Judge rejects TelexFree’s mediation proposals
With Acre’s Public Prosecutors rejecting Carlos Costa’s mediation proposals late last week, it fell on Judge Thais Khalil to go over the proposals and make a decision.
Khalil’s decision was handed down yesterday in the shadow of Carlos Costa running all over Brazil to declare “god used him” to create TelexFree and that “nobody will take it” away.
This was followed up by a rather amusing “the battle is coming to an end” video, which was published on TelexFree’s Facebook page with the following caption:
The battle is coming to an end. We trust in God, we trust in justice.
In stark contrast to the deceptive narrative TelexFree are shoving down their affiliate’s throats, common-sense has once again trumped the company’s marketing theatrics.
Appearing personally at the mediation conference, Costa first proposed that TelexFree be continued to run their Ponzi scheme as if the authorities had never intervened.
The second proposal was a bit less laughable, with Costa proposing that the company be permitted to pay out existing affiliate investors, who would then be required to re-register in the US to continue to invest with TelexFree.
Basically in both instances Costa pushed for a restart of TelexFree’s Brazilian business operations, so it’s not really surprising that Judge Khalil rejected both proposals.
Short of being permitted to lure new Brazilian affiliate investors into the scheme, TelexFree’s gameplan appears to be get their funds unfrozen and transfer as much of it as possible offshore. For reasons unknown, TelexFree appear to believe their US operations will not attract the attention of the SEC.
In addition to sending Costa on his way and in a rather surprising move, Khalil also blocked the previously permitted release of TelexFree funds to pay off a construction firm to retain TelexFree’s stake in the project.
It had been previously ruled that the Acre court would use TelexFree’s funds to pay off the construction firm, looking to preserve TelexFree’s stake in the project to be used at a later date to refund affiliate investors.
I’m not really sure why this decision was “suspended”, but I can only presume Public Prosecutor’s must have presented evidence that shows the construction company had other plans for the money (of the “wink wink, nudge nudge” variety).
Looking forward, Judge Khalil’s decision yesterday now paves the way for the civil action to continue against TelexFree. TelexFree had argued that Acre’s Public Prosecutor’s had no business suing the company, but this argument was rejected by Khalil.
As the case continues, it is expected that a trial will occur sometime in 2014. Judge Khalil is currently going through over 40,000 documents of evidence Acre’s Public Prosecutors have provided her for review.
Personally I think yesterday’s decision sends a pretty clear signal a to how Judge Khalil sees the case. It would appear the issue of whether or not TelexFree is a Ponzi scheme has been determined, now it’s just a matter of putting together the evidence to cement it in court.
Telexfree’s business model alone should be enough for that.
Stay tuned…
In the end, the governor of Acre says he is willing to testify in Costa and Telexfree’s favor – “How could I be against this? I did not see or hear anyone complaining about [Telexfree]”.
If I am not mistaken, it was the Acre prosecutors that sued Telexfree because there is where the “company” had the most affiliates.
That should get him a few votes and the Court will give his testimony the weight it deserves.
@DFN
Sounds to me like a vote pander. TelexFree’s ideas don’t translate too well in court, and I’d bet the Governor has not looked at TelexFree’s business model. Well, not beyond Carlos Costa’s “we sell VOIP” bullshit.
(Sidenote: I’ve started marking roberto’s comments as spam. He seems to be using auto-translate to say the same thing over and over again, without responding to what anyone has already written: “blahblahblah why hasn’t the SEC shut down TelexFree blahblahblah”)
Oz, a very important part of Judge Khalil’s decision is not covered in this text. It can be found here: http://www.tjac.jus.br/noticias/noticia.jsp?texto=18538
Judge Khalil determined the company BDO RCS, the brazilian member of BDO International, to audit TelexFree and collect all information required to answer questions to be formulated by the parties.
She also said both parties may have technical assistance for the formulation of the questions, and BDO will have 20 days to give the answers. She then pointed out controversial topics on this and already formulated questions herself.
Things now are on how “smart” the Public Ministry of Acre will be on formulating specific questions whose answers leave TelexFree in very bad situation. Since TelexFree does not try to hide its Ponzi nature at all, it might not be very hard, but anyway, it should be done very carefully and skillfully.
1. Do you pay out existing affiliates with new affiliate money?
2. How much revenue was generated from sales of VOIP to non-affiliates vs. affiliates?
3. Can I deposit $x with your company, spam the internet and receive >$x over 52 weeks? (unregistered security)
4. As of today, can you pay out existing affiliates their 52 week ROIs in full globally? If not, why not?
5. If tommorrow globally no new affiliate money was taken in, how long could you continue to pay out existing affiliates what is owed?
Acre Public Prosecutors, you’re welcome.
Hehe for sure these questions are tricky for them, specially numers 2 and 4. I think topics should include for sure the 52 week ROIs (the “repurchase”), specially the fact that the weekly value (20 dollars) is not specified on the contract.
Concerning voip clients which are non-affiliates, this is a major subject. I think questions should involve the quantity of such clients, how long they keep as clients before giving up.
Prosecutors should also ask on the effective propaganda of the company. Not only the one on the official site. There are plenty of ways to demonstrate the promise of future profit is by far more publicized than the voip product itself.
And there’s much more. I’m not an expert.
Good
Oh dear, here’s why the Acre Governor is happy to support TelexFree:
Does somebody want to explain to this guy how a Ponzi scheme works and why they inevitably collapse?
http://economia.ig.com.br/2013-11-22/governador-do-acre-declara-apoio-a-telexfree-suspeita-de-piramide-financeira.html
From the article it seems as if the Governer’s political enemies were circulating rumors that he was the cause of the Acre investigation and TFree shutdown. The Governor (a hell of a nice guy) is trying to quash such rumors and do political damage control, particularly because a large proportion of the Acre population (perhaps 10%) has connections to TFree.
Yonex
With the current situation in Brazil…How are the US affiliates getting paid? Will they get in trouble when the SEC goes after TelexFree here?
I’m worried about my brother. I hope he is lying about all of the money he is making because it just doesn’t add up to me.
My sister-in-law was telling me yesterday she is getting a reconstructive dental job and that she is paying $24k cash for it. Not to mention all of the expensive items they have purchased recently and brag about with the purpose of attracting and signing up more people.
I’m talking expensive cars for him, wife and kid and brand name expensive watches and everyone knows him and his wife do not have a job.
Assuming is true…is this income flow being tracked? When the s*** hits the fan…do affiliates get fined? I’m very concern about greediness driving them to a point of no return or to get involved in something that could end up in legal consequences.
It’s alright to buy things and better your lifestyle I suppose, is the means to get there what worries me.
The situation in Brazil seems to have slowed down. I believe they have been occupied with the process of collecting evidence from the parties, a time consuming process.
The company in the US is a different legal entity located outside the geographical jurisdiction of the court in Acre. It had some payment issues in August (July 30 – September 15), but I believe it has been resolved after that.
There are some methods to reduce the risks for clawbacks, but they are not bullet proof. One of the methods goes like this:
1. Create a new account (subscription) from the back office.
2. Sign up a new affiliate, offer him the new account.
3. Let him pay DIRECTLY to you …
4. While you can use the funds stored in your back office to pay for the AdCentrals he want to buy.
Paying for the AdCentrals in that way will be a non monetary transaction, i.e. it won’t show up as a transaction of MONEY. It will only reduce the back office balance, some “numbers on a screen”.
But a trained investigator will probably be able to detect methods like that, the method is far from being bullet proof. The new account will be some type of “sub account” to the account it was generated from, e.g. it will have some similar digits in the account number.
Normally not, but that depends on how deeply they have been involved in it, e.g. the number of people they have recruited. Ponzi schemes are typically handled as CIVIL cases in the US. Civil cases don’t have “punishment”, but they have “equitable remedies” like “disgorgement of ill gotten gains” (“clawbacks”).
If you have family or friends involved in something, the best idea is probably to relax yourself, i.e. you can’t do much to change the situation without harming yourself / your relationships. The other good idea is to collect factual and “balanced” information (for your OWN knowledge about it).
I tried to add that type of information, e.g. about the methods to reduce the risk for clawback.
One advice you should give your brother is the “Howard Kaplan advice” from ZeekRewards = “run it like a business, and keep records of all the work, expenses and payments, on a daily or weekly basis”.
He can use records like that in a defense strategy, in case his other defense strategy fails for some reason (e.g. experienced investigators). It’s primarily a defense against tax issues.
@Lee
US affiliates are getting paid with whatever Brazilian money TelexFree had offshore when they got shut down, and from newly invested affiliate money coming in from Asia and Europe.
Going over Zeek Rewards is your bestbet. It’s top affiliates have either had to pay back a half to most of their “earnings”, or are now facing clawback litigation in court.
That’s if the regulators step in mind you. Oh and then there’s the IRS. “Don’t have a job” and “luxury cars and watches” is just begging for an audit.
That said you mentioned “assuming it’s true”. Has anyone actually seen this stuff and spending of actual money, or is your brother just dreaming about what he’s going to do with monopoly money on a screen?
Realistically you’re probably not going to get through to them if they’ve invested that much / recruited other investors to pay for what you’re claiming. Best to just ride it out like those who watched friends and family invest in Zeek Rewards did.
Not much else you can do unfortunately.
@OZ
Movements on Facebook today indicate that Carlos Costa will promote a massive migration of Brazilian advisers to the American base of Telexfree.
Leaders are people who request data supposedly received no money in the scheme. These people will receive free adcentral accounts in Telexfree LLC to begin their networks. It is unclear how the “new money” will come into circulation in this scheme. Please stay tuned to check what will happen in the coming hours.
Thanks for the update Igor. If they’re going to be open about circumventing the Acre injunction surely that’s not going to play out well with the Public Prosecutors. Or maybe the writing is on the wall and TF just don’t care anymore.
Let’s face it, at this point they’ve exhausted every legal avenue open to them and been rejected every step of the way.
Meanwhile TelexFree appear to be keen to break into Africa:
Ponzi investment schemes create a skilled and competant workforce?
Ruh roh Raggy…
TelexFree is gunna be fine cuz… Carlos Costa has a lot of books?
He mentions something about having to pay the taxes (part of the latest mediation proposal rejection decision, claims that they lost the hotel decision because the PP filed their appeal on the 20th and the decision was made on the 21st (the argument being if they had more time they would have won, because y’know… that’s made a difference for them in the past).
Something about meeting with insurers is in there too but auto-translate is fuzzy. Five pages of questions from the PP’s (or Judge?) have also been forwarded to TF, which they are responding to.
That’s all in the first five minutes, then it degenerates into the usual religious sermon Costa closes with.
Oh, and this gem:
One would assume he’s talking about TF being a Ponzi scheme. How that doesn’t exist, given TelexFree’s business model and flow of money within the company is hilarious.
Is that seriously all that it takes to convince the Brazilian TelexFree herd that there’s nothing amiss? Unbelievable.
Yeah, there’s a lot of that going around.
Take the TelexFree staffs’ effort to prove to the courts there is a legitimate business, for example.
OZ, close to the end of the video, Carlos Costa says he talked to some top promoters and they decided “to get some personal information on telexfree promoters”, saying that one of the uplines is going to contact you to get personal data (such as governament ID number, name, date of entry in Telexfree, etc).
I know, like they don’t have that info already?
Anyway, following closely the manneuvers of telexfree top promoters, they are asking specifically for the ones who didn’t get their investments back, to send all this information. They claim they are going to select “some” of these promoters to join Telexfree USA for free, and probably erase these ones from YMPACTUS.
That makes sense since Ympactus is about to be audited by a major auditing company. That would erase some of the debts they would have to present during the audition.
Top promoters are saying that the video was a “way” of saying they are migrating these people to Telexfree USA, but he couldn’t say it because it would be a breach in the Court blocking of the company.
Also, until mid 2013, Telexfree registration system had a major flaw, permiting any number or letters to be put into the registration fields, resulting in potential thousands of false registrations.
This proves once more that Telexfree never cared for personal data, or real names, as long as you made the payment, they would activate your account.
But, now that they’re being audited, that may become a big issue.
There’s a chance that TelexFree does NOT have this info — or at least not all of it.
Some recruits may be paying their sponsors directly, with the sponsors entering data on the recruits’ behalf and then somehow performing a transaction within the TelexFree system by which the recruits’ accounts get credited.
TelexFree sponsors doing it this way probably have no idea if the data the recruits give them is valid. There also could be typos or complete fabrications entered by the sponsors, so the system could reflect Garbage In, Garbage Out.
GIGO happened in AdSurfDaily. (ASD somehow appears to have lacked data on 20,000 or so members.) It is highly likely that this led to the denial of XXX number of Ponzi remissions claims. Recruits who paid their sponsors directly may not have been able to prove they paid ANYTHING to ASD.
The sponsors, meanwhile, put themselves in a position that would have enabled them to cherry-pick cash and use ASD’s internal system to transfer a corresponding number of “ad packs” to the recruits’ accounts.
ASD almost certainly did not know its real bottom line because of all the side deals arranged by the sponsors and tacitly endorsed by ASD. Result? The ASD Ponzi deepened. Members who paid sponsors directly received credits that paid 1 percent a day and some or all of the money never made it to ASD.
In short, the sponsors used ASD to create direct cash flow for themselves while passing on the burden of paying the recruits 1 percent a day to ASD
TelexFree easily could have the same or similar problems. And since it has to issue 1099 tax forms, the lack of reliable data could be hugely problematic.
One large U.S. TelexFree sponsors’ group clearly is encouraging recruits to turn over $15,125 for the purchase of multiple “contracts.” Some/most/all of that money may be going to the sponsors directly, rather than TelexFree directly. Who knows what percentage of that money is being transferred to TelexFree by the sponsors collecting it?
That money could constitute off-the-books income for the sponsors. The possibility also exists that the money is being commingled with the personal funds of the sponsors or the funds from another “opportunity” unrelated to TelexFree.
Commingling occurred within ASD proper, and also among certain of its sponsors. The Feds seized the personal bank accounts of X number of ASD members/insiders, leading to screaming prompts from one of the insiders to make sure fellow sponsors removed the money from their accounts and shut down the accounts before they could be seized.
Beyond the madness and danger of any person joining TelexFree during an active pyramid-scheme probe, there exists the danger of not being able to demonstrate a loss if a collapse ensues.
In short, just another day in MLM La-La Land.
PPBlog
Woman takes out a loan for £50,000 ($21,770 USD) and invests in TelexFree.
TelexFree gets shut down by Brazilian authorities, woman panics and jumps out of fifth floor window.
Still alive, but now living in a hospital’s Intensive Care Unit.
Yay Ponzi schemes.
http://www.pbagora.com.br/conteudo.php?id=20131126202842&cat=paraiba&keys=mulher-pulou-edificio-teria-investido-r$-mil-telexfree
Its that darn confirmation bias thing again. The woman obviously mislead herself because she wanted live in an intensive care unit.
TelexFree’s back office has that system built into it. Affiliates can generate new “sub accounts” whenever they want, e.g. generate fake customers to qualify for binary commission, or generate sub accounts to their main accounts to generate binary commission on their own investments.
Or to generate new accounts for people they recruit, and get paid directly from the new recruitees. That method will reduce the number of monetary transactions in the system, i.e. fewer transactions to and from external accounts. Most transactions will be internal transactions of “numbers on a screen” balances.
That system was explained in several of the back office training videos that were available on Youtube (Telexfreetrainer Scott Miller, if I remember it correctly). Some of the most detailed videos were removed after they were mentioned in a comment here.
I chuckled. Am I going to hell?
That depends, did god use you to chuckle or was it all you?
They’re like a freaking cult with real convincing mind controlling techniques. There is no doubt in my mind that some brain washing approach it’s being used to get this people to sign up and that would explain the meetings. They are constantly having group meetings like some kind of underground organization.
I mean…if you are selling a “product”….what else is there to talk so much about? For Christ sake!
Anyway, my brother has now my other brother and a sister signed up and on the band wagon this week. “We are all a 100% TelexFree family”…as they say.
I wish they knew English so I could show them this page but as good brainwashed prospect as they are, they probably wouldn’t believe it and say they are all lies.
In the mean time I just follow you guys to keep myself updated. You really are good at this. Thanks for this page and for your excellent “investigative journalism”.
How does facebook (Ozedit: Yeah so I’m going to stop you right there. Let’s not start by comparing Facebook to blatant Ponzi schemes shall we).
I newly joined US Telexfree.While researching I found this page. I learned a lot but often feel concerned about objectivity. Yes, you made me hesitate to recruit others and revealed Brazil case to me. Yet, you do ignore U.S. has 51 legal systems and every country has its own laws.
Also, you have not mentioned effect of Telexfree becoming a cell phone provider in the US.
@sdanielle
None of what you posted negates TelexFree being a Ponzi scheme. But please, by all means continue to make excuses to justify your involvement.
…..and in every one of them pyramid, and ponzis are considered investment fraud and a violation of securities law. So yeah, then there’s that.
By the way all the states are interlocked into one legal system. The laws vary state to state, but federal law applies to every state. Thought you should know….before you settled into a false sense of security.
Drop Kick
Hello sdanielle,
You might want to ask youself why TelexFree is instructing affiliates not to identify any of the carriers it will use in its asserted TelexMobile venture.
Also: You commented that the “U.S. has 51 legal systems.”
I’m thinking you might be talking about the laws/regulations of the 50 states, plus the District of Columbia (Washington, DC). Of course, there also are federal laws and regulations, as Hoss points out.
To me, TelexFree is inviting regulatory scrutiny in about every direction one could look. For starters, it’s Zeek Rewards-like scheme easily could catch the attention of the U.S. Securities and Exchange Commission (SEC) and perhaps even the Federal Trade Commission (FTC).
But with TelexFree purportedly branching out into the cell-phone business, it could catch the attention of the Federal Communications Commission (FTC).
And TelexFree also says it will point members/prospects to the credit-repair business, the debt-reduction business and the financial-advisory business. That could draw the attention of both the FTC and the SEC.
There’s an infamous MLM huckster known as Phil Piccolo. I haven’t seen anything yet that ties Phil Piccolo to TelexFree, but TelexFree’s evolving business plan sure sounds like a Piccolo plan — especially the parts about branching off into the cell-phone and credit-repair businesses.
Be careful, sdanielle. VOIP/cell phone/credit repair, debt reduction, etc., is a highly curious business mix.
When I was a child, my Mom was a customer of the Avon Lady. She’d come to our home, and she and Mom would drink coffee, smoke cigarettes and shoot the breeze. The Avon Lady eventually would show Mom her wares, and Mom often bought something. The Avon Lady was good company for Mom, and Mom liked the products. She considered herself an Avon gal.
But if the Avon lady ever would have tried to sell my Mom some sort of companion product for credit repair, debt reduction and financial advice, I’m sure Mom would have spotted the incongruity and become far less hospitable to the Avon Lady.
PPBlog
Update on the TelexFree affiliate who jumped out of the shopping mall:
She’s dead.
Apparently a relative tried to deny the initial report (sourced from another relative) that she jumped because of the loan she took out to invest in TelexFree. Likely a TelexFree affiliate themselves, I hope they feel good about roping family and friends into the scheme.
http://www.pbagora.com.br/conteudo.php?id=20131129224255&cat=paraiba&keys=morre-mulher-pulou-predio-jp-porque-teria-divida-telexfree