TelexFree bankruptcy suspended, moved to Massachusetts
The notion that a global Ponzi scheme be able to file bankruptcy in a state it registered a shell company in, solely to evade financial, criminal and civil liabilities for the running of said Ponzi scheme, was always going to be a stretch.
Still, hats off to TelexFree’s lawyers for putting on a good show in fighting for the absurd.
At the conclusion to the mammoth 8 hour hearing conducted last Friday in Nevada’s bankruptcy court, Judge Landis used a series of prongs to determine whether or not TelexFree’s bankruptcy case should be transferred to Massachusetts (where the company is currently being sued by the SEC and Massachusetts Securities Division).
The prongs Judge Landis used to reach his decision were as follows:
- “Neither schedules nor statements of affairs have been filed. Evidence developed at hearing that there are no known secured creditors of debtor, bulk of creditors are promoters owed money due to original failed comp plan, approximately 90% of debtor’s creditors reside outside of Nevada and Massachusetts, approx. 75% of customers and promoters reside outside U.S. While less than 5% live in MA, there are fewer customers and promoters in Nevada and Massachusetts, and 10 of largest unsecured creditors reside in MA.” Conclusion: favors transfer to Massachusetts
- Proximity of Debtors – “LLC shares headquarters with Inc. in MA. Chief restructuring officer stated he would have performed restructuring duties in MA headquarters before search warrant execution; thereafter, he would perform his duties from Georgia. Neither Financial nor LLC has office presence or employees in Nevada.” Conclusion: favors transfer to Massachusetts
- Proximity of Assets – “All of (TelexFree’s) IT and office equipment (is) located in Massachusetts.” Conclusion: favors transfer to Massachusetts
- Judicial Economy and Economical Administration – “Access to books and records most readily available in Massachusetts.” Conclusion: favors transfer to Massachusetts
- Necessity of ancillary administration in case of liquidation – (reasons above), Conclusion: favors transfer to Massachusetts
Also called out for knowing next-to-nothing about TelexFree’s current and past business ventures were CEO Stuart MacMillan and “hide the money” stooge William Runge:
While credentials of MacMillan and Runge not subject to question, court finds they have little knowledge related to business administration of LLC and Financial – couldn’t identify competitors. Proximity of witnesses weighs in favor of transfer.
One of the more comedic aspects of the May 2nd hearing was that, when they weren’t being fed questions by TelexFree lawyers, Runge and MacMillan’s answered rarely fell outside of the range of “I don’t know” to “I don’t have that information”.
Personally I thought it was great to see Landis see through TelexFree’s “we know nothing!” ruse and better still, cite it as a determining factor in his reasons for judgement.
Ultimately, in analysing whether or not a transfer to Massachusetts served the “interests of justice”, Judge Landis concluded that
Access to (TelexFree’s) books and records (are) in Massachusetts. (TelexFree has) no business presence or employees in Nevada. Judicial economy would also be better served (by transfer of the case to Massachusetts).
Debtors have national law firm. Nothing in record to suggest that any party would be divided fair trial in either Nevada or Massachusetts – neutral factor. Fewer customers and promoters in Nevada than Massachusetts.
Transfer to Massachusetts would also aid in enforcement of judgments. Enforceability of judgment in SEC’s enforcement action would be aided by transfer. As to original choice of forum, court exercises its discretion to conclude venue is properly in Massachusetts.
I thought that was the end of it, but Judge Landis went on to further conclude that due to his belief that TelexFree bankruptcy case involved “unusual circumstances”, and ordered that pending a transfer of the application to Massachusetts,
(The) court finds that abstention in form of suspension of all proceedings is warranted until such time as transfer to District of Massachusetts is completed.
Or in layman’s terms, TelexFree bankruptcy is now dead in the water until it is moved to Massachusetts. TelexFree’s lawyers fought hard against the movement of the proceedings, indicating that Massachusetts is a much less desirable environment for TelexFree to try to shirk its Ponzi liabilities in.
A major contributing factor to this is that the same judge hearing the SEC complaint might be appointed to oversee the bankruptcy proceedings. What that will mean for TelexFree should be obvious…
One side-effect of the Nevada courts abstention of the proceedings, is that the DoJ’s Chapter 11 Trustee nomination has been shelved until the proceedings are transferred. Whereupon presumably the motion will be given a new hearing date.
That is of course if TelexFree management don’t realize it’s over and do a runner.
At this stage and with Landis’ judgement only handed down minutes ago, no date has been set for the transfer to Massachusetts – but I suspect that will be out either by the end of the week or early next week.
Pending any additional information contained in Landis’ written order (expected to be filed within 48 hours), that’s all for tonight.
Looking forward, TelexFree’s next defeat will likely come on Thursday, when they face off against the SEC to argue whether or not a preliminary injunction should be granted against the company, its management and two of its top promotors.
In light of today’s defeat and that a preliminary injunction has already been granted against two top promoters, it’s wholly expected that on May 8th the requested injunction will be granted.
As always, stay tuned…
Footnote: My sincere thanks to Jordan Maglich @ PonziTracker for covering the May 6th order hearing live. Without his dedication the live updates those following the case have enjoyed would not have been possible.
Please consider donating to PonziTracker to help cover expenses, as the cost otherwise comes directly out of Maglich’s pocket (Paypal donate button is at the bottom of the coverage linked to above).
So the popcorn is on hold until further notice…
Probably best to finish it off now. There’s not going to be much of a fight to be had going forward.
TelexFree’s eggs were all in the “keep the proceedings in Nevada” basket. Those eggs are now laying splattered all over the floor.
I wonder if they’re going to keep putting up the good fight in MA now or do they consider this a big blow. Who knows…
So what to expect now? Is still the TRO working on them or do they have chances to run with the money away? Question is are we by any chance be able to recover something back?
The Promoters should feel lucky if they recover 20% of their money. And it will take over a year at that…
First they need to find all the hidden piggy banks from the crooks. I would start in their backyard 🙂
TRO is still in effect till Thurs, then it’s likely to be converted into a preliminary injunction.
The money is frozen, and it appears additional funds/assets were seized by the US Attorney’s Office only recently. The details of what was seized haven’t been made public yet.
Other than that, whatever assets TelexFree had hidden probably is going to stay hidden for long now. Whatever hope they had of hiding in the bankruptcy courts is now over.
I imagine at some point a Receivership will be appointed. Till that happens (or something else), it’s difficult to say.
That TelexFree were using offshore bank accounts is known. How much they stashed and where will play a large role in recoverable funds made available to investors.
Meanwhile you’ve got Labriola filing BS in Massachusetts, claiming he has only $20,000 in assets despite working at TelexFree since the Ponzi started in 2012.
Oz, where is the source?
Linked in Footnote. I relied on PonziTracker’s coverage of the judgement hearing. His source was Judge Landis himself.
That is the biggest joke of all. I’d start searching that guy first. He was at the forefront of all marketing, promoter venues and communications.
He’s got millions stashed somewhere. I can’t believe the BS that these guys spew when the shit is hitting the fan. The insiders need some jail time with a cell next to Maddoff.
Yeeeeeeh!!! This is great news!!! My prediction came true (along with alot of others who felt it would go this way)….It’s nice we won this battle….
and also…. I had said if I was wrong I’d say somthing nice about Faith Sloan…… Whew!!!!
Have Carlos Costa appear on youtube lately?? he said he’d be the good or bad news bearer no matter what.. Maybe he’s in Disney World enjoying his last minutes as a rich “entrepreneur”… who knows….
The question now is, when do the MA proceedings start and will TF put up a good fight in MA as they did in NV.
It wouldn’t surprise me to see TelexFree file an appeal to the bankruptcy court “panel” or even the district court (if there’s no panel in Las Vegas) to fight the transfer of venue.
Also, keep in mind that Judge Landis ruled on the minimal amount of stuff possible. It is essentially a “punt”. There was no ruling on whether the TRO conflicted with bankruptcy or US Trustee’s request to have special trustee oversee the bankruptcy.
I can appreciate TelexFree have the option to now file an appeal, but to what end?
The SEC are going to charge on with their case, as will the Securities Division. By the time an appeal is heard, lost and then the case is moved to Massachusetts and a hearing is heard, how far along are the civil cases going to be?
I’d hate to be the lawyer that has to answer the “So, what do we do now?” question from TelexFree today.
If I may add… The only people who will probably qualify to get any money back will be those who have invested their money directly with Telexfree.
For those who purchased the credits from other promoters by using cash and no paper trail to back it up (which was the majority of the investments in the past three months), those can kiss their money good bye as I believe there will be no way to track that information and it will be impossible to recover those funds… Good luck!
Delay, of course. Delay is a valid tactic. Remember, GT has millions to spend. They’re just spreading it around a bit.
Yes, he has. Today he posted 3 videos on TF’s Facebook page. In the last one he explained how E&Y auditors now know everything about TF after he explained the details to them, and that now they know how legit and legal TF is.
He also said that he was going to meet Ympactus/TF lawyers in Brazil to watch the BK ruling today. I’d bet he’ll soon be releasing another video saying today BK outcome was a “huge victory”…
I have to applaud the SEC for their strategy to file a motion to move the bankruptcy hearing to MA. Otherwise they would be fighting a bankruptcy filing in NV on May 2 prior to their own cases for preliminary injunction on May 9.
Very smart move. *** clap clap clap ***
Bankruptcy over/suspended. Another great victory!
There are some new videos of Carlos Costa on the Telexfree Facebook page. It appears that they also had a hearing in Brazil today.
@Oz,
So was the issue of the lawyers getting paid addressed or is that request going to have to go to Mass as well?
Probably going to Mass, but that’s a very minor issue.
There is a Bankruptcy Appeal Panel.
GT would need to file for an Emergency Stay of Landis’ ruling and they can’t do that until he signs an Order. This is the only way I know to stop the transfer.
That would be an extraordinary remedy for the BAP to entertain.
Otherwise things move forward and any appeal is taken up in due course. The first hurdle is for the BAP to agree to even hear it , and if they did, it wouldn’t be heard for a year OR MORE.
In that amount of time an appeal is likely to have been overcome by events in Massachusetts anyway so that by that device potential errors are often rendered moot.
Landis punted but not without the SEC cheering him on.
Good decision.
Safe decision.
GT is not going to have much of anything to spend if a Preliminary Injunction freezes the Telexfree assets. I’d have to say that is of major concern. The hearing is in two days.
Thanks for the clarification. Keep forgetting almost all courts are overworked and often underpaid.
There really is no ARGUMENT that GT can make to ask the BAP to even CONSIDER a stay of the venue move (what are they going to say? What’s in LV stays in LV?) (But doing so will undoubtedly add to the bill they’re going to hand TelexFree or what’s left of it.)
Technically the money was ALREADY PAID to GT (3.5 million? 4.2 mil?)
IN Two days they have to deal with the Preliminary Injunction. I predict they will lose that, and they will have no money to do anything.
The Court will authorize Green burg Traurig to draw some funds to represent Telexfree in front of the Mass BK Court two weeks later and then it will be OVER.
Funny.
Yes but that may be recoverable to the estate if its proved the retainer was paid with illegally obtained funds. GT will doubltlessly get something but they have to be concerned with their billing.
And they’re going to argue that they have to give their best… and they have to be paid as they put in a “good faith” effort. Else government can steamroll anybody by accusing all their money are “ill gotten gains” and freeze them.
Greenberg Traurig, Gordon Silver, Alvarez and Marshall, etc. have to keep careful accounting of their expenses, but they already do that as they have to account for all that in front of judge landis ANY WAY, which was in first-day motions, IIRC.
The payment of professionals motion was not approved in the Nevada Court.
The billings to address the Preliminary Injunction can not be that significant yet since the hearing is the day after tomorrow and I don’t think Telexfree’s attorneys have filed even a single opposition.
For Greenburg et al to get paid much more than they have already billed would require the Mass judge to approve a separate payment to the professionals motion in the Mass BK which could only take place if the same Mass judge ruled that automatic stay trumps his own TRO. I am not saying it can’t happen, just that it does not seem at all likely.
Telexfree would not be the first to make that argument and lose. If the judge rules there is a “likely” chance of success on the merits of the SEC Motion as written then the Injunction will be approved as is and the funds will be frozen.
Under such circumstances I would reasonably assume the judge would soon find that that the Preliminary Injunction trumps the automatic stay and the Bankruptcy would be suspended, dismissed, or converted to a Ch 7. I frankly do not know what other accomodations the Court would be willing to extend. At some point the consequences are what they are.
If it goes to 7 surely a Trustee will be appointed and Greenburg Truarig will be out of a job.
Ah, that’s one of the motions that got punted. OIC.
OIC?
Lol!! Wait for the wacky TF affiliates claiming yet another victory. They’ll be dancing in the streets singing the praises of the TF lawyers who are going to take them to the promised land.
Just visited Sann Rodrigues facebook page, it’s a riot! Keeps saying he’s forming an “Association in Defense of Promoters” (against Telexfree) but at the same time writes that he hopes Telexfree bankrupcy is accepted (no luck) so it can keep working!
Before today’s announcement he writes he’ll make his opinion knows SOON….yeah, how convenient, wait to see the legal status to define his position. So transparent but yet people fall easily for this type of scammer.
Oh, I see.
I assume he is organizing to object to Telexfree’s stated intentions (rejecting contracts) All I can say is if this does not go to a reorganization under Chapter 11 he will never have the chance to make that objection. For that reason, of course he hopes the Bankruptcy petition succeeds.
This “thing” is about two steps from being over for good. Not quite check mate yet, but very very close.
They’re now in “check”. 😉
Definitely that. !
Still two questions:
(1) Who thought this whole thing up? The founders (Merrill and Wanzler) aren’t capable of thinking this up: the bogus ads, binary, etc. What they had were local connections to get the ball rolling. Did Craft design this. It was a very well designed Ponzi.
(2) Who did their product development? I’m a software guy and reverse engineered their product. It is Jitsi (open source) with their stolen logo and names given to the basic protocols (TelexChat) and several gateways negotiated.
I would estimate you could build their product for 5K total of work, given that they stole the logo too. But someone had to know to ask someone to set up the gateway and repurpose the free software, and again, I don’t think the founders could have thought that even that up.
And the BS has begun to be spread… In a conference live right now (youtube.com/watch?v=t7G6KEGsWy8), at 1:36:00, TF guys are saying that they do not see with “good eyes” the BK process being moved to MA because they believe MA justice + SEC are interested in TF’s money (meaning they are corrupt).
They even mention the Watergate scandal (I guess they are trying to make a point like “even US presidentes do bad things”).
They say Judge Landis would not define future dates unless he was sure TF is not a pyramid/ponzi scheme, and it was clear the judge said it was not that, but SEC twisted judge’s mind and presented no proof. According to that Carlos Castilho guy, the only proof SEC has is “their calculator”.
(At some point someone asks whether they’ve heard May 2nd BK hearing audio and they say: “no”).
They mix Brazil corruption, politics, religion, US corruption scandals in a desperate attempt to justify what happened.
They say justice does not understand MLM, this is too modern to them, TF will be victorious in the end, blah blah… New judge will not understand them… blah blah blah…
Acre’s PP was the one responsible to “poison” MA society and judiciary against TF… blah blah blah… E&Y audit on Ympactus in Brazil is already bought by Acre’s PP because they want TF money… blah blah blah…
My gosh… I cannot listen to that anymore. Check the link for youselves later.
While most people’s focus are set on the BK, the SEC and the Division in MA, it is important not to lose focus that behind the scheme, there were many con-artists, namely:
1. San Rodriguess – (The head)
2. James Merrill – (The orange for President of TF)
3. Carlos Costa – (The Brazilian Cheerleader for Brazilians)
4. Carlos Wanzeler – (The other head)
5. San Rodrigues’s FIRST TIER Promoters for each country
6. U.S. TF cheerleaders
7. Disk-A-Vontade (May have more to do with TF than sees the eye)
8. Brazilian promoters (people that could receive large sums of money into their accounts from their own ROI or TF?)
9. Coyottes that may have run with money in case of Bankruptcy, SEC or U.S. authorities after the company
10. Finding out where the money is that these guys are living off of while the proceedings and charges are taking place.
11. Prevention from these individuals to flee the country once criminal charges are individually filed.
12. Not focusing so much on the NEW MANAGEMENT that the original owners hired to take the HEAT.
This video says it best:
@jamil
Most of that will be addressed in the SEC and Securities Division lawsuits. They don’t have much to do with MacMillan or the other fallguy’s TelexFree presented in their bankruptcy case.
Note MacMillan and co. aren’t subject to either a TRO or preliminary injunction.
Oh dear… You know Merrill, Costa and Wanzeler are the owners / presidents / directors of Disk-A-Vontade, right?
Just check this: youtube.com/watch?v=b25Lzd4BSFM
They have already tried (and failed) to apply the same “VoIP” scam in Brazil, using DAV.
If those guys are not part of DAV anymore, it sure is just to cover tracks and hide something. Sann Rodrigues took parte in DAV too. In fact, those guys are part of so many scams that are hard to keep track of. Just keep Googling and you’ll find a bunch of videos (most in portuguese).
I have pointed to Adams, Craft & Ewing as potential organizers.
* Paul T. Adams, a.k.a. P. Thomas Adams
* John Ewing, a.k.a. John D. Ewing
* Joseph H. Craft, a.k.a. Joe H. Craft
I used the Nevada Secretary of State’s Entity search to come to that conclusion, by looking at the registered agent (CRA) that registered TelexFree’s Nevada entities.
* BWFC PROCESSING CENTER, LLC (owned by Adams, Craft, Ewing)
I looked at the other companies owned by those 3 individuals and the types of services offered, e.g. accounting, assets protection, para-legal services. In short, they offer the types of services (directly or indirectly) that were needed to organize it.
* Joe H. Craft had a controlling position in TelexFree as a CFO, the one who can control the flow of money. That was the reason why I first started to look into that part.
If you believe Merrill’s testimony, it was Costas (and Wanzeler). Though I’d like to *suggest* (but I have NO PROOF) that it was really Sann Rodrigues, who may have planted the idea in Wanzeler’s head so he could “suggest” it to Merrill.
What proof do I have? Compare “Universo FoneClub” comp plan to TelexFree comp plan and see what similarities you spotted. Then ask, who provided the phone cards to Universo FoneClub?
Yes it’s fully circumstantial.
I know their Android app was originally done by a guy in Brazil who used to market the app, without the actual Telephony features, as a “TelexFree marketing aid” to log into the Backoffice and all that.
Looks like TelexFree simply bought the app, hack on the Telephony, and launched it as its own. I’ve decompiled their app to take a peek inside.
IIRC, Craft was not brought into TelexFree until later in the game. He may have been “involved” in the creation, but I’m not convinced he was among the “founders circle”.
Perhaps not publicly, but the SEC or DoJ mentioned he’d been with the company for a few years as a consultant during the May 2nd hearing.
https://behindmlm.com/companies/telexfree/ponzitracker-telexfree-may-2nd-bankruptcy-hearing-live-updates/#comment-260575
I thought the “abstain” decision would prevent that? It’s a suspension of the case, and that’s not a decision that can be appealed.
It’s a “no further decisions will be made in this case” decision. They can’t appeal that decision to a Bankruptcy Appeal Panel.
Only if USA have punishments to dumb use of the legal system and the telexfree lawyers are unwilling to try the judges patience. Telexfree in Brazil managed to set some kind of record in “absurd appeals”. I lost count last august with 11 defeats in 2 months.
Joe Craft was brought in in April 2012, according to William Runge or Stuart A. MacMillan, when they were asked directly about it. Initially one of them stated “around one year” when he was asked in court, but it was corrected to “April 2012” when he was asked directly.
TelexFree LLC in Nevada was registered in July 2012, 2012-07-19, by BWFC Processing Center LLC (CRA), the Commercial Registered Agent owned by Adams, Craft & Ewing LLLP.
It doesn’t mean they’re the MAIN organizers, it’s only about that they can be part of a group of organizers.
One of the points the SEC or DoJ attorney drove home on May 2nd was that Wanzeler and Merril trusted Craft with the $38 mill. Not MacMillan, not Runge.
They’re obviously going after Craft as an insider.
As an example of Telexfree “legal crazyness”, they alleged to the judged that the name “Telexfree” was valued in “R$ 660 milhões” (around $260 million) and tried to use this value as a proof that they could pay everyone.
Yes, that´s right: a company operating a ponzy scheme tried to convince a judge (and everyne else) that its fake trademark was more valuable than the Washington Post, sold to Amazon in the same week for $250 million. But of course only the zombies believed that.
http://gazetaonline.globo.com/_conteudo/2013/07/noticias/dinheiro/1454070-garantia-da-telexfree-e-sua-propria-marca.html
I stopped counting after 14 appeals or Judicial Reviews = right before the first bankruptcy petition.
“No further decision” should normally eliminate the right to file an appeal. It means they don’t have a valid case in Nevada. The court analysed change of venue to Massachusetts, but it didn’t order it. Instead it ordered abstention. The conclusion was “ADJOURNED”.
It didn’t make any decisions about the TRO or about appointment of a Trustee. It suspended the case as a whole.
He was INVOLVED, but he wasn’t CFO until VERY recently.
The judge ruled that the transfer will take place, and suspended until then. TF can appeal the transfer itself, rather than the suspension that resulted from it.
There’s a provision under US Bankruptcy law under 9011
http://www.law.cornell.edu/rules/frbp/rule_9011
We haven’t gotten to that point. On the surface, TF’s situation does sound like a bankruptcy candidate… If you haven’t pierced their disguise and looked at some real data, like Mass and SEC had done.
I have posted some initial information about Joe H. Craft, Paul T. Adams and John D. Ewing in the realscam.com forum.
realscam.com/f9/telexfree-scam-not-2366/index2.html#post70936
Where do they send an appeal? 🙂
An appeal should normally be sent to the court that has made the decision, and that court will send it to the appelate court.
The suspension is about telling the party that “you don’t have a valid bankruptcy case here in Nevada, your case is suspended”. The judge has closed the door for an appeal in Nevada.
That would depend on how much risk are Greenberg Traurig / Gordon Silver are willing to take at angering the court.
They *could* file an emergency appeal to the bankruptcy panel asking for a TRO against the change of venue until the panel can consider it. It’ll likely to be turned down, but they *can* do it.
They really have this persecution complex, eh? or paranoia, that everybody is trying to hurt them, eh? That it’s all one grand conspiracy?
Maybe they should consider a few religions texts, like:
Christianity: The Bible
Don’t think they have many Jews or Muslims over there, but just in case:
Jewish Rabbi talking about “Servants of the Pyramid (scheme)”
http://www.ynet.co.il/articles/0,7340,L-3935637,00.html
Saudi standing committee on Academic Research, Fatwa 22935: Multi-level marketing prohibited by Shariah law
http://islamqa.info/en/42579
Nope, not when the case has been suspended. You’re talking about a Temporary Restraining Order against the court here? I don’t believe those exist. You may have some scenarios where a Supreme Court can instruct a lower court, but that’s not the scenario here.
The case has been suspended = it’s not a valid case in Nevada = it can’t be appealed in Nevada either. You will need a valid case to file a valid appeal.
As far as I can see it, the abstension decision closed the door to further appeals.
And it turns out they stole the logo from the Badmington tourney, so they fixed it by chopping it in half and made it silver. Yes, we remember. 🙂
The problem is the “leaders” are still offering false hope to the sheeple, by basically telling them what they *want* to hear rather than the truth.
Someone needs to make some anti-TelexFree videos, by putting all of Costas’ antics from his videos and put them next to the truth. Then in big letters, stamp LIAR (in Portuguese) across his face. Go over each lie, truth, stamp liar. Then at the end, summarize each one, LIAR LIAR LIAR LIAR LIAR.
At the end, put: COSTAS — X LIES AND COUNTING. (where X is the number of lies you documented)
I’m not a lawyer so I tend to get a “stay” vs. “injunction” vs. “restraining order” mixed up. I think Hoss said it could be stayed… if GT/GS want to risk it, and it’s VERY VERY unlikely.
I don’t think the “stay in Landis’ rulings” option exist either (post #23). I’m not able to identify that type of order from a court.
I haven’t read the order, only the Ponzitracker live report. The decision seems to be final.
Judge Landis analysed the venue, and came to the conclusion that Nevada wasn’t the correct venue for a joint bankruptcy case when it involved the Massachusetts registered TelexFree Inc.
He then analysed abstension, and came to the conclusion that suspension of the case could be ordered. He then ordered adjournment.
So, what arguements are the Ponzie 8 going to use to get out o the mess they made for themselves?
How’s the I didn’t know or Gerald Nerha told me it was legal position going to work for them? Or Faith Sloans’ I ben doin this for years and no one told me I couldn’t?
If history is anything to go by, if there’s an excuse, they’ll (try and) use it.
I know victims are looking for a definitive answer as to when they can expect to get at least some of their money back, and they all want to see the criminals in jail being beaten with sharp sticks, but, IM(very)HO, this is going to drag on for years with more twisting and turning than a bucket full of worms being exposed to sunlight.
Bottom line for me is, though: it’s a billion plus dollar fraud and, no matter how much twisting and turning or delays there may be, the bad guys are not going to win.
It’s just not going to happen as fast as people wish and hope it would.
– Real World : TF is still a dead ponzi scheme, that has no magic money to payback 80% of the money that it’s investors think they have in their accounts.
– TF Fantasy World : there are a million fantastical stories.. but the rule is you don’t count your money until it’s in your hand.
For Telexfree to obtain an Emergency Stay the BAP would would have to be convinced that “irreparable harm” would result from the transfer of venue.
No. He transferred venue for the two Nevada entities based on the factors and his analysis and stated that the Mass company should have filed in Mass to begin with and may do so if it chooses. This effectively removed the Mass company from the jointly administered estates until it refiles and petitions to be re-included.
Then he suspended (a form of abstention) the case until transfer to Mass was complete. Suspension was appropriate because there are Motions outstanding that Mass will have to deal when the case recommences (such as the TRO vs Automatic Stay and the appointment of a Trustee.)
Any idea that the Court abstained first and thus could not have acted to transfer is backwards. Any idea that an appeal of the transfer of venue is foreclosed because it took place after the Court suspended the case is incorrect.
Landis ordered transfer and then suspended if that helps to understand the process. Read the last ten minutes of the transcript.
Appeals are filed with the BAP, and the Landis Court is given judicial notice of that….not the other way around. To conclude that appeal is foreclosed because Landis suspended the case is implausible and wrong (all decisions are subject to appeal)…. but don’t take my word for it.
Here is the closing line of Ponzi Tracker’s coverage:
“A detailed recap of the hearing is available here. There exists the possibility that TelexFree could appeal the ruling.”
Very interesting about Adams, Craft & Ewing. So the timeline could be that Merrill and Wanzler and trolling about for get rich quick schemes/phone cards and they think about using the internet and repurposing free software to brazil and charging for the gateway to POTS.
They engage their friend Costa, who brings in San R. and the ponzi/pyramid is designed. When it comes to big strategy and there is some money on the table and marketing help, Adams, Craft & Ewing then takes an active role in asset protection, and legal obfuscation.
It seems like their key innovations are:
– repurposing free software and creating the perception of new technology/or IP (VOIP !)
– using Christianity to sanction greed and solidify their network
– creating the impression of work among promoters through bogus ads (the only one I knew called his daily ad posting “investing” as in: “He is not here, he is working on his investments”
– using hard cash as the medium for all logic — I couldn’t argue any logic with this promoter because they kept arguing that despite all my fancy degrees and experience, they were getting paid weekly
– maximal frustration of the legal process by converting ponzi cash into litigation
– an incredible number of companies and money stashes all over the place
In summary, their plan was to activate greed in uneducated, ethnic and disaffected population. They held conferences in nice hotels and emphasized the indicia of a technology company. “Lots of people make millions in tech companies, with TelexFree I can too.”
I wish basic supply and demand arguments could easily have pricked a hole in this balloon, but economics is useless against the winds of false hope.
A Temporary Restraining Order is issued without Notice, It prohibits/enjoins potentially unlawful acts.
A Preliminary Injunction is issued with notice, after a hearing and prohibits/enjoins potentially unlawful acts.
A stay holds an action in abeyance.
Any mention of a Temporary Restraining Order in this context is, to say the least, inappropriate.
So to recap the TRO vs. injunction vs. stay, but in regular language, not legalese…
TRO == court to individual NOT in court: stop!
Injunction == court to individual IN court: stop!
stay == court to court: stop!
TL;DR? 😀
You’ve got it. The TRO is a no notice way to enjoin an individual or company. It was used here so that Telexfree and the individuals would not be alerted prior to the asset freeze and raid on the premises.
Next, the SEC has asked for a preliminary injunction which will enjoin the same actions and freeze funds during the course or proceedings that the SEC hopes will result in a permanent injunction. Here it was a three step process.
Oh, and a stay does not have to be court to court. A party may request a stay and receive one from the Court.
For example the Courtt might order some form of relief and one of the parties ask for a stay pending appeal or reconsideration or some such
Someone mentioned that even if SEC recovers all the millions stolen very few promoters will get paid. I would say more than 95% or more of the creditors are Promoters and the way they came in was through others in the upline. You would deposit money in someone’s account or give them cash and they paid an invoice you generated in the back office, then you get your position.
I think that’s how most of the promoters came in and most promoters had more than one position in TF. Also the ewallet function made it impossible to acquire more than one position and there was a limit.
So the question is – does the SEC really know all these details as to how people came in to TF and how they’re going to go about paying the victims back when there’s no receipts or real proof of investment in the company ?
I think this will be a big problem for promoters when that moment comes…
@Goodbrain
(thinking out loud)
Track all payouts through i-Payout and GPG before it to ascertain actual investment positions (and accounts they were under), sue the balls of net-winners and use all monies to pay back positions not made whole.
People who signed up with fake details get nothing. Still better than “everybody gets nothing” bankruptcy.
That’s a wonderful summation and analysis. I am sure you get this all the time but are you in any way related to Dietrich Bonhoeffer?
There’s someone I know close to where I live who made more than $1 million and a couple others who made over 500k. How are they going to get to these guys who are smaller dogs than a Faith Sloan or Sann Rodrigues or so many other team leaders around the country or the world who were profitable ? No easy task at all…
I bet if everybody who made a ton of money gave it back they could pay the late promoters who lost money in the scam. But how the hell do you accomplish that ? It’s next to impossible. It’s not like the Maddoff case where there’s hard proof as to who invested and how much…
There is only so much that can be done. Those that can document their investment stand to obtain a bigger piece of the pie I expect.
Watch the Zeek Rewards case. They’re going through it now (suing overseas net-winners).
TelexFree paid out via i-Payout and GPG, every position that was paid out on (profit or loss) should be trackable. Each of those ewallet accounts should have banking details or some such attached to it for identification too I imagine.
And if i-Payout dropped the ball with KYC, goodbye to them too (and a whole bunch of other scams they are currently still providing payment processor services for).
This is how I understand the system to be working in Madeira (and Portugal and overseas emigrant communities in general), and inline with what Goodbrain has said:
– Person X wanted to join Telexfree under sponsor Y;
– Sponsor Y collects credits from promoters Z, W, Q, etc. ad infinitum, and pays those credits with money (usually cash) got from person X. Promoter Z supplies 30 credits, promoter W 560 credits, and so on, and are paid in the equivalent in dollars.
People with credits “in transit” in the above system as of 13 April were never paid for their “sold” credits. This means that for effects of BO, they transferred those credits to another promoter, which is usually assumed to involve a money payment in exchange. However, since TelexFree was shutdown at that date, the receiver got the credits, but obviously never paid for them.
Apart from this, if person X wanted to be a Team Builder, he could be one instantly. He would buy himself the total positions necessary to build the team, along with the corresponding VOIP packets. The names and address for each username would be the same, only the username differs (no fake accounts).
One common system of managing accounts over here was to elect one of the accounts as the “main”, and all other accounts would transfer to that one, which in turn would be used to withdraw money (using e-wallet) and perform the “trocas” (cash for TF credits).
Due to this late scheme, one side effect of TF blocking withdrawals from old plan accounts around 1 April was that new accounts who were sending credits to old accounts got their credits frozen as well, even when withdrawals were allowed under those accounts (because they had sent all the credits they got to the other account, which was now frozen).
This is such a huge mess, that I find it almost impossible for people in this situation to be able to proof their claims with the Receivership (SEC), as well as opens the door for illegitimate or double claims.
I now understand why I saw BWF Consulting on my bank statement after my first withdrawal…
If they lose I pray they ar jailed, 20yrs each to serve as a deterrent to others. In the meantime, can someone advise on Unetenet nd MyAdvertisingPays. Tanx
If you’re talking about the realscam.com post, I have only posted some initial information.
realscam.com/f9/telexfree-scam-not-2366/index2.html#post70936
I used Windows Notebook for notes, and Microsoft Works spreadsheet to build up a short list of companies. Both of them are poorly organized, because I didn’t know exactly what I was looking for. And I haven’t identified it clearly now either.
I will need to provide some more background information there before I can focus on specific aspects.
What I meant was a “stay” is essentially an order from judge to another judge: “Hold on, we need to check something”. So it is essentially court to court. A third party can REQUEST it, or it’ll be triggered automatically like bankruptcy, but it essentially is an order from one court/judge to another, like
bankruptcy automatic stay = bankruptcy court to all other courts or such
They have already copied all of TF’s servers when they were seized and returned. You may find several references of “imaged” in the SEC complaints. That means the hard drives have been copied.
That still makes it hard to figure out how people came in to the business because of what I posted before.
Did they pay out through a different company than TelexFree?
BWFC Processing Center LLC is a commercial registered agent, owned by Adams, Craft & Ewing LLLP.
BridgeWay Financial Corporation is owned by John Ewing.
BWF Consulting is a new name, but it’s probably owned by the same group of people. I wasn’t familiar with that company name. I will try to google it.
They can at least get the total dollar amount (i.e. how much was paid into TF). For actual claims a receiver will probably have to be appointed, but let’s cross the river when we get there. (Much like Zeek did)
BWFC Processing Center LLC also is a New Hampshire payment-processing business.
Craft was listed as “manager” of the New Hampshire entity in a filing in that state on Feb. 27, 2014.
PPBlog
Can you add more details to it?
* Type of company? LLC, Inc, Ltd or others?
* “BWF Consulting” or “BWF Consultants”?
* Name of the bank they transferred money from?
Type of company will help me to identify where a company is registered, e.g. Ltd is the UK version of Inc. Small details like that can save me a lot of work.
Thanks. I will add it to my list.
It’s also registered on Joe Craft’s main address in 825 E MAIN ST BOONVILLE 47601 INDIANA (registered in both Indiana and Nevada).
But there comes the problem. It’s simply not worth the efforts checking all the different business registries in all different jurisdictions.
If I’m looking for a payment processor, it’s probably easier to check VISA or MasterCard – list of third party agents.
Let me save you some work. 🙂
BWFC Processing Center LLC operates a payment-processing business in New Hampshire and is associated with Craft addresses in both New Hampshire and Indiana.
TelexFree regulatory filings to obtain a telecom license in Alabama identify Craft as TelexFree’s CFO during the opening week of March 2014. That’s BEFORE TelexFree held what in essence was an emergency board meeting on April 13 at which Craft was appointed CFO.
Meanwhile, Page 19 of the 99-page Alabama document shows an image of a March 8, 2014, document from the office of Alabama Secretary of State Jim Bennett. The document notes that the name TelexFree LLC was “reserved as available” in the state.
Here’s where it gets interesting . . .
“This name reservation is for the exclusive use of BWFC Processing Center, LLC, 825 East Main St, Boonville, IN 47601 for a period of one year beginning March 08, 2014 and expiring March 08, 2015,” the document reads in part.
Why the name TelexFree LLC was reserved in Alabama for BWFC Processing Center LLC (with Craft’s address in Indiana) is unclear.
PPBlog
It does not have to be court to court, judge to judge. An individual movant can ask for a stay and receive one upon showing there is a high likelihood of irreparable or irreversible damage should an order be carried out but reversed on appeal.
Typically the movant must show proof of filing the appeal within a limited period of time to maintain the stay. In such a case the appeals court is not issuing the stay. It is the court that signed the original order
Often a bond is required as well.
That BWFC was the commercial registered agent for service of Telexfree LLC seems like a reasonable guess. I don’t know if its right or not.
That’s very close to some of the descriptions I have got from several promoters, but I didn’t ask for all the details (I already knew most of them).
Some teams were organized around ideas like that, while it was less common in other teams. The method was commonly known and commonly used, but it wasn’t TYPICAL for the average promoter. The TYPICAL method was simply “work from home / get paid weekly”.
That method was rather TYPICAL if people had more than one account.
They can forget all the internal transactions, and that will make it much easier.
* People have paid money IN, either to TelexFree (or another entity) or directly to a promoter.
* People have received money OUT, either from TelexFree (or another entity) or directly from a promoter.
Net loss will be the difference between money IN and money OUT. They can simply forget all the internal transactions. They can forget frozen e-Wallets too, but they will potentially be asked about e-Wallets.
But that’d be issued by the same judge to a order he himself signed, so essentially it is still a judge to a judge? Or did I reduce it down too far? 😀
That could be an attempt to “domicile” the corp in that state. Or it could be to create yet another deniable “clone” corp as diversion.
Hey Oz, the Order Approving U.S. Securities & Exchange Commission’s Motion to Change Venue is out. Go check it out.
http://www.kccllc.net/telexfree/document/1412524140507000000000003
@@@@@ @DIEGO….
Just check this: youtube.com/watch?v=b25Lzd4BSFM
Yes. Hearsay has it that San Rodriguess & Co. Left a bunch of investors holding the bag in Minas Gerais a few years ago. There is also the issue of how their VOIP system was operating (re-routing), allegedly violating ANATEL’s regulations in Brazil.
http://goo.gl/3JkAR5
Wasn’t that him trying to resurrect his US Ponzi “Universo FoneClub” in Brazil? IIRC, that is.
Why would anyone ask for stay when further proceedings already have been suspended? It would make more sense to reopen the case?
I don’t think a change of venue from Nevada to Massachusetts can be classified as “high likelihood of irreparable or irreversible damage”.
I don’t either and doubtless the Bankruptcy Appeal Panel would feel the same way which is why asking for a stay on the venue change Order would be a waste of time.
Chang and I were discussing the general mechanics of a stay not Telexfree.
At this stage, I don’t think logic will have much to do with what happens.
It’s going to be a case of delaying, delaying and more delaying from here on in, IM(very)HO.
You do seem to be entering a logical death spiral there.
A judge can stay his own order.
Hopefully it will be possible to distinguish between delay for the sake of delay and the inherently time consuming process of providing due process of law to the accused.
There is a logic to delay.
Agreed.
I should have specified that I was referring to the entire process, rather than the bankruptcy and that the delay/s would come from both sides, not just the defendants.
From memory, the AdSurf Daily case took around four years from civil action to the cell door slamming on Andy Bowdoin.
I see no reason to expect any different result here.