TelexFree lose 2nd bankruptcy case, Costa rages
Back in September last year TelexFree tried to convince a court in Acre that, despite being owned by the same three people, TelexFree should be able to use Ympactus’ funds to pay off Ympactus’ debts, including ROIs owed to affiliate investors.
As part of the injunction handed down against TelexFree, Ympactus’ funds are currently frozen.
Not surprisingly, a judge rejected TelexFree’s bankruptcy application, as it was clear the company was just trying to wriggle free funds it had been blocked from. Practically speaking, other than using a different name, there’s no difference between Ympactus and TelexFree.
Hearing the case, Judge Braz Aristóteles dos Reis firstly pointed out that in the public eye, TelexFree and Ympactus are one and the same company. That withstanding, they both also list James Merril as the owner in official company-related documents.
Furthermore, according to Brazilian law a company provided as a credit source in a Bankruptcy Protection application has to demonstrate active operation for over two years. Ympactus failed on this count with tax filings only dating back to 2012.
Same owners, same business, same AdCentral driven Ponzi scheme.
Now, almost six months later, it appears TelexFree figured they’d try their luck in a different Brazilian state by filing another bankruptcy application. This time filed in Espírito Santo, here’s how TelexFree’s latest attempt to circumvent the Acre injunction went down…
In filing their second appeal, once again TelexFree’s arguments remained consistent with what they presented in Acre. They claimed Ympactus should be granted bankruptcy protection because they had been in business for two years.
The problem with this argument is, as it was in Acre, that while Ympactus was indeed first registered in 2010 (well over two years ago), it was initially registered as a company to ‘market cosmetics, perfumery and toilet personnel‘.
During this time, it was revealed in the Acre bankruptcy hearing that ‘for the months of September and October 2011 at R$63 ($28.63 USD) and R$21 ($9.54 USD) respectively‘.
These amounts, in the Judge’s opinion, clearly demonstrated Ympactus’ failure to meet the requirement of “regular (business) operations) for two years prior.
It wasn’t until March 2012 that owners Carlos Costa, James Merril and Carlos Wanzeler repurposed Ympactus to front the TelexFree Ponzi scheme in Brazil.
March 2012 of course putting us at less than two years (which I believe is counted up until the time the company was effectively shutdown in Brazil in June 2013).
Mirroring the Judge’s decision in Acre and based on the fact that Ympactus’ ‘contract with Telexfree was made less than two years‘ ago,
Judges Lyrio Regis de Souza Lyrio, Janet Vargas Simões and Annibal de Rezende Lima unanimously voted to dismiss (TelexFree’s) appeal.
Following the rejection, an angry Carlos Costa took to YouTube to declare that ‘he found the decision to be strange‘. Costa claimed that
the obligation of (the) Justice is (to ensure) the firm’s survival, especially thinking of its creditors and the affiliates.
Costa stated he wants to pay the advisers, however (the appeal was) treated more as an attempt to unlock £29 million for Telexfree International.
Whether intentionally or not, with that last statement Costa hits the nail on the head. Underlying the “we want to pay our affiliates’ hookline is the simple fact that, being barred from recruiting or paying out affiliate investors in Brazil, TelexFree is likely to siphon off any released funds offshore. Then, with Costa on board a plane to join fellow TelexFree owners James Merril and Carlos Wanzeler in the US, the company could abandon what’s left of their Ponzi legacy in Brazil.
Evidence of this has already surfaced, with TelexFree closing it’s Brazilian office earlier this month:
Those associated with Telexfree will not meet at the headquarters of Ympactus anymore. Those who invested in TelexFree were surprised by a sign warning that the company will no longer be receiving people at the Brazilian office, only in Massachusetts.
What hasn’t been widely discussed is the obvious, that those affiliate investors who still believe in Brazil are being urged to re-sign up as affiliates fraudulently through the US and other countries. Additionally any money paid out to existing Brazilian investors on the condition that TelexFree be permitted to resume operations would then likely then be re-invested back into the company (to be then paid out to those at the top of the scheme).
And that’s precisely why TelexFree’s bankruptcy claims, along with every other appeal they’ve filed, has been thus far denied.
Reading between the lines, it would appear the frozen funds is the only reason Costa remains in Brazil. It might have originally been on the idea that hoodwinking the Brazilian judiciary into believing they should legalize Ponzi schemes was possible, but as evidenced by TelexFree abandoning Acre and trying their luck in other Brazilian states, the reality of a pending Judgement against the company seems to be finally sinking in.
Meanwhile in other TelexFree news, Public Prosecutors in Acre have tracked down the publisher of false claims that one of their own had been murdered. The claims, published on Facebook back in December of last year, alleged
that a prosecutor involved in the TelexFree pyramid-scheme probe had been murdered. The bogus report was supplemented by photos of a mutilated body purported to be that of the prosecutor.
Turns out using death hoaxes against Public Prosecutors in the vein hope they’ll drop the case against your favorite Ponzi scheme wasn’t the smartest idea…
One person, a resident of Rio Branco, was identified as the owner of the computer where the news originated.
According to the prosecutor Adenilson de Souza, member of the Special Action Group for Combating Organized Crime (Gaeco), conductor of the investigation, so the news began to appear, a procedure was established to determine the facts.
The procedure now, according to Souza, is to forward all investigation material to the Special Court under a “crime of threat” complaint. “When the Judgeship receives it, (they) will probably make a complaint and then (the publisher) will have the responsibility of answering in court for this illegal act,” he adds.
Sounds good to me…
Unfortunately these delaying tactics could easily drag on for three or four years.
The court is not an investigative agency, can only act on the motion before it at the time and has to treat each motion on its’ individual merits.
What happens next depends largely on how deep TelexFrees’ pockets are and whether or not criminal charges are bought before the civil part of things is concluded.
I wouldn’t be so pessimistic, LRM. The prosecutors have brought in the big hammer: organized crime unit.
The civil case has gotten enough attention to make it a CRIMINAL matter. THAT will likely accelerate prosecution schedule.
In fact, I wouldn’t be surprised if there’s already surveillance on Costas himself to make sure he doesn’t jump on a plane like Manoj Kumar.
I’m not at all pessimistic. I cannot imagine the Brazilian authorities are going to put up with this nonsense for much longer.
IM(very)HO, it won’t be for the want of trying every delaying tactic in the book (and not in the book) by Costas and those behind TelexFree, I might add.
https://www.law.berkeley.edu/library/robbins/CommonLawCivilLawTraditions.html
Looks like Telexfree in Brazil is going down. But what about the US, Russia, latin ameria, and the rest of the world?
The reports from alexa.com show Russia as bigger trafic to telexfree than brazil, meaning there are just as many promoters there. I mean, even if Brazil shuts down telexfree in this country brazilians will still be investing in telexfree argentina, us, latin america, etc, you name it.
What do you guys think?
At this point, I wouldn’t put it past Costa to be trying to delay TelexFail’s demise by causing a ruckus to distract the
authorities in Brazil while it/he builds up a nest egg in other countries.
He likely knows very well how far his ship has sunk, and the very slim to nil chances of its recovery.
events that might happen in the future? that dissolve the company in brazil and rivalgono on the American one? really could last another 4 years? we have to wait for the SEC to intervene from 1 year? how the process will go forward now, what would be the next step?
There is no rest of the world if nobody’s PAYING for all that VOIP and those ad servers for them to log into.
I think they call it “decapitation maneuver”.
And guess where are they ALL going soon? On a cruise. 🙂
Listen Guys I read your comets and K.Chang updates
I just have few questions.
Why Behind MLM blog site only reports negative news about every single company, its always bad bad bad news?
Every time I read the news it is never positive.
Why when there is positive news that the company releases and everyone knows about it, this website doesn’t mention a word about it.
Me and all the readers of this blog would like to hear both sides of the story about every MLM company that is listed on here.
( I dont mean to piss anyone off here just want to enjoy reading good news when there is about any given company)
Please report the truth 🙂
@robert
Next step is either regulatory shutdown or Ponzi implosion. The former is looking much more likely than the latter at this stage. TF are doing a stellar job of fleecing new South America and Europe based investors at the moment.
@Alex
I named BehindMLM for a reason. I try to take people behind the spammy press-releases and forced smiles. This is a no-BS look and analysis of the MLM industry. There is no “negative” and “positive”, only news.
Anyone who’s emailed me and waited for a response will know I’m pressed for time as it is. Why waste my time covering what “everybody knows”? If you want to read that sort of stuff there’s plenty of other MLM blogs regurgitating press-releases and marketing spam for you to read.
I focus my time on creating original content you’re not likely to find elsewhere. And even if it is available elsewhere (without my permission or otherwise), often a lot of supplementary value to the articles themselves is provided via the comments here, which you certainly won’t find anywhere else (and for that I’m grateful).
Unfortunately, due to the state of the industry this means I find myself mainly covering the underbelly of MLM. People who would prefer to be left to run their schemes quietly from the shadows.
This is a reflection of the industry itself. If it policed itself I’d have nothing “negative” to write about.
Nothing but.
Oh men! I just want TelexFree to be closed down in the US and Brazil already!! When you think that will happen OZ?
Even the Black Death ended.
Of course it killed between seventy-five and two hundred million people before the population was so thinned out that the plague could no longer sustain itself.
@Oz and Chang:
I’ve put up a complete analysis from a legal perspective on TelexFree and TelexFree International at telexfreereport.the6parameters.com
Can you guys take a look at it and let me know if I’ve missed anything you think needs to be added?
If the analysis meets with your approval, feel free to use it or refer to it…
Ken
What TYPE of comments do you want? We’re not the “approval” type of guys. In most cases, we will share information and provide a platform for doing it.
Some parts of it, e.g. the VoIP subscriptions and the sub accounts, may be easier to understand if you see it from a user perspective = “how it’s being used in reality” rather than a technical description.
You can try to ask one of the members posting in the MMG forum about the details for that.
The first month VoIP subscription is actually how to register to become a TelexFree promoter, a type of “registration fee”. People will need to pay it even in countries where the VoIP service don’t work.
After the first month, the invoice can remain unpaid in the back office.
After you have signed up as a promoter, you can invest in “contracts” (AdCentral $289, or AdCentral Family $1,375), and you can generate sub accounts either for personal use or for people you recruit.
A sub account is the same as your main account, but it will be organized under your main account. You will need to pay $49.90 minus $44.90 commission = $5 net price (the first month). The sub accounts will be placed into a binary system under your main account = you will earn binary commissions if you invest in “contracts” through sub accounts.
The sub accounts also acts as fake customers = qualifiers for binary commission.
You don’t NEED those sub accounts, you will only need them if you want to earn the binary pairing commissions from your own investments, or from investments made by people you have recruited.
Its a great read. Thanks.
@Ken
Well I’m an approval kind of gal. I really appreciated your analysis and the time it took you to put it together. It was easy to read and you explained all areas in a way that I think people will be able to understand. That is “english” speaking people….
My concern is the non English speaking people and those that don’t even have access to the internet. Peru? Really? DR? Really? Africa?
I believe in taking care of my brother and sister no matter where he or she is.
@Ken due to TelexFree being an evolving story, I’m not too fond of definitive analysis beyond an initial review.
We know TelexFree is a Ponzi scheme by review and analysis of their business model, the rest of the story is still being written.
I have found a couple of websites (links disabled).
Faith Sloan / Scott Miller, “the back office explained”:
telexfree.faithsloan.com/telexfree-how-to-videos/backoffice/telexfree-backoffice-training-scott-miller/
Scott Miller signup an advertising:
everyonepaidweekly.net/
The first video shows the sub account system, among many other details. The Scott Miller recruitment site show some of the marketing ideas, i.e. it isn’t solely about investments in AdCentrals, it’s more about a “system” where people can do a whole lot of things.
People can generate sub accounts directly from the back office, for personal use to earn binary commissions, or for recruitment purposes (also to earn binary commissions), or to generate fake customers as “qualifiers” for commissions.
The sub accounts can also be used for sale of the VoIP subscriptions to real customers, e.g. selling 1 month subscription as “air time”. Or it can be used for “discount” on personal use of the VoIP service, paying net $5 rather than net $48.90 for second and following months.
Net price:
$49.90 minus $44.90 commission = $5 (1st month). You will probably find some eBay examples trying to sell “TelexFree air time” for $10 – $25.
AFAIK, TelexFree doesn’t have any limits for the amount people can invest or reinvest. The $289, $1,375 and $15,125 are only EXAMPLES for some typical investments, but “if you want to earn more you can simply buy more contracts”.
can tell me what this is “Acre” ?
Acre is a state in Brazil.
@Norway-thanks for the input-I’ll add it to the review/analysis. It was the one angle I didn’t spend time on, but you’re right in your assessment.
Might have misunderstood my use of the word “approval.” What I was basically alluding to was that if it met with your approval in terms of being accurate as far the information and facts presented, and sound as far as analysis and reviewing the company and its program, that if you wanted to use it, share it, etc., great…
@Oz-agreed…there is more to come in the story, especially around mid-year with the anticipated final ruling in the case…this is a definitive review/analysis as of the current moment…it can always be updated, which I plan to do…as I know you do on your site as well…
@Oz-they’re fleecing a huge number of people in Africa, especially Uganda, Kenya, and Tanzania (East Africa!) Haven’t heard much from Western Africa, although I’m sure there’s a number of people in Nigeria that are likely involved…
We “share information”, so we will usually “approve” nearly all types of relevant information.
You had a part I was very interested in, the part about teambuilders. That’s a part I haven’t analysed myself. And that’s how it works here, people will simply add information to the existing one, from many different viewpoints. People will also use the information in many different ways.
I simply tried to find the pieces of information I was missing myself, and my main focus was on those parts. That’s how people will be reading it when they’re familiar with the topic presented, they will be looking for something specific.
I was primarily looking for “missing pieces”, something I could add to my own knowledge. And I found some pieces. Other people will probably be looking for something else.
Another piece of interest was the Tanzania part. It didn’t exactly come as a surprise to me that the local organizers were very little interested in any “conflicting ideas”. 🙂
TelexFree can be compared to Zeek Rewards, it will primarily attract non-MLM people. Programs like that will attract experienced Ponzi players, and a lot of people with very little business experience.
I believe your MLM ideas may have failed in Tanzania, it was simply not the right type of audience there. It was another type of income opportunity seekers than what you normally will meet in MLM.
The first state in Brazil where TelexFree was officially “shut down” by a court.
* Capital city = Rio Branco.
* Population = appr. 750,000 people.
TelexFree Brazil hasn’t been completely shut down yet. It has only been halted from doing any recruitment related activities in/to/from Brazil. But that includes all transactions to and from promoters.
@Norway:
Having your assets frozen, prohibited from recruiting new people, prohibited from paying any commissions, and losing 14 appeals to have the original injunction lifted effectively means you’ve been shut down if you’re a network marketing company.
The only question that remains is will this be a permanent shut down, which the Court has indicated a final decision will be rendered around mid-year, and based on the numerous appeals they’ve lost to date, there’s every indication that it’s likely to be permanently shut down when the Court’s decision is revealed mid year…
Pretty good analysis, but you may want to make it more in the Ackman style HerbalifePyramid website.
My personal feeling is you talked WAY too much about yourself at the beginning. While it is important to establish your credentials, the facts you present should stand for themselves.
There should be an index to the different sections that allow people to jump ahead.
I haven’t read every section, but I can tell you that TVI Express is a bigger scam, as it crossed too many nations. In South Africa alone it’s about 100 million USD. And TVI Express pyramid hit almost every country in the world, after getting started in India. Cumulatively speaking it should be well over a billion dollars. The head of the scam, Tarun Trikha, had enough dollars to start a sham airline in Indonesia, that’s how much money they stole.
Chang:
First rule to remember: Why should people listen to you? Hence the reason for making people aware of my background. I’d rather know too much about someone, than not enough…
Second, it establishes credibility and expertise. Facts, while certainly important, are not enough in and of themselves. Facts can be spun a number of different ways-people need to know that you have the background, the knowledge, the experience, and the expertise to put the facts in proper context and qualified to speak with some authority as to what those facts really mean.
Regarding TVI Express, I knew Tarun Trikha (tried to warn him several times that his program was going to get hammered for being an illegal pyramid scheme as I was in India at the time), and while TVI Express certainly qualifies as perhaps the biggest illegal pyramid scheme to date that was marketed via a network marketing program, by the time U.S. regulators get around to hitting TelexFree International, TelexFree could end up surpassing TVI Express.
First, in Brazil alone they’re looking at around $300 million minimum in U.S. dollars, and TelexFree is hitting every part of the world, from the U.S. to Asia to Europe to Africa! They’re likely to put up huge numbers in Russia alone. I happen to be in Africa at the moment, and it would blow your mind to see the kind of money they’re pulling out of just East African countries like Uganda, Kenya, and Tanzania.
It has the potential to rival and/or exceed TVI Express, especially if it takes U.S. regulators a year or two to put together a strong case…
I can accept that. It seems MLM folks / noobs are more impressed by background than the truth. 🙂 Though I think even you’d agree that inability to separate the message from the messenger is a bit of a cognitive bias. 🙂
I’ve invested alot of money in telexfree and have made my money back and some..
you guys talk all this crap without being involved in the company..You are all a bunch of haters..cant see a new company succeed…
Where do you think your ROI came from?
Doesn’t sound like “crap” to me, Ponzi pimp.
Credibility isn’t any problem here. “People will usually DETECT it if you’re able to REFLECT it”. They will detect the amount of experience and knowledge invested in the work. But they will also detect the opposite, “if you’re not able to reflect it, then people will normally not detect it either”.
Take a look at Gerald Nehra in the role as an attorney for TelexFree? Nehra clearly has some professional reputation as an MLM attorney. But his “accumulated reputation and credibility” failed miserably when he tried to apply it here.
When he failed to REFLECT professional legal ideas, we were completely unable to DETECT it either. We were only able to detect “constructed legal theories that most likely will fail in court”. We detected pseudo compliance rather than compliance.
None of us were involved with Zeek Rewards, either.
Your point being ??
“Z”
That would be haterZ with a “Z”
If a ponzi pimp is going to throw meaningless insults at people, they could at least try and get the spelling right.
So why don’t you try your hand at smuggling / selling narcotics? Police and TV talk crap about them all the time. They aren’t involved in narc, what right do they have to talk bad about it?
Yes, that’s the sort of sh**-for-brains logic you’re using.
You guys could keep talking down on telexfree and I’ll keep making over a 1,000 wkly..
instead of doing soo much research on a company why dont you guys start making money for a change…I dont take advice from brokr people or none believers..GOOD LUCK!!
“Everybody is poor who doesn’t invest in my Ponzi schemes” – There’s some more of that bullshit Ponzi marketing Red Shield was pushing out earlier.
Believe in what? Investing your money to give to existing investors on the promise people will invest after you so you can take their money? Belief has nothing to do with Ponzi schemes.
If you guys are soo sure its a ponzi scheme..where’s the evidence; why dont I hear ONE person in telexfree complaining about the company? Everyone gets paid on time with no problems..
I only hear the ones not involved with the company Bad mouthing…What proof do you guys have?? All you guys have are assumptions & opinions…but no FACTS OR PROOF.
Oh I dunno chief, try TelexFree’s business model. You invest in AdCentral positions, Costa and friends use that money to pay out $20 a week, you get paid with new position money.
Because the company is currently heavily campaigning in South America, Europe and Asia for new investors. That’s how Ponzi schemes work, as long as people keep investing real money, they pay out.
At $20 a week per position ROIs are drip-fed, so when there’s no more money left, it’ll be sudden and it will hurt (those who invested last).
Right, because TelexFree’s business model isn’t proof enough. Honestly if you’ve got nothing intelligent to say, spambin. I think we’ve heard enough drivel from the Ponzi zombies today.
So to you TelexFree is a religion, correct?
Your church pastor would be very sad to hear that, that you have started worshipping a false idol.
In that case, this Bible quote applies to you:
“For the time is coming when people will not endure sound teaching, but having itching ears they will accumulate for themselves teachers to suit their own passions, and will turn away from listening to the truth and wander off into myths.” — 2 Timothy 4:3-4
@Miguel
Gosh, it must be really painful to go through life bent over with your head up your a**.
As you said you don’t believe in any one who doesn’t believe in TelexFree, there is no evidence that you will accept.
The rest of the world, however, accepts when a government like Brazil acts against TelexFree, that’s enough for them.
Perhaps you should ask… WHY do you insist on only believing people who believe same as you do?
Or will thinking such thoughts make your head hurt?
We only have information about how you can find the proofs yourself. The proof is right in front of your own eyes in your own back office.
You can simply look at the number of real customers you have = customers paying the full $49.90 price after the first month. You will need more than 2 customers per AdCentral to support your own weekly payout.
Why do you ask us about proof when you have it yourself? Most rational people would simply look at the proofs they have themselves, rather than asking random questions on the internet.
Do police have to be involved with the criminals to arrest them? How about judges?
Your bad logic only works if you stop thinking. And if you stop thinking, you are acting on FAITH (no evidence). Which, when combined with you demanding impossible evidence, proves you’re in a religion / cult, not a business.
“false Christs and false prophets will arise and perform great signs and wonders, so as to lead astray, if possible, even the elect.” — Matthew 24:24
Take no part in the unfruitful works of darkness, but instead expose them. — Ephesians 5:11
Hey Miguel, what about mr. Aerci Olm? He’s a “leader” that is known for his love/hate relationship with Telexfree? OK, he did chain himself to the AC forum in Telexfree’s favor, but in his videos he constantly complains about the company’s lack of feedback, etc.
Also, this Brazilian website called ReclameAqui (ComplainHere) lists Telexfree as NOT RECOMMENDED.
http://www.reclameaqui.com.br/indices/lista_reclamacoes/?id=45519&tp=9403f4c8cd5af61c485541e9444950c069c79ffa&subtp=c92a9bc341d739044ff5400661d44a60a808be22
Out of 13739 complaints, only 2958 were attended to. What do you say about this? Are these people “not involved” with the company?
Please comment.
Miguel, one more thing – no one here is force-feeding you with the facts. You actually took some of your precious time to read the blog entry and comments and then started ranting saying
You also ask for proofs and facts:
All the info BehindMLM has gathered and the analysis they performed is in the blog for the world to read.
Why is it that Telexfree did not hand over the affiliate data Brazilian justice asked them to?
Why is it that whenever a TelexFree enthusiast is asked for information, they vanish?
Apt
Just got this today from a nice (naive) lady about this thing that will eventually go up in smoke:
Sad things is she promotes some quality stuff. 5 months of due diligence and couldn’t see it Or is she just like all the others greed mongers who think they can get out before the roof caves?
Both numbers are relatively low for the type of investment / type of compensation plan. They’re indicating “forced reinvestment” rather than “free payout”.
5 months of “due diligence” in the eyes of a sheeple means “I listened to my friends ‘making money doing nothing’ for 5 months”.
THANK YOU GUYS FOR ALL THE WONDERFUL COMMENTS. ..
You’re welcome. Next time it will probably be easier if you ask about something you’re interested in. 🙂
“Proof” is something people have themselves in their own back offices, not something they can expect to find on the internet. They will only need to interpret it correctly.
The proof is the number of REAL CUSTOMERS you’re able to get from the ads. That will show you whether or not the ads have any business function at all for the company. No customers coming in from the ads = no real function at all for the company.
I have some questions. I have a friend that sadly had her family invest in the company native brazil but now a citizen in the states. I read and did a good amount of research but still have a few questions.
I was told they were charging an extra 40 dollars to have the leaders “take care” of the ad posting for them. Could this be a sign the company’s funds are hitting rock bottom or simply someone attempting to make extra money.
Secondly is there a way to report a company like this and get out of your payment/receive refunds? I had them all read your entire article and it seemed to help.
What type of legal action could occur on those that invest.. Jail time? Fines? Or would people higher up the ladder get hit with bigger penalties?
I have tried my hardest to convince them of what they have gotten themselves into but what course of action would be best for them if they have just given a large sum of many thousands of dollars to TelexFree? Some of them sold farms houses etc in brazil just to invest in the scam.
Someone making extra money… WITH permission from company’s top officers.
The company, “AdAssureLite”, did the same for Zeek Rewards ponzi 2 months before Zeek was closed by SEC. And now they are being pushed by none other than TelexFree’s CMO Steve Labriola.
If that doesn’t tell you that TelexFree is a fraud, nothing will. I have an article explaining this on my blog:
http://amlmskeptic.blogspot.com/2014/01/mlm-absurdities-how-scam-evolve-around.html
Simply someone attempting to make extra money. We have seen similar offers in other programs.
Nothing I know about. The experience can become useful in itself.
Clawbacks of net winnings, if the scheme is shut down by a court and handled by a Receiver. You should probably take a quick look at Zeek Rewards which was shut down in August 2012, and has been handled by a court since then.
https://behindmlm.com/category/companies/zeek-rewards/
* Dawn Wright-Olivares pleaded guilty to fraud against the United States in December 2013, in a settlement on 2 criminal charges (tax fraud etc.). Disgorgement of $8.6 million.
* Daniel Olivares pleaded guilty to something. Disgorgement of $3.2 million.
* Some professionals were fined, e.g. Troy Dooly at MlmHelpdesk was fined $3,000 plus $3,000 disgorgement of ill-gotten gains for pimping the Ponzi scheme (failing to disclose to his readers that he actually was hired by Rex Venture Group to positively try to affect Zeek Rewards’ reputation on the internet).
* Clawback claims against net winners with more than $1,000 in profit.
In general, a Ponzi scheme can “legally” pay back people’s OWN money, but it starts to become fraudulent when they use other investors’ money to pay a profit to some investors. Ponzi schemes will often involve tax frauds, money laundering and other legal risks.
When they first have joined and handed over their money, there’s very little you can do other than to hope they will get their investment back, and try to prevent negative side effects.
“Make THEM take some control over the situation”.
“Run it like a business = make sure to keep your OWN records of money IN/OUT, the work done, the people you’re doing business with. Make sure you’re able to communicate what the business is about to professionals, e.g. to a tax advisor”.
That’s a general tax advice, Howard Kaplan’s general tax advice to participants in Zeek Rewards 7 months before it was shut down.
“Relax and try to balance your own point of view”.
“Relax” is because people normally will handle a situation better and make better choices if they’re relatively relaxed.
“Balance your own point of view” is because it makes it easier for others to communicate potential solutions, if they don’t need to “reflect” a very specific point of view all the time.
The fraudulent parts of TelexFree are the investments in AdCentrals (a Ponzi scheme component), and the recruitment system (a pyramid scheme component). The sale of VOIP subscriptions would normally have been legitimate in itself. People CAN legally make money on that part in theory.
Your friend’s family is technically outside the area where you realisticly can expect to have much influence. You can’t expect much results in a situation like that, you probably shouldn’t TRY too hard either.
The Ponzi scheme part of TelexFree is about the investments in AdCentrals. Investors in Ponzi schemes will normally have status as “victims of a fraud”. Net winners can receive clawback claims = profit being distributed back to the net losers.
A plain and factual description like that is actually the best way to see it. It gives a simplified description of the legal aspects.
Most Ponzi schemes of the types reviewed here are about “work from home” income opportunities. They will typically target specific groups of people, e.g. the Brazilian community in the U.S. has been plagued with many different Ponzi schemes in 2013.
People will get attracted to the schemes because of the prospected high ROI, and because many of the schemes will manage to create an illusion of being legitimate work from home opportunities. People will willingly mislead themselves when they WANT to believe something.
Try to see it from neutral viewpoints like that?
Ken am enlightened now I know what telexfree is all about and I can now smell a pyramid from afar.tell me about DIPEK.its in Kenya.
Fraud schemes sometimes spawn cottage fraud schemes or second-tier scams.
Some of the people who pretended no fraud was occurring at Zeek Rewards went into the business of placing ads for Zeek Rewards members, for instance.
This cottage fraud continued with TelexFree: Some of the people who are pretending that no fraud is occurring there now are in the business of placing ads for TelexFree members.
Unfortunately, some folks within MLM would want you to believe that the cottage businesses show the initiative of so-called “serial entrepreneurs” — the willingness of capitalists to respond to a marketplace need.
What is actually shows is that HYIP schemes often include multiple layers of fraud. The first is in the “opportunity” itself. There may be one or more follow-up layers.
These may include purported “ad posting” businesses, “leads” businesses or “customer acquisition programs” that exist to perpetuate a fraud scheme.
Beyond that, some “program” sponsors encourage recruits to pay them directly, rather than the company.
Some of the money paid directly to sponsors never even may make it to the company, which means the company doesn’t even know its own bottom line.
And because a Ponzi scheme is per se fraud, it means that a company that’s already insolvent or is teetering on the brink of collapse and propping itself up with deceptions such as “80/20” programs was effectively further gutted from the inside by sponsors running second-tier scams.
PPBlog
@Joan:
Are you in Nairobi?
If you are, look me up on Facebook! Do a search and look for the pic of the white guy with the hot looking black chick! (I’m probably the only white Ken Stewart on Facebook with a black wife! LOL! She’s Kenyan…)
Message my inbox and if you are in Nairobi we can meet for coffee!
Ken
@Miguel:
Where’s the evidence? First, it’s been shut down for being an illegal pyramid scheme in Brazil! That isn’t in dispute at this point!
Second, the U.S. program is the same as the Brazilian program, i.e., VOIP and AdCentral Packages, and as currently structured and being promoted online, it would be in violation of U.S. securities laws. You can read a view from a legal and regulatory compliance perspective at telexfreereport.the6parameters.com
Anyone with any familiarity with U.S. securities laws would be able to determine that TelexFree International is an illegal pyramid scheme. If you would like a fairly easy to understand primer on securities laws, and how they would be applied against TelexFree International, MLM law firm Grimes and Reese has an excellent overview at Source: mlmlaw.com/library/guides/securities4.html
The proof is in applying the legal standards to the business model and using common sense! In addition, as noted on my review, there are also other ways in which a program can be determined to be an illegal pyramid scheme, i.e., the improper and illegal income claims being made by TelexFree International reps online, which are easily documented and provable. They are all over the Internet, i.e., “guaranteed income,” “make money without having to sell anything or recruit anyone,” “invest,” “return on investment,” etc., all of which violate SEC rules (using such words not automatically re-classifies whatever you are selling to be a “security,” which requires you be registered licensed, and regulated)and which automatically subject the company to charges of selling securities without a license and being an illegal pyramid scheme.
Furthermore, Brazil and the U.S. have an intercountry cooperative agreement that dates back to 1999 between the U.S. Department of Justice and FTC and their Brazilian countparts at the the Administrative Council for Economic Defense (CADE); Secretariat for Economic Law Enforcement (SDE) in the Ministry of Justice; or the Secretariat for Economic Monitoring (SEAE) in the Ministry of Finance.
The 1999 agreement includes a provision on “positive comity” under which each side may notify the other when it believes activities in the notified country are having an adverse impact on the notifying country; the notifying country may request the notified country to take the appropriate law enforcement action under its own laws before the notifying country undertakes any enforcement action under its own laws. The agreement also provides for the sharing of information and evidence related to enforcement and for regular consultations between the parties, which includes the sharing of information of investigations, etc.
Due to the allegations of fraud and money laundering being investigated in Brazil in relationship to the TelexFree case, anyone with an ounce of common sense would be able to reasonably conclude that Brazilian regulators and law enforcement would be in touch with their U.S. counterparts because 1) there is a suspicion that up to $88 million was illegally diverted offshore after the judge had issued a freeze on their accounts and activities, with some of that money likely ending up in U.S. accounts; 2) there are concerns that the new U.S. entity TelexFree International is circumventing the rulings in Brazil by having people in Brazil sign up through the U.S. entity and paying them commissions, and 3) because the principals behind the Brazilian entity happen to own the U.S. entity.
Most importantly, Brazil could request a U.S. investigation to occur, and as part of the 1999 agreement, the U.S. would obligated to do so! In this case, it would likely be the DOJ and/or FTC working in conjunction with the IRS, the SEC, the Secret Service, and the U.S. Marshals Service.
Finally, you said you don’t listen to broke people. Great-my partner and I have 70 years of combined network marketing experience (each of us have been in the industry for more than 30 years), we’ve earned upwards of around $17 million USD in 3 companies, have created around a $1 million a year income today, and I was just awarded membership in the Academy of Multi-Level Marketing, which is an organization of more than 100 of the industry’s top experts and leaders. So, would we qualify as people you would listen to? LOL..
By the way, I wouldn’t go spending all that money you’re making just yet! If you’re not familiar with “clawbacks,” I would suggest taking the time to become familiar with the recent Zeek Rewards case and what happened to top earners and those who were deemed to be a “net winner,” meaning they made more money than what they put in. They’ve all been hit with a “clawback,” meaning they’re having to return their net winnings!
You can learn more at thompsonburton.com/zeekrecovery and scroll down to the section entitled Zeek Receiver Issues Quarterly Report….does one of the industry’s top law firms qualify as someone you’d listen to?
Hope the above proves useful to you-smart people will listen. Not so smart people won’t…hopefully you fall into the smart category before it’s too late!
@ Ken
Hey Ken thanx for the great piece you put together there.. I’m not going to lie, I’m starting to realize there is something wrong with this easy income..
as you guys can see I’m new in MLM business..I was just introduced to telexfree & saw all the money my friends were making; soo I decided to take a risk;& the risk was worth taking because I’ve made all my money back & some but I will like to learn more about MLM & how to make money from something with not SOO many RED Flags…
Question:
Did Telex Free actually become bankrupt in Brazil? What does everyone think would happen if they filed in USA too?
Red flags go up on Monday. How many distributors are revolting against not getting paid lately?
TelexFree isn’t bankrupt in Brazil (it’s one and the same company globally), they only recently paid $R70 million in tax fines.
The company was shutdown last June via injunction, and remains under investigation with a civil case against it currently making its way through the courts.
Correct me if I am wrong but it was Ympactus that sought (and was denied) bankruptcy protection in Brazil, not Telexfree….or was it the other way around?
What would happen if Telexfree declared BK in the US? A Trustee would administer the estate much as the Reciever is administrating the estate of Rex Venture Group and Zeek Rewards now.
You are correct. The point is: the very first attempt was denied because Ympactus presented some bogus “debit list”, including a huge amount that should be paid to Telexfree due to a “contract termination”.
Note that, up to that point, the name “Ympactus” had never seen the day light.
When judge in the case noted Ympactus was terminating a contract with Telexfree, whose owners are basically the same people, he denied the bankruptcy protection.
That’s when it became public that TF and Ympactus had relations no more, but it was never clear how Carlos Costa was never fired of being the “marketing director” of both companies…
In the end, everybody knows that was just na TF/Ympactus attempt to put their claws back in the money justice had confiscated.
Rumors are flying high in America that Telex Free is filing bankruptcy soon to eliminate all of the payments to its distributors. How does such a cash rich company get away with this?
It hasn’t.
Rumours and reality are usually miles apart.