TelexFree file lawsuit against Brazilian media
No doubt frustrated at the amount of legal setbacks the company has experienced in Brazil’s courts, TelexFree today announced that they were initiating legal action against the media company Globo.
Globo, who have been diligently reporting on TelexFree’s ongoing legal failures over the past few months through their online news portal “G1”, are the largest media group in Latin America and ranked 17th in the world for global media ownership.
Last Tuesday the topic of TelexFree came up on “Mais Você”, a television show hosted by Ana Maria Braga on the Globo television network.
With the discussion reflecting the obvious Ponzi scheme nature of the business evident to anyone who hasn’t invested money in the company, at one point during the three-minute segment Braga jokingly asked “whether or not TelexFree’s affiliates were bandits”.
Cue internet firestorm from TelexFree and its affiliates.
Following the broadcast TelexFree were quick to condemn Braga’s comments, labelling them “slanderous, libellous and defamatory”.
Before the matter, abusive defamatory and slanderous displayed in the program plus you rede Globo on Tuesday 17 September the Board of TelexFREE announces that it is already taking the appropriate legal measures, demanding the right to aggregate response with the request for moral damages, even on today’s date.
We’re together in defence of our rights.
TelexFREE (translated from Portuguese)
Putting aside the question of how a television broadcast can be libellous, TelexFree’s posting was quick to garner over 1200 supportive comments from its angry affiliate investors.
Published in the same hour as the above message, then came the news that TelexFree had filed a lawsuit against Globo. In their suit, TelexFree seeks unspecified punitive damages and demands a “right of reply” to be aired on the network.
Their argument?
1. (TelexFree’s) main economic activity is the marketing of VoIPs at Multilevel Marketing system, being the most commercialized product is called 99TELEXFREE, which is an adapter that allows users to call landlines or furniture in the national territory or to about 40 countries and is a viable and inexpensive to replace the high cost of fares offered by phone carriers in Brazil long-distance calls (DDD), International (DDI), as well as those made for devices phones.
2. The company uses sales strategy as network marketing or multilevel marketing (MLM).
This strategic concept is based on the distribution of products and services through the appointment of independent distributors, called Promoters, to third parties who resell the products marketed by the Claimant, the Claimant being a national leader in marketing VoIPs.
Possibly explaining the swiftness with which TelexFree filed the suit, these same points have been repeatedly trotted in attempts to lift a business crippling injunction granted in the Brazilian state of Acre in June.
To date TelexFree, using the above arguments, has failed to convince a Judge in Brazil to lift the injunction. Back in June, upon hearing TelexFree’s “we have a VOIP product argument”, Judge Thais Kalil remarked
adding publishers to the network is of more importance than actually trying to sell the VoIP product.
The issue is that the earnings will be exhausted when the main source of revenue of the group (new affiliate registrations) stops.
Many (affiliates) do not even have the opportunity to recover their initial investment (minimum U.S. $ 339) and this is detrimental.
Meanwhile in response to schemes like TelexFree wreaking havoc across the local MLM industry, the Brazilian government has released a booklet that explains ‘the differences between financial pyramid schemes, which are illegal, and multilevel marketing‘.
The Ministry of Justice published the booklet, which they claimed was in response to over 80 complaints received from the general public and over ten lawsuits filed against such schemes by Federal and State Prosecutors.
The booklet, which is available online, shows that the main difference is that in a pyramid scheme the sale of a real product or marketing of products or services is of little importance to its operations.
In a pyramid scheme, the main source of income is the incentive for recruitment of new people into the business, which requires exponentially infinite growth and is not sustainable.
So how does TelexFree stack up?
The document points out some points that can help detect pyramids:
– Requirement to pay initial high values for membership
TelexFree charges affiliates $289 for an “AdCentral” investment position in the company, paying out a guaranteed $20 a week ROI for 52 weeks.
Affiliates are also able to purchase multiple positions, referred to as a Family AdCentrals for $1375, paying out 5 x $20 for 52 weeks.
– The work of “dealer” is not clearly linked to a real effort on real sales of the product. There may even be some activity involved, but it makes little sense for the sale.
Affiliates supposedly purchase TelexFree VOIP contracts each week, which they then sell back to the company for $20. Needless to say it is only the payment of money to TelexFree by an affiliate that qualifies them for payment, rather than the sale of a product to any customer(s).
– The promise of high profits, usually in a short time, with no clarity as to any real effort by the participant with respect to the sale of products.
As above, TelexFree affiliates invest in AdCentral positions with the company paying them $20 a week per AdCentral invested in.
As a standalone retail product TelexFree’s VOIP offering makes little sense when compared to alternative VOIP offerings such as Skype.
Whether or not TelexFree will now also sue Brazil’s Ministry of Justice for pretty much declaring their business model to be a Ponzi scheme, remains to be seen…
Given that TelexFree includes ice cream makers, Rambo-ney, aNatGeo video pirates (that guy who stole the Kruger National Park video to illustrate how Lions and more can’t kill that calf), and people dumb enough to send death threats to judges, can we really take any of the comments seriously? 😉
Man.. these guys don’t give up do they.
The Parrot says, “Telexfree is under an injunction but there has been not formal finding of wrongdoing or criminal activity.” Squack Squack
Wow! Telexfree lawyers hit the “jackpot” when they where retained by Telexfree. The nonsense they come up with to keep the checks coming.
A common thread between Telexfree lawyers and affiliates????? “as long as I’m making money” the **** with everyone else.
You should see the SpeakAsia topics… Reads almost identical, including filing lawsuit to sue a TV (comedy/satire in this case) that criticized/made fun of it.
It will be interesting to hear more about the telexfree frauds and money laundering schemes. Seems that everything TF does is covering up one lie after another.
And bye the way….What’s going on with the famouse lawyer Gerald Nehra????? He was one of the “reasons” for Telexfree being legit?
Last we heard from him he was trying to legit himself publicly saying Telexfree had to be 20% selling product and they weren’t there yet..Telexfree big wigs have mentioned a second legal team???? whys that?
Has Gerry actually said… Hey maybe I want to have some kind of legal career after Ponzie Pyramid schemes…???? Or has some government entity wispered in his ear that they’re on to Telexfree and he’s bailing like any self saving rat does from a ship?
that is…..a sloooooow siiiiinking ship……
According to some sharp-eyed observers… Telexfree “UK” is playing dodge-a-hammer as it has posted yet 3rd address since it was first exposed here.
Three addresses in less than 2 months? Nothing suss…
Ympactus(who represents Telexfree in Brazil) has filed for bankruptcy protection.
https://www.facebook.com/photo.php?fbid=301768886630887&set=a.151664011641376.32507.136480546493056&type=1
With assets frozen I don’t really understand why they’d need bankruptcy protection? Unless they were using Brazilian money to pay off the rest of the world (??).
Or is this TelexFree cutting its losses and exiting the Brazilian market?
Yeah as I understand it Costa is going to put out another video tommorow about it. Hopefully the local news cover it as they’re always easier to understand (and don’t waffle on about god etc).
Bad news for the investor/promoters. The golden “dream” is now officially and permanently turned to sh**.
The frozen money still belongs to Ympactus. If the BK court approves it may be incrementally released and used to administer the estate, which includes a BK Trustee’s obligation to defend the company against private and governmental actions. Quite possibly such funds could be used to defend the good faith actions of the officers and directors of Ypactus as well.
Though I have not read the filing it would seem the intent is not to dissolve the company but to protect the frozen estate assets and hope to use them to fight against the Acre Civil Action.
If Ympactus loses that Civil Action then the company will be dissolved and whatever assets remain will be distributed to the creditors. We are not there yet but Juiza Borges down in Acre can rule on this issue at any time.
On the other hand the Acre Prosecutor, will, if pressed, argue in front of the BK Court that use of estate funds for defending the Civil Action is unsupportable and any Motion to do so should be denied. He might argue that by statute, bankruptcy protection is limited and may not be used to protect illegal activity.
The injunction placed upon Ympactus (which was the subject of appeals is based upon strong suspicion and sufficient showing by the state. None the less Telexfree has not been legally found guilty of anything yet and they have the right to seek bankruptcy court protection.
Here come the news articles with some additional information:
http://www.ac24horas.com/2013/09/19/falencia-anunciada-advogados-da-telexfree-ingressam-com-pedido-de-recuperacao-judicial/
” According to the statement, the associate director, Carlos Costa, will be explaining all the details of the lawsuit on Friday, 20. The company claims that the new lawsuit aims to protect their affiliates..”
Costas’ opinion of what will “protect” the affiliates is clearly different from the Acre’s Prosecutor.
Can you summarize it?
It’s more like protect their own ***es by declaring bankruptcy protection from creditors… i.e. their affiliates filing lawsuits against it.
In other words, it’s to protect AGAINST affiliates.
Any remember the joke “to serve man”?
http://en.wikipedia.org/wiki/To_Serve_Man_(The_Twilight_Zone)
Captions are up on the Costa video and translate reasonably well.
Costa first holds up flags from two different countries which have been signed by TelexFree management (Merril and Wanzeler). These were from a TelexFree affiliate investor recruitment drive recently held in South America.
Costa then spins the thirteen appeal denials by saying without them they wouldn’t have been led down the path of filing for bankruptcy protection (so getting denied was a good thing).
He then appears to address criticism from Facebook etc., saying that somebody (a judge?) has said if they pay back affiliates all will be well (summarised). That is apparently rejected because Costa asserts TelexFree hasn’t done anything illegal (and that they will somehow prove it at a later date).
Then he starts crying about prosecutors referring to TelexFree affiliates as “investors”. He also complains about police “calling” up their affiliates and mentions the TV show during which it was asked whether or not TelexFree’s affiliates were bandits.
Costa states this is all evidence of “confusion” surrounding TelexFree and its business model. He mentions 90 days from the 21st as a sort of deadline, not sure what for.
He mentions something about someone trying to play affiliates against the company, which think is your standard call for unity amongst Ponzi operators when things go south.
The payment of taxes is also dragged out again as a point of legitimacy.
Points of the bankruptcy case Costa makes:
1. Any company has the right to fight “for its life”, that being how it operates commercially.
2. TelexFree has, by law, 60 days to present a payment plan if they are granted bankrupty protection. Costa appears to say that they won’t submit a plan, but the 60 days will “allow them to get justice” or some such.
I think he’s stating this is a time stalling approach (?)
3. If bankrupty protection is approved, all affiliates will have to prove they have a balance with the company. This will be presented to TelexFree’s lawyer, with all payments accounted for by their new payment model (?)
How that’s going to work when common-sense dictates TF can’t pay out more than they took in from affiliates is not discussed.
4. The company will work strictly within the law. They will prove that to a Judge, a trustee and prosecutors (Costa thanks god) that TelexFree has a legitimate business model and prove it’s economic viability, legality and sustainability.
They will do so under the “strict eye” of a Judge, trustee, public ministry and it will be a “marvel, thank god”.
Costa claims all this despite the fact TelexFree has failed to achieve the above over thirteen denied appeals.
He finishes up the broadcast by stating (I think) that “numerous documents” have been submitted, telling everyone to wait for “an attack” while the documents are analysed. After which “justice will manifest” itself.
Costa declares he is confident they will succeed because he has the “Grace of God” and “all the documents are in order”.
A bunch of “TelexFree will recover” waffle happens and then he closes out the video.
The only one who needs bankruptcy protection is Costas himself (from angry affiliates looking for their money).
The bankruptcy has to be approved by a judge, unless laws are very different in Brazil. A company suspected of criminal wrongdoing cannot dodge its responsibilities by Bankruptcy reorganization.
The guy is just another YouTube hack.
My prediction is that the bankruptcy will be rejected or limited. A bankruptcy court will not have the correct jurisdiction to take full control over the case or to interfere with the other court’s decisions.
Ympactus Comercial SA is a newly registered entity, registered after June 18th. It isn’t even included in the complaint or in the order from the Acre Court (YC LTDA is).
Hi guys, I just became a promoter yesterday Sept 20, and the invoice I received was emitted by Telexfree LLC located in Massachusetts USA.
My question is, are these two firms the one in Brazil and the other in The USA linked? or they operate separately? Because I realized that the CEO of Telexfree Brazil is Carlos Costa, in the other hand Telexfree LLC CEO is James Merrill.
Do you guys think that I lose my money?
Thank you!
Costa isn’t the CEO of anything. James Merril, Carlos Wanzeler and Carlos Costa own TelexFree. It’s the same company globally, despite the weekly-changing mailbox adresses and company names used.
Thank you OZ. At this point I guess I lost my money, didn’t I?
Not as long as new investors such as yourself keep joining. Your money isn’t lost, it’s just been paid to people who invested before you.
That said I’m not entirely sure what happens if TelexFree lose their bankruptcy protection application in Brazil. They’re fast running out of options with a civil case filed against them and criminal charges apparently soon to follow.
TelexFree USA does still pay, but it has had payment problems for 1.5 to 2 months, since it changed to GPG payment processor. It has just recently changed to i-Payouts.
It’s impossible to predict anything in the short term, but it will eventually be shut down or run out of investors. That might happen without any “warning periods”, it can be directly affected by the investigation in Brazil or by a court decision there.
TelexFree USA and TelexFree Brazil are two different legal entities, but with the same owners (Costa, Merrill, Wanzeler).
The injunction in Brazil was about ACTIVITIES rather than about ENTITIES = about recruitment into the network marketing part of the businesses in/from/to Brazil (within the Court’s geographical jurisdiction), and about payment to and from the illegal parts of the business.
The defendants in the case were/are
* TelexFree Brazil (Ympactus Comercial LTDA)
* Carlos Costa (owner, living in Brazil)
* James Merrill (owner, living in USA)
* Carlos Wanzeler (owner, USA)
* Lyvia Wanzeler (wife of owner, USA)
The Court in Acre CAN legally shut down TelexFree USA through an American Court, but so far we haven’t seen anything pointing clearly in that direction.
There IS an upcoming case partly pointing in that direction, but we know too little about the details there. The Court in Acre sent out subpoenas on September 3rd to the defendants or to witnesses.
Subpoena = legal request for information and documentation in a civil case, for “disclosure” purposes (a pre trial action). It had a 20 day deadline, and I have translated that to be about 4 weeks = at the end of September / beginning of October.
QUICK OVERVIEWThe best method to get an overview is simply to look at the headlines in the articles here and the dates they are published. That method will give you a quick overview, primarily about the situation in Brazil.
* scroll to the top of this article
* click on “TelexFree”, right under the headline
* that will bring up a list of all TelexFree articles
If you want a quick overview for payment problems July 30 to around mid September, you can find information like that on telexfreeunitedstates.com/telexfree-updates (I don’t have any link, I just remember where I found it).
Its likely they are both part of a larger organization.
Thank you Oz and M_Norway… I’m much more clear on this subject.
Let’s wait for news in the icoming days to see what happens.
You will be lucky to break even.
I’m curious, what made you decide to join TelexFree, was it a speil from your upline making you believe you are in a good position to earn lots of money? Or something else?
Wait, so they register a scapegoat entity, to have it declare bankruptcy, in hopes of saving the real entity? Now THAT is fraud for sure.
You do realize that is not a real office, right?
http://amlmskeptic.blogspot.com/2013/07/telexfree-location-lie-its-tvi-express.html
Depending on how you paid, there may still be a chance to reverse the payment.
That doesn’t make any sense at all.
Portugal-Latin America uses the title SA (anonymous partnership) for stock corporations and LTDA (limitada or limited liability) for limited companies.
A few months ago (June?) there was a flurry of gossip concerning affiliate “points” being converted to stock ownership. The public discussion of this died off but it doesn’t mean it did not happen. Effecting such a conversion requires little more than paying a few fees, some documentation and transferring data from one company to another.
Did defendant Ympactus Commercial LTDA convert to Ympactus Commercial SA? Maybe, but in any event it does not matter as far as the civil action goes. The Court is not going to lose track of the defendant’s identity. The proper parties will be joined or substituted as required.
However, forming corporations (SA) or Limited Companies (LTDA) after the fact provides no shield from civil or criminal liability incurred prior to formation. So why convert?
The conversion appeared to be a way to convince the critics, the public and the court that promoters owned something more than empty ponzi-pyramid promises.
The “something more” was to have been stock in a newly formed corporation, which by appearances was the company formed in June called Ympactus Commercial SA.
Without a complete accounting of either companies’ assets it is impossible to know if the promoter’s stock has/or could have any value. There is potential value if Ympactus Commercial FTDA contributed real estate owned and the rights to cash (even though currently frozen) to the SA company.
Under such circumstances as these it makes sense for CY SA to file for BK protection.
Ympactus SA is probably the successor of Ympactus LTDA, the same legal entity but with a new ownership structure. It was registered (or changed) AFTER June 18th.
SA = Public
LTDA = Private
The judiciary in Brazil will most likely handle the situation correctly. It isn’t worth spending too much time on it, TelexFree’s different appeals have all been rejected.
I also stopped believing in Costa’s defense ideas several weeks ago. 🙂
Successor, yes. same legal entity, no. The same legal entities do not have different names. That would be pretty confusing wouldn’t it?
I’m sorry for my limited English. I’m brazilian.
I think I can somewhat explain that.
Ympactus was registered as a special kind of business entity (LTDA ME – ME translates roughly as “microbusiness”) that has some special protection from the brazilian crazy bureaucracy. But this kind of entity can not legally earn more than R$360.000/year in *gross* revenues.
So how it´s legally possible that Ympactus was paying millions to top promoters and indirectly waving (never at its own website) recipes of paying crazy amounts in federal taxes?
Just ONE of these recipes (a brazilian DARF) shows Ympactus paying 59 MILLIONS in income taxes on behalf of its promoters:
http://www.nossogruponacional.com.br/tag/darf-telexfree-2013/
No one outside telexfree really believes that DARF is legit, of course, but the questions about how a business limited to gross revenues of under 0.36Mi could be paying (at least) 59Mi in taxes had to stop.