TelexFree lose final interlocutory appeal
You knew it was coming. I knew it was coming.
After nine previous appeal denials in court it seems the only people who refused to believe it was game over were TelexFree investors outside of Brazil still trying to convince people to invest, and those in Brazil who had invested their money with the company.
In what must have been a rather short hearing, once again upon consideration of evidence presented both by TelexFree and the Public Prosecutor’s Office of Acre, TelexFree has lost yet another appeal in court.
The hearing was for an interlocutory hearing and was held to decide once and for all whether the injunction barring TelexFree from paying commissions and its affiliates recruiting new investors should be lifted.
Things got off to a bit of an interesting start with Public Prosecutor William Silvia asking to be excused from the hearing, citing a possible conflict of interest given some of his family had invested in TelexFree.
Silvia was excused with the Public Prosecutor’s Office then being represented by Alvaro Pereira. After hearing both sides of the case, a panel of judges unanimously decided to uphold the injunction against TelexFree, denying the company relief by way of an interlocutory appeal.
Not only was the appeal denied but the judge’s were quite candidly blunt about what they thought of TelexFree.
Judge Samoel Evangelista noted
that the scheme has a short life and that selling VOIP is not the main activity those who join the company engage in, but rather it is the recruitment of new affiliates.
“The company’s entire advertising effort is designed not to promote the product but to attract new affiliates,” he explained.
Federal Judge Valdirene Cordeiro explained his own vote against the appeal, stating that
all that has been publicized in the media and presented in the (Public Prosecutor’s) file confirms the existence of a pyramid scheme.
Sympathising with TelexFree affiliates who had invested more than they could afford to lose, Judge Eva Evangelista remarked
I feel a sense of compassion towards the people who sold their only home and only car on the promise of easy money (with TelexFree).
This should be assessed through further civil action, with compensation paid out dependant on how much was invested.
As it stands now, I believe the question of TelexFree resuming business operations in Brazil is a closed book. No matter what TelexFree’s affiliates or the company might tell you, it’s just not going to happen.
TelexFree do now have the option of filing an appeal in the Superior Court, however that would appear to be a complete waste of time.
Ten appeals denied and you really think TelexFree hasn’t already served up every defence its lawyers can think of? Please.
Looking forward, from Judge Evangelista’s remarks it would appear that the next step will be determining what funds have been and can be recovered, with the goal of returning invested money to affiliate investors who were net losers in the scheme.
Whether or not that will involve a Receivership and clawback litigation of the net winners in the scheme remains to be seen. Criminal proceedings against TelexFree, its owners and possibly its affiliates beyond the investigatory stage are also yet to be announced.
Meanwhile to those investing and continuing to attract investors in offshore markets TelexFree operates in, be warned – the company just lost its major investment market in Brazil and two of the owners are currently hiding out in the US.
This is not a company projecting a steady and prosperous future. Like all Ponzi schemes one way or another business operations have come to an end – with it only being a matter of time before the permanent shutdown of business operations in Brazil reverberate elsewhere in TelexFree’s global operations.
Evidence of this is already observable, with news that Acre Public Prosecutor’s have now ‘asked a U.S. court to prevent the recruitment of new affiliates into Telexfree’.
Personally I for one will be glad to put this at times entertaining but altogether sorry chapter of MLM history to rest.
I’d express my hope that the closure of yet another pseudo-compliance based Ponzi scheme would prove yet again to participants that no matter how you dress one up, a Ponzi is still just that – however by the looks of some of the schemes in my inbox that I’ve yet to review, that hope would largely be a wasted effort.
Update 13th August – I can confirm that an appeal in the Superior Court will be filed (groan):
Wilson Roberto Furtado, a TelexFree lawyer, stated that TelexFree will take the case to the Superior Court of Justice.
Meanwhile Horst Fuchs, another of TelexFree’s lawyers, appears to be in outright denial over the decision:
Another attorney, Horst Fuchs, said that TelexFree’s new defeat was predictable since the case, from his point of view, is not being treated in accordance with the legal rules.
Good luck with that Mr. Fuchs.