioned in post #1.
He has useful general info, but he can’t seriously mean that 500,000 investors individually should file claims to the court, and individually complain about fraud to the US Trustee.
April 21st Steve Labriola call (4 minutes):
He’s quite obviously just reading a press-release that’s been vetoed by TelexFree’s lawyers.
I’m of the thinking that the entire TF leaders clan must continue the “We Must Fight The Fight” theme so that even in defeat they can claim: “We told you we would not stop fighting for you and TF, and blah, blah, blah.”
They thought they could get over the Brazil courts if they had enough support from the mass of TF believers. When that failed and they thought they could get over on the US courts with the bankruptcy road blocks, they knew they were in too deep in animal caca.
I see it as an elaborate yet cheap attempt at psychological manipulation so that the “scammer” label already pasted on their foreheads doesn’t appear to be as obvious most see it by now.
Given the fact that after all the lies they have accepted from Telexfree over the past few years, Labriola and Co know only too well the remaining members have self qualified themselves to accept almost anything their heroes throw at them.
I don’t believe for a second Brazil, Madeira, Uganda, Rwanda or the Dominican Republic were “accidentally” targeted by the criminals behind TelexFree. None of them could be considered to be populated by sophisticated investors or legal systems familiar with internet fraud.
One has only to look at the relatively short time it took for US authorities to bring the whole charade to a screaming halt compared to the way Brazil and the other countries handled what to the experienced observer was a blatantly obvious fraud from the outset, to realize the lack of experience and sophistication in those countries was what enabled TF to become the billion dollar tragedy it is.
None of us can know, obviously, but, I wouldn’t mind betting Telexfree in the US didn’t and would never have, gained enough traction to be anything but “just another” low level HYIP ponzi fraud amongst the thousands of others on the ‘net today.
I’m still confused about the case in Madeira (Portugal).
Our legal system is familiar with this kind of financial fraud (ask anyone in Portugal who’s Dona Branca), and the root of the problem was not exactly lack of investment sophistication, but rather excess of it (in the main promoters, of course, many of the lower folk are know-nothings).
I remember that by early 2013, Telexfree was being pimped out over here like if there was no tomorrow by such people as Bank workers, stock market brokers, Finance inspectors, Government members, physicians, priests, and all sort of public servants and business owners. Until early this month it was very noticeable in most public services the small gatherings of Telexfree pimps and newbies around the computers during work hours, and everywhere you went you would be hearing the marvelous joys of Telexfree.
All this of course led the small folk to believe it was legitimate and eventually they joined it as well, but the bulk of the spread in the first months actually occurred among people quite knowledgeable of what they were jumping in.
I’m still at wonder about how this cancer entered the island and how it managed to swallow it so fast.
It’s not uncommon that people in “positions” are the ones pimping Ponzi schemes. The first ones can have been recruited by someone they trust, and they recruit others trusting them, and so on and so forth. It will spread through a network of people.
That’s partly why I’m looking at other factors than “criminal channels”. Most Ponzi schemes are actually spreading through more “normal channels”, e.g. business networks, sport clubs, religious groups, etc.
TelexFree might have found some promoters through business networks, but you will need local knowledge and understand the language to find the connections.
Try to google “John Ewing”, “Bridgewater Financial Corporation”, or “Bridgewater Global Investments LLLP” along with the names of some of the top promoters in Madeira?
From another thread:
Oops, those should have been BridgeWAY (not WATER). BridgeWATER is a $120 billion hedgefund, founded by Ray Dalio.
Bridgeway offers a wide range of assets protection. I haven’t looked into the details yet, but it’s clearly the type of “other types of channels” that can attract people in “positions”.
I tried that method, but it gives some false hits. The name “Bridgeway” is too common.
Here’s some of the methods TelexFree potentially can have used to conceal assets.
* Maximum protection = offshore company
The methods are from an assets protection PDF from Bridgeway.
What makes you think that KCC had anything to do with the “press release?” Generally that is not something they would get involved in. They are not a public relations firm.
It would not surprise me if Greenburg Traurig referred their client to KCC. Here’s a link to the services KCC provides: kccllc.com/corporate-restructuring/what-we-do/
Good question. The press release on the KCC website itself listed “Media contact” to a CJ Holt, and an 888 number that had apparently never been used before… No internet history at all. The only CJ Holt I can find is a duty drawback company (who deals with US Customs and border enforcement?) and should be unrelated.
The press release apparently appeared on eReleases first. Someone really paid money because it went to Reuters.
To me it was pure simple greed! Bunch of lying, shameless, thiefs! No better than the politians scum that “govern” this land!
eReleases also as a PR writing and a Personal Publicist service. I suspect someone paid them to write the crap.
Where is that piece of crap Gerald Nehra now? I guarantee that Faith Sloan & co will attempt to point the finger at him.
Only liars and scammers would make excuses and cry victim. These people did indeed know they were running and leading people into a ponzi, Zero integrity, very bad people with not an inkling of consideration for fellow human beings.
This woman has pimped ponzis for years, just look her up blog. People like this need to be made example of.
1. The judge said so and 2. the press-release is linked off the KCC TelexFree bankruptcy website. They put it up and the bankruptcy page at the same time.
The bankruptcy press-release never appeared on the eReleases website listing for TelexFree (it only shows the old three ones they’d written previously).
Just looked at the KCC website, and a new document asking the Court to extend the date to file their “schedule” was requested.
This is interesting; wonder what is behind it.
Did you read the document? 🙂
Hmmm… Did KCC use a different PR service? Sounds like they did. Didn’t they have the same CJ Holt contact number at the end though?
TL;DR version: they have our records, we can’t fill out the paperwork!
It does indeed have the same CJ Holt contact details on the bottom.
I’m thinking TelexFree/KCC paid eReleases to write the release then but not distribute it, that was left to KCC. The original PDF appears on the KCC website (including barcode), and was then copied to the usual spam services.
Well, two things have crossed my mind:
1 – That’s some sort of “you know, guys, this is going nowhere so let’s just forget about this bankruptcy stuff and avoid all the trouble. Let’s focus on saving our a**es”.
2 – They just want to put that “on hold” because they know scammers know that bankruptcy would just mean “no money to no one”.
Putting this move together with the “wait for new products” announcement on TF website PLUS Sann “Scam” Rodrigues “brotherhood of the poor victims”, it smells like they want people to “be on their side”, taking the “we’re a victm of the system” BS already applied for so long in Brazil to another level.
Little more detail on the checks Craft tried to leave with:
Thanks for the guidance, you are correct on both counts.
The SEC has their records.
The bankruptcy AND the legal actions from SEC / Massachusetts may have been partially planned. “It’s better to initiate the action rather than waiting for it to happen”.
ADAMS, CRAFT & EWING are offering different types of assets protection, including protection from government agencies. Telexfree has the type of assets protection they offer, e.g. Nevada registered companies.
Authorities in Rwanda reported “international money laundering cartel”, i.e. money was siphoned out of Rwanda to what the authorities interpreted to be organized money laundering. “TelexFree Rwanda” was an empty company owned by local people.
Merrill & Wanzeler have clearly been clients of ADAMS, CRAFT & EWING for a long period of time.
The bankruptcy can have been initiated to direct people’s attention away from something. Most people will focus on what’s right in front of their own eyes, on what makes most noise. The bankruptcy has certainly made a lot of noise.
Here’s some of the companies that potentially are owned by ADAMS, CRAFT & EWING. Many of them are inactive, I picked the names from a list of 1,200 companies.
Lol, iG point out that Botafogo received “at least” $1.7 million USD in sponsorship from TelexFree – more than the company made from selling VOIP ($1.3 million).
Meanwhile, scammers are still saying that the requested extension in the bankruptcy case has nothing to do with the fact that “a judge” will “free Telexfree” from any charges on May 2nd.
They say that “contrary to what some blogs are posting this is just to give them time to prepare a good strategy”. Oh gosh… Can’t wait till SEC shut it down for good.
If I recall correctly, the initial application for Bankruptcy that was filed by TelexFree had many missing elements and they were asked to complete this application. It would be interesting to know if they ended up completed this application and if anything new was revealed.
To me, it seemed that TelexFree intentionally left several elements out of the initial application as it would expose some of their problems.
They have requested an extension until late June to file the schedules claiming extenuating circumstances.
Specifically they cite the distraction of dealing with the State of Massachusetts and the SEC and the fact that their company records have been seized by law enforcement.
Clearly a stall tactic. They are playing games at the expense of many people who have lost money in this scheme. And I can’t say that their games wont work.
As time goes on, people with automatically begin to calm down and focus on other things in their lives. By the time this whole mess is over, few will even know what happened with the TelexFree and their management.
Document Name: Motion of the United States Trustee for Order Directing the Appointment of a Chapter 11 Trustee Pursuant to §1104 (a):
If I well understood, the US Trustee asks for Telexfree to be handed to a trustee appointed by the court, and all links to the former owners to be severed.
This means that, if approved, the bankruptcy process would be ended or stalled, and all now is in the hands of the courts (including keeping the VOIP service working and everything else). Correct?
A pretty damning statement in that document:
“It appears that part of the reason for the Debtors’ cash flow problems was the diversion of funds to insiders.”
TL;DR — we got the paperwork, let us control what’s left of it so you don’t mess it up any more!
Going through that new doc now. Will have an article up soon.
Can’t play by the rules? Lose your company to a Trustee!
As it should be.
According to the trustee, the former management cannot be trusted, and neither can any of the interim officers they brought in. Bankruptcy trustee should be appointed to REALLY get to the bottom of the whole thing.
Which is interesting as it’s filed almost in response to the 6-week delay sought by KCC. KCC were originally given 2 weeks by Judge Landis to file the remaining paperwork, such as assets, liabilities, creditors, and so on, all of which should have been included in the initial application.
Basically, US Trustees is saying that any paperwork KCC filed would likely to not be true, as they were working with a bunch of alleged crooks who paid themselves lavishly before declaring bankruptcy, and since SEC/Mass have the paperwork, the bankruptcy trustee, with a little help, can fill it out properly… and if necessarily file clawback lawsuits against the conspirators (with SEC’s/Ma SecState’s help), much like Bernie Madoff’s trustee Irving H. Picard suing various banks and beneficiaries for BILLIONS of dollars (also with DOJ help).
This does not stall or end the bankruptcy. What this means (If approved) is that a Trustee will completely take over ALL business aspects and operations of Telexfree.
That might include defending lawsuits against the company, dealing with the SEC and Massachusetts, Filing schedules, Recovering funds, filing lawsuits on behalf of the company etc. All matters related to the company in other words. His obligation is to do what is in the best interest of the company AND its creditors.
The Trustee has great autonomy but must keep the court informed and obtain consent for many specific actions.
I would guess that the SEC and Mass actions will continue as they have their own mandates. They may even file claims against the Bankruptcy estate in the future.
So, if I well understood, at the very minimum, once appointed a trustee (if appointed) the bankruptcy process will have to restart from scratch without the interference of the mentioned gang of crooks, and all company services (VOIP, website, etc) will be managed by the new trustee.
Maybe for some time, at least, Telexfree will be acting as an honest company. 🙂
I am convinced that the $10 million transferred to the Dominican Republic was to be used as a potential startup for a new venture in the event all was lost.
Technically speaking, bankruptcy process haven’t started. All TelexFree so far have done is “declare intent to file bankruptcy” and “authorized agents to represent itself in bankruptcy”. The actual application was turned back as “incomplete” and judge gave them 2 weeks. Now they want 6 weeks.
That’s correct and more realistically. One of the first steps will be to get rid of the smoke and mirrors.
One thing I do not understand here is why Telexfree allowed (apparently, ordered) KCC to publish all court documents, which evidently incriminate them a lot, and even bring KCC itself to the mud.
Doesn’t make any sense. Is this court document publication mandatory in the US?
I think it’s got something to do with transparency in bankruptcy cases. Might be due to the large number of affected creditors or some such (definitely not a bankruptcy lawyer here!).
I personally do not yet see that KCC is tarred with the same brush as the insiders at Telexfree. They file schedules based on the information they have access to. If Merrill tries to hide assets or writes self serving press releases how is KCC to know? What duty does KCC have to verify the representations of an owner and his CFO?
The US Trustee did not mention KCC in his Motion to Appoint a Chapter 11 Trustee. This does not prove that KCC is clean but it provides no basis for suspicion either.
Yes, but they have been mentioned in the former DoJ objection (which apparently was mostly about them, indeed).
I don’t mean they’re on the same business as the crooks, but from the objection it seems they were or could be illegitimately profiting from it. That’s why I mentioned the mud.
Yes it is mandatory. These are schedules of assets and liabilities, Profit and Loss, List of creditors, leases etc. They are Basic accounting reports without a lot of detail.
The purpose is full disclosure and transparency. The creditors are entitled to know the true and entire picture and so is the Court, for it is the court that is empowered to modify and cancel obligations of the debtor. By law the court may not use this power until it is satisfied that available information has been taken into account.
Amazing legal system! Thank you so much, Merrill and Wanzeler, for establishing the main headquarters of Telexfree in the United States and not anywhere else. From heart.
The objection was to them “jumping the gun” and taking certain actions on behalf of the debtors without proper authority to do so. The point was well taken.
The rest of it appeared to be objections to various terms of the engagement. Perfectly normal stuff in my mind since DOJ has noticing capabilities of its own and there had been no chance for comment before KCC went to work. In the end the estate ends up paying for KCCs services so the contract is subject to and should be reviewed by the parties and by the court.
I thought that’s what the DOJ attorney was saying and nothing more.