i-Payout defend handling TelexFree ewallet money
Following weeks of commission delays for non-Brazilian TelexFree affiliates just over a moth ago, ewallet provider Global Payroll Gateway (GPG) abruptly announced that they could ‘no longer support TelexFree‘.
The announcement was made in mid September, with GPG informing TelexFree’s affiliates that International Payout Systems (i-Payout) would be taking over the supply of ewallet services to TelexFree.
No official reason was given for GPG’s dropping of TelexFree, however on their website GPG state
GPG maintains strict accordance with the USA Patriot act and a wide variety of other international financial regulatory and banking regulations.
GPG is very careful to follow all international regulations and laws concerning Anti-Money Laundering, Identity Protection and Payroll in general.
TelexFree is currently under criminal investigation in Brazil, with pending charges of money laundering and embezzlement being touted by Public Prosecutors.
About a month after my article on GPG dumping TelexFree went live I received an email from i-Payout, with the company wishing to clarify a few things.
In addition to informing me that I’d used the wrong domain to calculate their comparative size to GPG, i-Payout also insisted that they had
done a complete due diligence on TelexFree, assessed its needs, and confirmed the product as compliant with all US laws.
“Complete due diligence” you say? Go on…
i-payout is providing its product and services to TelexFree’s US and global business outside of Brazil. TelexFree is a US corporation based Massachusetts and is a separate entity from the business in Brazil. The US business maintains the payouts to US and other worldwide members outside of Brazil.
i-payout has done a complete due diligence on TelexFree, assessed its needs, and confirmed the product as compliant with all US laws.
i-payout™ also verified every single TelexFree member by a submission of a valid ID. In all cases, and as with all clients, i-payout™ maintains the USA Patriot Act and international regulations concerning AML, Identity Protection, OFAC regulation.
IP security makes the program more than compliant with today’s industry standard for KYC (know your customer).
As you have stated in the blog post, GPG was providing payment solution services to TelexFree for both the US company and the separate TelexFree organization based in Brazil; however, when the US based TelexFree and GPG cut ties, i-payout was brought in to provide our services to all of TelexFree’s members (outside of Brazil).
i-payout™ takes great pride in that we are fully audited and SOC II compliant.
Again, it is important for us to reiterate that i-payout™ has never worked with the TelexFree organization in Brazil and has never offered any of its services to TelexFree in Brazil.
Additionally, we wanted to share with you some of the rigorous due diligence we follow with all clients:
1. Obtain and review Corporate documents
2. Review of shareholders agreements and verifying documents
3. Bank statements to prove historical availability of funds
4. EIN or other tax registration docs for international companies
5. Copy of government ID for all shareholders and their resumes
6. Customer support details for the compan (sic)
7. Login credentials to the member site to verify products are in line with business overview provided
For TelexFree i-payout completed extended Due Diligence:
1. Site survey – visited their site to ensure office, people, processes, etc.
2. Vendor proof – invoice and proof of payment for a vendor 3 months ago, 6 months ago
3. Organizational chart review
4. Random audit of several affiliates’ accounts: compensation plan are they on? How / when they get paid? Obtain confirmation of the sales, etc.
5. Proof of filing 2012 tax returns
6. Legal opinion for any open cases and review of documents relevant to closed cases.
As you can see, i-payout is very thorough in its evaluation of potential clients. We thank you for your interest and reporting on the industry and we welcome you to review our eWallet.
Well that was certainly an exhaustive list.
What immediately struck me however was the stressing that i-Payout had nothing to do with TelexFree’s Brazilian operations. Did they not know the company used the same $289 AdCentral investment model globally?
And as far as “complete due diligence” goes, why was there no mention of TelexFree’s business model? Seemingly, i-Payout’s purported “complete due diligence” could be summed up as
we viewed some documents, checked some IDs, rocked up to their virtual office and concluded that TelexFree management are a bunch of swell guys.
At a loss as to how anyone could claim to have conducted “complete due diligence” without mention of an MLM company’s business model and compensation plan, I sent off the following reply:
‘i-payoutTM is providing its product and services to TelexFree’s US and global business outside of Brazil.’
Does it matter? The company uses the same business model globally. Affiliates pay $289 (sic) for a position in the comp plan on the guarantee of a $20 a week ROI.
The company claims this is compensation for “posting ads” (to attract new investors), however I’m sure I don’t need to remind you that time and time again “posting ads” has been shot down as a Ponzi defence in US courts (AdSurfDaily being the most prominent example).
‘i-payoutTM also verified every single TelexFree member by a submission of a valid ID. In all cases, and as with all clients, i-payoutTM maintains the USA Patriot Act and international regulations concerning AML, Identity Protection, OFAC regulation.
IP security makes the program more than compliant with today’s industry standard for KYC (know your customer).’
Are you aware of TelexFree affiliates from Brazil publishing YouTube videos advising Brazilian nationals to sign up via US accounts? How do you think they are funding their accounts and getting paid commissions?
How do you think this is going to play out as the TelexFree investigation continues in Brazil and regulators follow the money? Currently TelexFree faces pending charges of money laundering and embezzlement charges.
Do you really think none of that money has/will pass through your ewallet systems?
‘Again, it is important for us to reiterate that i-payoutTM has never worked with the TelexFree organization in Brazil and has never offered any of its services to TelexFree in Brazil.
Additionally, we wanted to share with you some of the rigorous due diligence we follow with all clients:’
Looking at that list, it would appear you’ve done everything due diligence wise except go over the company’s business model and compensation plan.
TelexFree accepts $289 investments from affiliates, on the premise of a $20 a week guaranteed ROI for 52 weeks. ROIs are paid out of new affiliate investor money.
I can appreciate as a payment processor the limit of your due diligence not extending past covering your own ass as a business, however as a ewallet customer I’d expect the company I am a client of to go above and beyond protecting the integrity of not only my account but the company itself.
One need only look at the freezing of accounts in NXPay when shit hit the fan for Zeek Rewards to see the implications of providing ewallet services to obvious Ponzi schemes.
TelexFree is owned by the same three people globally, inclusive of the Brazilian operations. Brazilian courts have already recognised this in dismissing TelexFree’s bankruptcy application on the grounds of they can’t use their US operation to fund a Brazilian bankruptcy as it’s the same company.
Throwing your hands in the air and proclaiming “but we visited them at their offices and had a beer, they were swell guys!” doesn’t cut it. Ponzi schemes by nature are designed to deceive until a regulator starts up an investigation.
Once that happens, all that becomes relevant is the fact that affiliates invest $299 and receive a guaranteed $20 a week ROI, paid out of new investor money.
For the record, what is your company’s official stance on the above business model, which is what TelexFree have used globally since the company’s inception?
Full disclosure: I intend to publish an article on this in the near future using your response(s) to emphasise the culture of complicit complacency between ewallets and some of their more dubious clients.
Four days later I received the following reply:
Thank you for getting back to us. We appreciate and respect your opinions. As we have stated before, we would love to be a resource for you in relation to any and all factual information as it relates to i-payout. Feel free to reach out to us with any further questions regarding i-payout.
No kidding… that was it, the entire email.
For a company that reached out to me and insisted they’d conducted “complete due diligence” on a company they were providing ewallet services to, the response above was astonishingly inadequate.
In i-Payout’s first email, the company asserted that they’d sought a ‘legal opinion for any open cases and review of documents relevant to closed cases‘ and conducted a ‘random audit of several affiliates’ accounts‘, supposedly including the compensation plan.
What legal firm i-Payout are using (Yes Men Inc?) I have no idea, however even the most basic of due diligence reveals a thinly masked Ponzi schemes, with pending criminal charges in Brazil threatening to bring the whole operation down.
As an affiliate that’s worthy of some serious consideration, but as a payment processor… how nuts do you have to be to want a piece of that pie?
On their website TelexFree advertise their AdCentral investment scheme as follows:
Be our Promoter
EARN MONEY FROM ADVERTISING TECHNOLOGY VOIP Telexfree
Through a ADCENTRAL. MEMBERSHIP $ 50 (Partner) + Adcentral Kit U $ 289.00 (Central ad accounts 99Telexfree + 10) = U.S. $ 339.00 (Annual)
The promoter will receive an account 99Telexfree worth U.S. $ 49.90 each week to make 7 different ads on free ad sites on the internet, from Monday to Sunday.
Invest $289, post ads and bing-badda-boom $20 a week ROI guaranteed. And if you’re wondering where I got $20 a week from, here’s how TelexFree’s compensation plan explanation used to read (before they were busted in Brazil):
Be our promoter
Earn money doing announcements on Internet!
Through a ADCENTRAL, that you geot (sic) for the amount of US$299 (annually), the promoter will receive US$20 each week.
Despite changing the language used to describe the compensation plan, TelexFree failed to actually change the plan itself (referred to as MLM psuedo-compliance). TelexFree still pays out affiliates $20 a week after they’ve invested $299 and spam the internet with unsolicited ads.
Why is this significant?
In an investor alert issued not even a week ago the SEC reiterated, amongst other things,
Be wary if you are offered compensation in exchange for little work such as making payments, recruiting others, and placing advertisements.
How does TelexFree stack up?
-Making Payments? $289 AdCentral payments or bulk lots of “AdCentral Family” positions for $1156, check.
-Recruiting others? As per the TelexFree compensation plan, the company pays out $20 per AdCentral position and $100 per AdCentral Family position invested in by personally recruited affiliates, check.
-Placing advertisements? Spam the internet 7 days a week and TelexFree pay you your $20 a week ROI per AdCentral position invested in, check.
On one hand I can appreciate i-Payout’s due diligence being limited to covering their own asses should the SEC come down on TelexFree for selling obvious unregistered securities. However these guys went out of their way to contact me and profess their conducting of “complete due diligence”.
And then when I pushed them on it, totally caved in with a tin can autobot response that completely ignored my followup questions.
To date, i-Payout have not clarified what their official position on an MLM compensation plan that charges affiliates $289 a position and pays out a $20 guaranteed ROI, paid out of newly invested affiliate funds.
The failure to clarify their position comes despite my request they do so (after they contacted me) and i-Payout’s own reassurances that they would ‘love to be a resource for you in relation to any and all factual information as it relates to i-payout‘.
Should the SEC shutdown TelexFree in the future and all eyes turn on i-Payout over their complicit involvement in handling TelexFree’s financial transactions, let it be recorded that they have conducted
complete due diligence on TelexFree, assessed its needs, and confirmed the product as compliant with all US laws.
What typically happens in the event of a shutdown is an ewallet processor throwing their hands up in the air and declaring they had no idea anything shifty was going on.
When the $600M Ponzi scheme Zeek Rewards was shut down by the SEC, here’s what happened to their ewallet processor NXPay:
In addition to their business going down the toilet, funds were frozen across the company resulting in widespread chaos and confusion.
I have no idea what percentage of revenue TelexFree’s investment scheme makes up within i-Payout’s global operations, but here’s a snapshot of the level of financial activity currently taking place (published on a popular Ponzi promotion forum less than 24 hours ago):
i just joined too.. all the folks here in cali just heard about this and some are putting their savings.
Not even six months ago the widely used MLM payment processor and ewallet service provider Liberty Reserve was shutdown in a joint operation between US, Costa Rican and Spanish authorities.
(Arthur) Budovsky, a Costa Rican citizen of Ukrainian origin, has been under investigation since 2011 for money laundering using a company he created in the country called Liberty Reserve.
Money laundering, one of the same pending charges TelexFree are facing down in Brazil. With Carlos Wanzeler, James Merril and Carlos Costa owning TelexFree’s global operations (it’s the same company internationally), the risk that tainted money would have or is passing through US banking channels would appear to be extraordinary.
That doesn’t seem to bother i-Payout though.
Affiliate investors across America are dumping their life savings into TelexFree on the expectation of a $20 a week ROI paid out for every $289 invested with the company. But i-Payout would have you believe TelexFree is wholly compliant because they had a few beers with the owners down at their Massachusetts virtual office space.
Sounds bulletproof to me.