telexfree-logoDespite vehement objection from former TelexFree affiliate Daniil Shoyfer, a preliminary injunction was granted against him on February 12th.

Scott Miller was also named in the injunction however, until Shoyfer, he offered up no opposition.

The injunction was granted as part of a civil lawsuit brought against several top TelexFree investors, with Shoyfer and Miller the only two not already subject to a preliminary injunction.

Putative Class Representatives Rita Dos Santos and Celio Da Silva had sought the injunction, on the basis

  • their lawsuit against the defendants would likely succeed
  • that if Shoyfer and Miller weren’t restrained, they would “suffer irreparable harm”
  • the balance of equities tipped in favor of the plaintiffs and
  • the granting of an injunction against Shoyfer and Miller was in the public interest

In his ruling, Judge Hillman wrote

I am satisfied that Plaintiffs have established a reasonable likelihood of success on the merits as to their unjust enrichment claim.

Hillman did however stipulate that Santos and Da Silva’s claim that Shoyfer and Miller were “top level promoters” in TelexFree would need to be supported.

The Plaintiffs’ depiction of Shoyfer as a “Top Level Promoter” who swindled TelexFree victims out of millions of dollars is, on the current record, nothing more than unsupported rhetoric.

Indeed, the affidavits submitted by Plaintiffs in support of their request for injunctive relief are replete with unauthenticated texts and e-mails and in some instances, include assertions by the affiant which from their context are clearly not based on personal knowledge (and therefore, should not have been included).

With respect to Santos and Da Silva suffering irreparable harm, Hillman acknowledged this was “a more difficult question”.

Although this is a close call, I find that the nature of Plaintiffs’ unjust enrichment claim is such that they do not have an adequate remedy at law.

At the same time, I find that the assets restrained must have a nexus to Plaintiffs’ claim, that is, any assets restrained must be directly or indirectly traceable to money received by Shoyfer in his capacity as a TelexFree promoter.

Little discussion is warranted with respect to the last two factors.

Unless restrained and enjoined by the Court, Shoyfer may dissipate and/or conceal assets that would be available to compensate the Plaintiffs.

Therefore, I find that the balance of equities tips in Plaintiffs’ favor, and that an injunction is in the public interest.

The Plaintiffs have established that all four factors weigh in their favor, and therefore, a preliminary injunction shall enter against the Individual Defendants.

The preliminary injunction granted takes into consideration the specific circumstances of Santos and Da Silva’s filed lawsuit, with Hillman ordering Shoyfer and Miller’s assets frozen.

An allowance for “ordinary living expenses” is permitted, with Shoyfer and Miller required to file a “statement of accounting” each month.

Any expenditure outside of ordinary living expenses must be first approved by the court, with Shoyfer and Miller granted leave to petition the Court to exclude assets that ‘are not traceable to monies received by him in connection with his involvement with TelexFree‘.

Daniil Shoyfer is current an active investor in the My Advertising Pays Ponzi scheme, with investment in the scheme no doubt falling outside of ordinary living expenses.

With Shoyfer’s funds in My Advertising Pays currently frozen, it’ll be interesting to see whether he applies for an exemption.

Shoyfer began investing in My Advertising Pays in May of 2014. TelexFree was shut down by the SEC in April, and Shoyfer had been withdrawing tens of thousands of dollars out of TelexFree over the months prior.

In addition to providing a detailed money trail for My Advertising Pays investments and payouts, Shoyfer will have to provide documented proof he didn’t invest TelexFree funds into My Advertising Pays.

A detailed money trail will no doubt be of interest to any regulators investigating My Advertising Pays, as the scheme claimed it was abandoning the US late last year.

 

Footnote: Our thanks to Don@ASDUpdates for providing a copy of Judge Hillman’s February 12th order.