TelexFree May 2nd bankruptcy recap, what now?
As Jordan Maglich’s cell phone battery began to die, we wound up BehindMLM’s eight-hour coverage of the May 2nd bankruptcy proceedings.
Absolute kudos to PonziTracker and Maglich, who wound up being the primary source of information coming out of the courtroom after repeated warnings against streaming the session shut down any alternatives.
I know I was mentally exhausted by the end of it, and I was only syndicating Maglich’s updates with commentary and additional information I was tracking. I can only imagine how he felt having to maintain concentration over a phone call with only a few short breaks in between!
Anyway, logistics aside, here’s where we’re at currently.
The hearing itself was somewhat revealing. Straight off the bat we had fresh regulatory developments, as news broke that civil and criminal forfeiture action had been filed against TelexFree by the US Attorney’s Office.
From Wikipedia,
Asset forfeiture is a form of confiscation of assets by the state, pursuant to law. It typically applies to the alleged proceeds or instrumentalities of crime.
There are two types of forfeiture cases, criminal and civil. Approximately half of all forfeiture cases practiced today are civil, although many of those are filed in parallel to a related criminal case. In civil forfeiture cases, the US Government sues the item of property, not the person; the owner is effectively a third-party claimant.
The burden is on the Government to establish that the property is subject to forfeiture by a “preponderance of the evidence.” If it is successful, the owner may yet prevail by establishing an “innocent owner” defense.
In civil cases, the owner need not be judged guilty of any crime; it is possible for the Government to prevail by proving that someone other than the owner used the property to commit a crime. In contrast, criminal forfeiture is usually carried out in a sentence following a conviction and is a punitive act against the offender.
TelexFree, arguing that the forfeitures had no impact on the bankruptcy hearings of the day, managed to reduce the impact of the developments. This mostly due to the fact that the US Attorney’s Office were not present as a party at the proceedings.
As such, Judge Landis stipulated that he would ‘not consider papers in connection with rulings on pending matters‘ in the bankruptcy court, and he wasn’t ‘inclined to take (the forfeiture) papers into evidence‘.
Landis did however order a short recess, during which he went over the forfeiture documents so as to be “mindful” of them going forward.
The forfeiture documents were filed under seal, so as such I have no indication as to the specifics therein. However the take-away from the development is that there’s likely civil and criminal legal action looming on the horizon from the US Attorney’s Office, which will be in addition to the already launched civil action by the SEC and Massachusetts’ Securities Division.
To give you some idea of the weight behind the forfeiture documents (as per the DoJ’s website),
Charged with ensuring “that the laws be faithfully executed,” the 93 United States Attorneys work to enforce federal laws throughout the country.
The President appoints a United States Attorney to each of the 94 federal districts (Guam and the Northern Mariana Islands are separate districts but share a United States Attorney).
The United States Attorney is the chief federal law enforcement officer in their district and is also involved in civil litigation where the United States is a party.
What comes next from the US Attorney’s Office will definitely be something to keep an eye on going forward.
Getting back to the Nevada hearing though, after Landis reviewed the documents the first hearing regarding the SEC’s venue-change motion proceeded.
Whether coached or not, there were very obvious ploys by William Runge and Stuart Macmillan to feign ignorance and cluelessness about TelexFree’s AdCentral Ponzi scheme activities.
Runge (financial advisor) claimed he had no idea about fraudulent transfers taking place, didn’t know who TelexFree’s VOIP competitors were or whether or not the service itself was competitive in the marketplace. Interestingly, the figure of $5 billion dollars was floated as the total sum of TelexFree’s AdCentral ROI liabilities. But of course Runge couldn’t remember who initially provided him with that figure.
Runge also revealed that Joe Craft had been working with TelexFree for two years, erasing any doubt he was just brought in at the last-minute or had no idea about the fraudulent AdCentral investment scheme.
Stuart Macmillan revealed that he had based his $50 million a month in VOIP revenue estimate on being “optimistic” about the VOIP product, because a
network marketing exec working with MacMillan said he was excited about product. MacMillan optimistic because this exec is optimistic.
Macmillan also claimed to have never looked at the TelexFree affiliate contract prior to the company being raided, couldn’t understand the correlation between affiliates posting spam-ads to qualify for their daily ROI and revenue generation, didn’t ask questions about why payment processors “frequently” refused to do business with TelexFree, and also had “no explanation” as to why TelexFree’s affiliate activity (new money coming in) dropped by 90% when they terminated the passive investment scheme, or why there was a “drastic increase in payment requests” from existing affiliates.
Macmillan was pleased however to inform the court that he “loves network marketing”.
The hearing ended for the day with Maglich’s phone running out of battery, but as I understand it and as per Landis’ opening statements, Landis is going to work on his orders over the weekend with an intention to rule in open court on Monday. This could be Tuesday seeing as the statements were made towards the start of today’s session.
Whether or not Landis will rule on subsequent hearings that were not heard today (there were fourteen hearings scheduled), but there’s a possibility due to much of the evidence in these hearings being the same or similar to what was heard today regarding the venue-change motion. Alot of the core issues in the regulatory filings share the commonality of putting a stop to TelexFree’s abuse of the bankruptcy court to negate their Ponzi scheme liabilities.
Looking forward to next week, we’ve got Landis’ first order expected early in the week, with the Massachusetts hearing for the granting of a preliminary injunction on Thursday the 7th. The forfeiture warrants might result in additional legal action being taken by the US Attorney’s Office, failing which we still might learn more about them if the SEC decide to introduce them as evidence at the preliminary injunction hearing.
TelexFree certainly didn’t seem interested in trying to address the documents today, but I doubt they’ll be given the same luxury on the 7th down in Massachusetts (if the SEC introduce them).
In the meantime a number of interim orders were issued and filed late on the 1st and early on the 2nd, all of which were granted only until the hearing on the 2nd of May. I’ve seen TelexFree affiliates running around using the interim orders to proclaim premature victory in the bankruptcy case, which is rather disturbing.
Pending future hearings on the matters not heard today, those interim orders have otherwise expired. And in anycase, TelexFree have had their assets seized twice-over now (by the SEC and US Attorney’s Office), so they aren’t paying anyone anything.
They have challenge the TRO in the bankruptcy proceedings, but that matter was not heard (and until it is, I imagine unlikely to be ruled on).
Again, I can’t stress my thanks enough to PonziTracker for covering the hearing today. Without Maglich’s coverage, sadly the only updates out there till next week would be garbage like this (published before today’s hearing was even over):
Maglich’s coverage today set him back a few hundred dollars, so please consider donating even the most token of amounts to help cover costs (Paypal donate button is at the bottom of the article).
In other TelexFree news today, there were reports of TelexFree related arrests in the Dominican Republic and the filing of a class-action lawsuit by a group of TelexFree affiliates, one of whom had invested $209,000 into the company.
Filed by attorney Evans J. Carter in Middlesex Superior Court last week, the suit is for Massachusetts residents only. So far he has six clients, although he said he expects more could join.
“(Our clients) want us to have a judgment to go to Brazil or wherever else we have to” to reclaim their investments, he said.
Carter said he was first contacted about a potential lawsuit by a Brazilian tax preparers organization in Milford. He has also heard from several lawyers for other TelexFREE victims who could join the action.
More on those developments as additional information comes to hand.
Excellent coverage and precise. I was there at the hearing and that’s exactly what happened. The only thing really odd – to me anyway – is that the SEC and the U.S. attorney’s office seemed to be grilling witnesses that have no clue about the company’s real affairs and schemes both in the U.S. and abroad.
The impression I had was that the founders and people responsible for TelexFree/Fraud simply handed everything over to turn-around guys, lawyers, new managers/CFO/CEO and let these guys take the heat under the excuse of being fired or resigning.
Unless there is a change in procedure down the road, it would seem logical to question Mr. Merrill, Mr. Wanzeler, Sann Rodrigues, SLoan, Carlos Costa, etc. even if a professional interpreter is hired to offset language barriers.
Additionally, top promoters such as San Rodrigues and all of his first tier wingmen familiar with TelexFree operations, should be questioned in the case.
I suspect that will happen when criminal charges are filed individually rather than mix them with the U.S. bankruptcy court proceedings. In other words, at some point, those people will be prosecuted to the full extent of the law in a U.S. criminal court.
Nevada’s courtroom today was filled with Hispanics, one of who was kicked out by security for apparently attempting to record the proceedings. Hispanics in the state obviously want to recover their money. It was apparent to me that they were targeted by TF as promoters and that both Brazilians (legal and illegal immigrants) and Hispanics have been targeted throughout the United States as well.
My prediction is this: BK will move to MA. It will not be granted based on fraudulent practices. Criminal charges will be filed against previous ringleaders and possible charges against the new managers. I also predict that sooner or later, the FBI and other authorities will have to intervene to prevent suspects to flee the country to avoid prosecution.
I suspect that when all this is said and done, many will face prison time and fines and the whole company will shut down. The reason people are LYING to Brazilians and others about the results of proceedings in the U.S. is to simply not lose all the promoters who are hopeful that things will go back to normal. That is not possible because the company would have to use the new compensation plan, which is not attractive.
I presume that Brazil’s prosecution of TelexFree has to be a gold mine of information to help the prosecution in the U.S.
This is the bankruptcy court, not the Ponzi trial court.
Actually, what is sad are the comments over at the Ponzitracker website. You know the people who post crap are just crazy, or are trolling the people for lulz. But there are people posting comments like “we expect justice to be done and TelexFree be exonerated”.
They sound calm, but they are anything BUT logical.
Well, somebody had to be left holding the bag of goodies while the perps made a disappearing act. I think the judge will be taking that into account as well.
Oz: “In civil forfeiture cases, the US Government sues the item of property.”
This seems to be done when the agency can’t ascertain exactly who owns the property. Should someone come forward and claim it they might get it back, but on the other hand they might be arrested. Will the rat take the cheese??
@ Hoss,
I don’t understand what does that mean in this case? Can you explain?
@hoss
I think it depends on what the cheese is.
If it’s the database servers etc., then maybe… although they seem to have backups (Amazon).
If it’s the checks, then probably, but not until they have a paper from the Nevada court stating the TRO is in breach of the automatic stay.
That’ll be for some time yet (too much stuff before it that might effectively cancel it out).
It would be a lengthy explanation. Follow the link below if you are interested, the first five or six paragraphs should provide you with enough background to understand what the Feds are doing here.
http://en.wikipedia.org/wiki/In_rem_jurisdiction
Some legal minds might see the DOJ’s approach as an abuse of power, and that is why, if you remember from yesterday, the TelexFree attorney said something along the lines of “this will just kill us….” and it probably will eventually, but considering only yesterday’s hearing, its understandable that Landis would not allow the seizure and subpoenas to be entered into evidence.
“The thing” (money-property) was almost certainly siezed without specifically alleging or being able to yet prove that it belonged to Telexfree itself.
Asset seizure casts a VERY broad net. Landis, as he said, will remain mindful of that, though he did not say it quite that way.
@ Hoss…Thank you for the link and explanation.
Sure Dorothy.
Are we talking about the same thing. The IHS Raid on the 15th bagged most of that.
My assumption here is that the very most recent subpoenas/siezures by the DOJ (?) relate to new “stuff”
So.. as of right now.. if we’d assign scores would be a TF 1 / SEC 0 ??? Why would affiliates etc say that TF iS off the hook??? I just cant see that happening..
I can’ say as how I understand your scoring system but TF is not off the hook
Why would you assign a score when it’s just first quarter, and TF has the ball? The roster is set (no more evidence), and 3 TF guys testified. NOTHING MORE.
From what I read of the transcript, GT (or is it A&M) had partial backup of the TF servers, and uploaded those to Amazon S3 cloud, after disabling all inputs, so they can use that to communicate information to all TF promoters through “backoffice”, more efficient than notifying them by mail. May have consulting the judge on this, at least that’s what was implied.
Not sure what brought back the TF VOIP functions.
I take it as those affiliates having gone bat shit crazy after investing a large amount of money they’re now realizing they aren’t getting back, and are hysterically delusional at this point.
Or that’s their way of celebrating the inevitable demise of their trusted Ponzi scheme. I think its uncontrollable hysteria.
Actually, I think the “elephant in the room” that nobody wanted to talk about was the forfeiture complaints issued from the US Attorney’s office.
Given the previous cases like ASD (Zeek doesn’t count because Burks gave it up without seizure), the sealed asset forfeiture complaint would mean that everything regarding TelexFree had been SEIZED, not merely frozen, as well as assets belonging to the 8 alleged co-conspirators, AND RICO (racketeering) allegations.
But they never used it to that purpose, instead all they have and had on that respect is the usual babbling about how they think Chapter 11 would be marvelous to them.
Has anyone noticed that the download link for the Google App has become unavailable?
If anyone is interested the audio of the hearing can be accessed now on Ponzie Tracker.
K CHANG…
Thank you. I understand it was bankruptcy and not criminal court. Since I it is not unfamiliar how Brazilian crooks operate, I can confidently state that the people behind the TelexFree scam/scheme are buying time to flee or avoid getting nailed.
Normal reaction. Sure. But I think that authorities beyond the SEC must be looking into TelexFree with a microscope to see if there are more people behind it besides the ones being indicted.
WHo besides small time promoters put BIG money into TelexFree to make the whole pyramid work? Brazil, more than any other country, was the center of money generation for the company.
See this link and use Google translator: blogdobg.com.br/telexfree-a-maior-fraude-financeira-da-historia-do-brasil/
I suspect that there are many more people behind TelexFree than just Merril, Carlos Wanzeler, San Rodrigues, etc. That disk-a-vontade (the Brazilian voip company) could have more to do with telexfree since (hearsay) the owners are friends or relatives or Carlos Wanzeler.
Also,IMO, San Rodrigues is no victim. Remember him lying about TelexFree “headquarters” in MA and also allegedly starting the Universal Private Banking scheme that fell flat because he had no product (credit card) and no payment processor that would take in the money. Uprivatebanking.com (now an expired domain).
It wouldn’t surprise me that when everything ends up in a criminal court, authorities will likely unveil a huge scheme that had more to it than just a few guys at the top collecting all the money and, when pressured, they simply handed over the entire operation to a few greedy american guys and consultants that wanted a piece of the pie.
TelexFree criminal trial will be very interesting to follow. Also, Carlos Costa, TelexFree’s cheerleader and bull shitter par excellence was part owner at one time, right?
Either he’s cooperating with authorities or someone failed to indict him too because he had been responsible for keeping tens of thousands of Brazilians investing into the scheme by giving them hope through period videos that everything is fine, everything is being worked on, everything is going to be alright and even stating that “GOD himself was heading the company!!!”, in order to appeal to the large number of evangelicals Telexfree recruited through the Universal Church in Brazil – which by the way is owned by Edir Macedo (Listed in Forbes Mags as a Billionaire).
You think Edir Macedo liked the fact that much of his money source was now investing into TelexFree and not his church empire? Is anyone looking at him as a potential investor into TelexFree or more?
Then there is good ol’ San Rodrigues. Now this is the one that cannot escape justice, run or hide. That’s the snake’s head with a long history of scamming and allegedly leaving people behind holding the empty bag – as in investors in Brazil.
Hopefully it will be proven that behind every new country that telexfree opened, San was behind it at the top of the MLM tree. Brazil, Dominican Republic, Spain, Portugal, Peru, Mexico, etc.
They should also go after all his front men, guys he allegedly “hired” or “recruited” to promote under him for the countries he opened up. It’s been rumored that he would find 5-6 key people under him to open each country so that all money would flow up to him. And, who’s looking to see if the MLM tree was not manipulated during the course of operations?
The money tree allows people to be placed in key positions. If the software allows and administrator to change things around, for example, it can place a key promoter in tree branch that is generating the most sign ups and commissions!!
Then there is “contratos de gaveta” In Brazil, they call it “drawer contracts” that’s arrangements between one or more parties to do certains things through private verbal or secret contracts among themselves.
I don’t believe that the authorities are simply going to deal with new management and forget that an old one existed for 2-3 years prior. I bet they will retroactively indicted everyone responsible for the scheme whether they have resigned, have been conveniently fired (Wanzeler) or fled the country.
All of them are a flight risk and it won’t surprise me if their passports or ability to travel anywhere is going to be prohibited or restricted. Many of these guys, if they cannot fly on a commercial airlines, will simply find a small place, fly to mexico or colombia and flee into Brazil where they cannot be extradited and can possibly work out deals to avoid doing even short prison time.
TelexFree is likely to play the same game they did in Brazil. Blame the justice system for not allowing them to conduct business. Buy time. And, if they can, vanish with whatever money they put away for a rainy (stormy) day.
My opinion. I could be wrong, of course.
Your score card didn’t count the assets forfeiture warrants?
Remember that TelexFree initially had a very weak case. They can pretend that the business was about selling VOIP services, but they won’t fool others than themselves.
Here’s the link:
http://www.ponzitracker.com/main/2014/5/3/listen-to-the-telexfree-bankruptcy-hearing-here.html
I really thank you for all of this information! I’m from Madeira, Portugal, and people are completely insane with this whole scheme. It takes quite an effort to find viable updates about the process. Thank you!
An arrest warrant was issued by “la Procuraduria General de la Republica Dominicana” against Carlos Manuel Vanderpool Severino, alleged representative of TelexFREE in the Dominican Republic. The man is now officially a fugitive.
the score is : right now the Telex Investors can’t get any cash out of TF , and that score is not likely to change within the next 12 months, so they should take it up with their friends who profited.
Telexfree just headed the 9pm RTP TV news in Madeira, but I couldn’t hear why 2 hours ago the newspaper posted the accusation ‘minister protects the thieves’:
http://www.dnoticias.pt/impressa/diario/cartasdoleitor/edicao-2014-05-01/444775-mais-um-negocio
Yeah, and just yesterday we were talking about how that was a breach of the TRO. (Maybe TF team is reading everything posted here?)
Anyway, it is still available at Apple’s App Store. Perhaps they process removal requests in a different way, who knows.
I think most of the “babblers think that CH 11 protection means that after a short interruption everything will return to the way it was. Of course nothing could be further from the truth but there IS one reason why a Ch 11 might be cause for hope and celebration (at least in some quarters.) The reason? Clawbacks…. or more particularly, the lack thereof.
After Mcmullin’s performance on May 2nd, its impossible to envision that he is motivated or equipped to recover money for the estate.
Without the appointment of a Chapter 11 Trustee net winners would receive a virtual “get out of jail free card and this is one reason that a CH 11 will never be approved as Telexfree has requested.
The babblers can quit hoping. There will be no celebration.
Once more in madeira island news rtp madeira had said false information based in what leaders says in the websites and Facebook secret but not too secret group.
I think that who does the news also is someone involved in leathers ship because this isn’t the first time that they are trying to calm everyone and creating hope and giving time to the leaders run from their responsibilities because already the financial are seeking more information about the money that’s not a presented on ours taxes.
Almost 90% here in madeira island lost lot’s of cash. I hope tht this case closes fast becausevits prolonging too much pain here in madeira because everyone is thinking that telexfree will pay everything. I sad with ald this fake news that only gives people more pain and provides false hope. 🙁
Finaly The Ministry of Justice in Portugal starts the investigation focus on non declaired taxes of the top promoters in Madeira.
The National State TV channel RTP has broadcasted the report on prime time Friday 9pm.
http://www.rtp.pt/noticias/index.php?article=734725&tm=6&layout=122&visual=61
Many stories of life savings lost and even priests were involved. Just cannot belive it.
Part 6 is the argument. Hearing it now (it’s about than 2 and half hours 😮 )
2 separate investigations were launched, one by MP and another by Portuguese tax authority.
Part 6 is the argument. Hearing it now (it’s more than 2 and half hours long! 😮 )
One thing the reporter said caught my attention: “no one wants to show their faces” (refering to the fact people accepted to be interviewed only when faces are not filmed and voices are modified).
Here, in Brazil, we could see the same thing happening at the time we had a TF promoter doing a “hunger strike” in both Acre state and Brasilia city (Brazil’s capital). He complained a lot about how only 5 or 10 people showed up, out of hundreds and hundreds of promoters living in those places.
That endorses the fact that these scams (which are NOT modern events and have been existing for so many years) are flourishing due the pseudo privacy and anonymity internet offers to people. Of course, that is not the only fator helping scams to grow, but it sure is na important one.
That’s also a big reason why almost no one want to press charges or publicly defend their “company”: no one, nowhere, want to “show their faces” and be called either stupid or scammer.
@hoss
I assumed it was a total asset freeze, which was all the commotion was about. I suppose if there’s new stuff though that’s been seized, that might be why the docs were under seal.
Have to wait for a move by the Attorney’s Office or see if the docs are included on May the 7th I guess.
I have just finished listening to the court hearings audio files on Ponzitracker, and both the SEC and U.S. trustee attorneys simply, and completely destroyed telexfree arguments coming from the company attorneys.
The judge, which seemed to be on top of things all the time in IMHO, even came to a point where he lost his patience with one of Telexfree counselors (I believe named James Bastien?). Judge made James stop telling BS stories, just saying to him: “Ok counselor, you’re done!”.
IMHO, the bankrupcy case will not stay in Nevada. Not a chance.
I’m listening to that 6th audio now. @the third guy talking about being BFFs with Craft… I’m guessing the fireworks start when they get to the attorney arguments?
Not sure if I’ll do a writeup seeing as the order’s due in the next few days (probably not, going to recharge batteries).
Absolutely! The part where the attorneys try to convince the judge whether or not the case should move to Massachusetts. The Telexfree attorney’s premises are silly, and sometimes contradictory.
Cool cool. Listening now.
Loving what I’m hearing so far:
[41:00] SEC attorney: If the past is a Ponzi scheme, you don’t get to turn an illegitimate operation and turn it into a legitimate one.
Well, SEC argument about venue-change seems solid.
TelexFree lawyer is seriously arguing TF is not a Ponzi scheme. Goes on about lack of evidence, while at the same time presenting fallguy witnesses and declarations by people who have no clue about business activities prior to the bankruptcy.
He’s basing his arguments around the carefully selected and restrictive evidence TelexFree have submitted. And asking the Judge to ignore everything else, no matter how relevant it might be.
TelexFree lawyer is going to argue about not meeting the burden. Their argument sounds like it’s on legal technicalities, not practical or reality.
Lol:
Love it!
[1:04:15] I respectfully submit that this is a situation of actual prejudice to both creditors and the debtor in the scope of abstention. And we simply can’t conclude today, that the debtor has engaged in any wrongdoing.
The reason they can’t is because Runge and MacMillan “know nothing” about anything. The SEC clearly asked them about retail activity within the business.
Lol, the affiliate’s lawyer who rocked up got shot down pretty quick.
“Let me tell you about my clients…”
“No. You’re done.”
The cynic in me said “they’re just racking up billable minutes”, and court time is charged at a much higher rate than prep time, IIRC. Any real lawyers want to comment?
Here’s a list of the audios:
yourlisten.com/ponzitracker
PART 1 (20:31)
PART 2 (1:27:56)
PART 3 (5:50)
PART 4 (0:31)
PART 5 (2:32:04)
PART 6 (2:48:46)
Part 5 has cross examination about back office funds, VOIP sale vs AdCentral sales (e.g 1:54:00 – 1:58:10). The SEC is clearly aware of the problem with internal funds being used to pay for VOIP services and AdCentrals, “no fresh money coming in the door, only reducing the amount the company has to pay out”.
KEY INFORMATION ON CRIMINAL CHARGES:
What the SEC attorney is referring to is unclear (hello US Attorneys Office?), because as of now only civil actions have been filed.
GT on the other hand, is doing a pretty decent job arguing that TRO does not apply to bankruptcy’s auto-stay.
Key information on Ponzi scheme issue regarding bankruptcy:
*standing ovation*
They’re heard the TRO arguments as well? That’s interesting. Looks like we might get a conclusive order Monday/Tuesday regarding all if not most of the scheduled hearings.
IM(very)HO, all of this bankruptcy to-ing and fro-ing is largely irrelevant.
To imagine it will make anything but an interesting sidelight, one has to firstly ignore the fact we are discussing a billion dollar fraudulent scheme, secondly believe the legal system can be manipulated to such an extent that the perpetrators are going to escape prosecution on technicalities and thirdly ignore the Federal action/s.
It may be possible in the movies or on TV, but it ain’t gonna happen in real life.
TF’s lawyer is making the argument that no harm to the public will be done if the TRO is overruled.
How can you make that argument when it’s affiliate investor money?
TelexFree’s argument against the TRO is “we filed bankruptcy first!”.
Don’t see that holding up IMO, otherwise it opens up a legal loophole for Ponzi schemes.
The argument can be summarized as following:
TelexFree: we are not a Ponzi scheme until we’re judged to be, and we declared bankruptcy first, so you can’t TRO us!
SEC/Mass/DOJ: TelexFree is a suspected Ponzi scheme and until that is resolved NOBODY should touch the money, even if it’s for reorganization by experts! And one judge already granted us the TRO!
So it’s basically down to how much *does* judge landis weigh the suspicion of Ponzi scheme, vs. the company’s right to reorganize and its likelihood to succeed.
That comes down to how many retail VOIP customers TelexFree has.
CEO Stuart Macmillan “doesn’t know” that. I think that’ll work against them.
Are you sure this is at [2:48:40]?
Wonder if SEC will argue that a Ponzi scheme, by its very nature, is a fraud, and thus is not entitled to bankruptcy protection?
GT is basically pretending they know nothing about Ponzi scheme portions as they’re arguing technicalities rather than trying to dismantle SEC’s allegations. I think they know they’ve been fed a s*** sandwich by Merrill and Wanzeler but they have money to spend and they’ll do the best job they can with it.
@Restelo It is in the 6th audio recording (the one that had information we hadn’t seen/heard before.
At the end of the 6th recording the Judge says he’s going to work on the orders throughout the weekend and Monday.
Hearing to hand down the order(s) is on Tuesday.
The DoJ’s argument in the 6th recording about appointment of a Chapter 11 Trustee was pretty strong too. Focused a lot on the BS TelexFree presented in court and their transparent attempts to install key persons, present declarations and supply witnesses who know (or claim to know) nothing about the Ponzi fraud.
On Tuesday I’m tipping either a Trustee will be appointed or a venue-change will be made to Massachusetts. Don’t like abstention’s chances.
So, no hearing next Monday?
By the way, there’s new stuff from Boston at
https://sites.google.com/a/asdupdates.com/files-website/sec-v-telexfree-inc
Seems SEC is making agreements with both Merrill and Wanzeler about the preliminary RO, while Labriola is fighting back.
Nope, hearing is Tuesday.
What’s the problem with abstention? If the court abstains from hearing them, wouldn’t it end the bankruptcy circus once and for all? Or do they want bankruptcy to go on, but on their (SEC, US Trustee) terms?
Labriola’s opposition is interesting. He’s basically crying about not making any money (and only having $20,000 in assets).
Too bad promoting a Ponzi scheme is illegal. I think all the video/audio he’s put out singing the legitimacy and praises of TelexFree is going to bite him in the ass.
And considering he’s been around since the Common Cents days (TelexFree’s precursor), one has to ask – where has Labriola stashed his money?
And how on Earth can you claim ignorance when you’re the International Marketing Director of a Ponzi scheme for two years? Labriola’s lawyer tries to make the assertion that sure, Wanzeler and Merrill might be guilty, but that the SEC are pushing guilty by association.
It’ll be interesting to see if anything comes of Wanzeler and Merrill’s negotiations. They have nobody to sell out, unless they’re going to try and pin it on Sann Rodrigues (just spit-balling here), so what they are bargaining with is a bit of a mystery to me.
Not a problem, I just didn’t feel the arguments were as strong as on the other two (venue-change and Trustee appointment).
If I well understood, next Thursday 10.30 Landis will rule in everything submitted yesterday, less the First Day Motions?
Tuesday is what I heard.
Sorry, Tuesday, it’s late here. But will he rule in everything discussed yesterday besides FD Motions?
I believe so. They wound up hearing most of the arguments. Evidence and testimony shared a commonality so I guess they figured it was enough.
Employment of KCC and some tax stuff (from memory) is on the 28th, but that’s moot if the application doesn’t survive Tuesday.
Where is the Injunction to freeze all assets for San Rodrigues & company? Is it possible that they will deal with him separately on criminal charges?
If I had to guess, I’d say it’s not only “possible” but, entirely “probable”
When you see the names of some of the heavyweight agencies which have appeared in the last couple of days, I find it unimaginable that things aren’t going to become a lot more hot and heavy for Telexfree and those behind it in the coming weeks and months.
I read that he had a prior conviction for investment fraud which was not that long ago. Generally a conviction of that sort permanently prohibits the individual from participating in certain financial related activities such as selling securities or acting in a financial fiduciary capacity.
Sann may have received a suspended sentence the first time around. If he was on parole or probation there’s a chance he’s been picked up and is already back inside as a violator.
Really? His lawyer is going to try and convince the court to beleive he has 20,000 to his name because he was divorced and pay’s 350.00 a month in child support?…oh along with living expenses…..lol.
I hardly think these “normal” expenses would leave Mr. Labriola broke. Hmmmm let’s see, he is going to try and make a court beleive he worked for a company that is writing million dollar checks to everyone and their brother but he brought home a measly salary that couldn’t even support an average amount of finacial responsibility?
Next he’s going to tell us he only made 50,000 a year. lol…..He’s the Director of Marketing for a world wide billion dollar company for god sakes….How about a Christmas bonus..hmmmm?
So, promoters of the scheme made millions and Labriola didn’t break 100,000? …lol…I don’t which is worse, being thought of as a dumb ass because you claim you had no idea you where promoting a Ponzie scheme across the globe or that you made a pitence of a salary while those around you made millions.
Somehow I don’t think either is plausable. There’s a piggy bank burried somewhere…..
A fun detective exercise : )
I printed out the emails that were discussed. There’s somthing that doesn’t seem right about the last two emails and if they didn’t exist then there would be no evidence to support that they were going to put the cashiers checks in a deposit box.
One of the emails is from Meighan to Daversa saying “can you ask Joe to come down. I want to get going on the cashiers checks.” Joe shoots back “On a conference call”. Heighan then says ok just let me know when done. I am in conference room. ( Now that should have been the end and they would meet in the conference room).
Now, supposedly these guys are in the same building as one another. So, why didn’t Meighan just wait for Craft to come to the conference room to discuss the checks. Why would he send another email and now say lets open a box together.
This email looks different then the others and is not time stamped unless it got cut off when printing it out? But it provides a bridge in the email trail that allows the information about the deposit box. I don’t know it just isn’t setting well with me but I may be reading into somthing. But, also the last email to Runge from Meighan referrs to the Carlos check issues.
@Jamil
They currently have a TRO out against him and other than Wanzeler and Merrill, don’t appear to be co-operating with the SEC.
Wanzeler and Merill are both apparently trying to reach deals with the SEC, which means more information will have to come out in the wash. Not sure who they are selling out, but one possibility is of course Rodrigues.
The hearing to decide whether a permanent injunction is granted against him is on the 7th. Not sure if a lack of co-operation and/or potential breach of the TRO will add any significance to the hearing.
Apparently part of the defendants made or are making agreements with SEC, and for those the case is being settled – Crosby, La Rosa (possible connection with Vanderpool raid?), and now apparently Merrill and Wanzeler. The others will possibly or probably be dealt with in a slightly different manner…
Steve Labriola’s attorney doesn’t need to convince the court about anything, he only needs to point out that SEC has a weak case against his client and that a restraining order will violate the law (e.g. the child support argument).
Miserable Telexfree Nevada hearing coverage opened yesterday TV night news service from RTP-Madeira. What the journalist says:
– SEC charges have been dismissed by the judge;
– SEC charges consist in “a will to see Telexfree going bankrupt”
– SEC charges were based in the old compensation plan, which largely weakened their value;
– Court has ordered Telexfree to implement a new management, with new services and new client relations;
– Charges about Telexfree being pyramid were dismissed by the court, with Telexfree showing their VOIP product ssales have increased 20%/month, being in the top 5 applications in the market;
-At the moment the servers were disconnected, about 50 million people were using Telexfree apps.
This is not Telexzombies news service, this is our mainstream TV station in Madeira.
I’ve heard before this guy was on drugs, now I believe it.
See here: http://www.facebook.com/photo.php?v=728546570501966&set=vb.124445227578773&type=2&theater
There is already a restraining order against Labriola
@Dorothy remember that Meighan’s laptop was temporary seized by the SEC and they made a copy of the hard disk so they could have easily refused to accept those as an evidence in court if they knew it was fake or false
That is deplorable. It’s not journalism it’s lies.
Question..
What is their support for saying that SEC charges were dismissed? And that this is not a ponzi scheme?? Are people from the US Court System blind or they’ve been bribed too?? Come on this is starting to annoy me..
You’ve misread what ROM said.
He was pointing out what the RTP-Madeira TV news service reported, not what actually happened.
You can’t imagine how it annoyed me… I’m feeling now like 3rd world, totally. :\
PS – We are almost certainly the “Western Europe” referred to in the court last Friday.
Page 27 of the document at the bottom below Craft’s picture has the time stamp, then a page break. Meghein wrote it 4/15/2014 at 11:06 AM about two hours before Craft was apparently ready to go up to the conference room.
The SEC attorney knew about the problem, but he didn’t know EXACTLY what the problem was about. He will need to ask an ACCOUNTANT for how it will affect revenue and profit.
A payout to the back office is similar to IOU or CREDIT, a promise to pay the promoter real money later. The promise itself isn’t worth anything, it will first be worth something when the promise is fulfilled and the money actually have been paid out.
Real monetary transaction, e.g. from customers paying for products with credit cards, will bring in fresh money from the outside into the company’s bank account.
Internal funds transactions will not bring in fresh money from the outside. It will reduce the balance of existing promises, but Telexfree used it to generate even more promises.
“I will give you a promise to pay you some money. You can then use my promise to pay me for products and services. That will generate promises of commissions that can be paid out to other people. They can use the promises they have earnt as commissions from your purchase in a similar way, and generate even more promises. We will all be stinkin’ rich”. 🙂
The current order is temporary, “until a final order can be made”.
Labriola’s lawyer used the arguments he could find, and child support is a valid argument.
That is just outrageous. What sources are they using, TF blogs?
And now, in Brazil, the liers are using that Madeira news video to support their false allegations that “the judge said we’re no Ponzi no more”. Simply ridiculous.
Sounds like you all should protest in front of the government minister protesting that the TV station is lying and the news department head should be fired.
They are interpreting events to suit their own narrative.
Judge landis said he’s not going to preempt the bankruptcy just to hear the PENDING events out of Massachusetts. TF people read that as “judge dismissed Ponzi charges”.
What really happened is “bankruptcy judge said pending charges in different state will not stop my bankruptcy case until judge decides it’s proper to stop such”.
This is sometimes known as the “Texas Sharpshooter’s Fallacy”. The TF people know the message they want to convey, so they’re just fitting all the “news” into that narrative.
(The fallacy came from the alleged story of this sharpshooter in Texas who have dozens of bullseye painted around his farm, and in the middle of each bullseye target is a bullet hole. 100% accuracy. Looks very impressive. Until one day, one guy hid like a ninja to observe his technique…
The “sharpshooter” put a bullet hole on the wall first, THEN painted the bullseye around it)
I’ll not go that far, but will fill a complaint tomorrow with the TV station consumer authority.
I know. Its a temporary restraining order issued without regard to child support obligations or net worth. Is that contrary to your understanding of the matter?
Its a lot more accurate to say that he made his point and moved on. The Court had no need for a long winded explanation of Ponzi mechanics.
I hope you don’t think that just because Labriola has a modest child support payment that he is immune from all aspects of the proposed preliminary injunction.
@ M_Norway
Argument to what?
The child support statement was in the Introduction of Opposition to Preliminary Injunction. I don’t think the reason for bringing it up was of concern for the child support being paid, rather that it was the support and a recent divorce being the explanation his lawyer is using to explain why Labriola’s assets came to only 20,000.00.
It doesn’t answer why Labriola is claiming practical poverty when he’s surrounded by those bragging of making millions.
The question that was supposed to be answered was what Labriola’s worth? No one asked what bills he had to pay. Not even child support can be paid with Ponzie money.
He is trying to paint the picture that his worth is minimal because of a recent divorce. He’s only been with Telexfree for a year.
Was the divorce this year? I think not.
Boy that’s true.
Did Dorothy sounded like M_Norway for a moment? 😉
lol….well, I’ve been accused of worse things here….lol.
JK Norway : )
“I pay child support” can often be part of an assets protection strategy. I found it when I checked Joe Craft’s business partners.
It’s an argument that can be used in all 50 states. The $350 child support has been ordered by a court, and the Districts Court in Massachusetts can’t legally bring him in conflict with that court order.
“I don’t own anything significant, and I pay child support” was listed as one of the best legal strategies against assets freeze orders.
Hi OZ,
Great work on the coverage of TF events. I have listened to the recordings and I have to say by the sounds of it TF has engaged a good lawyer.
By listening to the recordings I have a feeling that Judge Landis is going to keep the bankruptcy in Nevada. I just don’t think the others did a good enough job to convince him that it should be moved.
What is your gut feel on the outcome?
@Impartial did you listen to the final arguments in audio #6?
I think either the venue-change or Trustee appointment is going to go through.
The legal implications of a Ponzi scheme filing for bankruptcy as a form of regulatory protection are simply too ridiculous to take seriously.
The preliminary injunction is not ONLY about an asset freeze. To suggest that the entirety of preliminary injunction will be scrapped as to Labriola because he pays nominal child support is *
(Theorizing here)
If the SEC bring the Attorneys Office forfeiture notices to the prelim hearing on Wednesday (and they involve Labriola), one possibility is the order of child support paid out of Labriola’s $20,000 until depletion, with the preliminary injunction remaining in place.
Labriola’s lawyer made a big deal about the SEC “not being able to prove” Labriola didn’t have money stashed away, not that he didn’t. A declaration from Labriola to that effect (“I only made $x from TelexFree and have no money hidden anywhere”), was conspicuously absent.
Is it legal to pay child support with money earned illegally?
There’s a bit of a grey area there. If Labriola’s $20,000 came out of investment positions, then there’s a problem. If it was his International Marketing Director’s salary, then that might be acceptable.
A spanner in the works would be the SEC going after him as an insider. Being named with the owners already suggests that, and as such that might trump anything else (and he’ll be ultimately ordered to pay whatever he earnt back, possibly sans child support payments).
Is it “likely” that even if he was only drawing in a salary..(being the marketer of a billion dollar company) (we’ll pretend it’s a company in the real world)..that the salary is of such a minimal amount that he has “assets” not just cash…his entire worth is 20 grand?
Even if I owned only my car, my clothes and a big screened tv I’d be worth 20 grand.
It does beg the question of where the money went, and again I’ll go back to the wording his lawyer used: “The SEC have no proof”, rather than an outright denial of riches supported by a declaration.
TelexFree affiliates loved to run around claiming there “was no proof” it was a Ponzi scheme, despite the business model. That hasn’t worked out very well for them.
If the SEC’s forensic accounts or the US Attorneys Office has information on Labriola’s assets, that’ll likely be presented on the 7th.
Any news on Ms. Sloan?
Nothing I’m aware of. No reply has been filed and she’s still not co-operating AFAIK.
Right now she’s the ‘Sloan Ranger’ 😛
I don’t know the source he used, but seems to be something from Brazil, since he’s reading “de Nevada”, which is the way Brazilians refer to that state. In Portugal is “do Nevada”.
This also shows how reckless and careless that guy (Luís Filipe Jardim, journalist and also news director for RTP-Madeira) was with that piece.
If you know of any “mainstream news” or some significant blog using the Madeira reportage to back up their claims, please say so, I want to include that in my complaint.
He merely parroted whatever was written in the Brazilian piece of crap he used as source, without any critic judgement about its quality and veracity. Astonishing and total abuse of our public TV service.
Good luck, whit the complaint…”ERC” will not take notice they never do when, the TV service is “RTP Madeira”.
kccllc.net/telexfree/document/1412524140505000000000002
Pag 24.
Is it the end for TELEX?
I understand that ´´IT IS HEREBY ORDERED that the United States Trustee is directed to appoint a Chapter 11 trustee´´is the end…….
Nah… Just those old same pro-TF blogs, managed by people involved in the scam. Brazilian news are very accurate when reporting something about TF and there has never been any “good news”, one of the reasons scammers say media is not to be trusted (unless they publish something good about them).
This is getting big.
Gerald “I see no Ponzi” Nehra named in complaint along with “Doe” defendents in racketeering of TelexFree
http://patrickpretty.com/2014/05/05/urgent-bulletin-moving-telexfree-gerald-nehra-mlm-law-banks-firm-sued-in-prospective-class-action/
That’d be this document in the KCCLLC doc-serve
http://www.kccllc.net/telexfree/document/1412524140505000000000004
Although they remain unknown to the Putative Class Representatives and will remain unknown until discovery has been exchanged, certain promoters were provided with inside information by Defendants and in fact acted as agents servants of the Defendants.
Additionally calls for disbarment and sanctions against G Nehra who permitted his status as an attorney and name to be used as a marketing tool for the scheme.
Behind MLM used as a source on page #4? Footnote 3.
And page #19, footnote 8.
And page #27, footnote 11.
And page #31, footnote 17.
And page #41, fotnote 23 and 24.
While I’m glad to see someone finally take action, I wonder what are the chances they’re going to get anything accomplished in the wake of the DOJ, SEC, Mass SecState fighting over jurisdiction, not to mention Nevada.
Where was this class action suit launched? In Nevada, right? I saw a local counsel and a pro hac from New Hampshire if I read that right. Wonder if the guy’s just covering his basis as he can always refile in Mass if the venue change is approved.
I made me sick viewing that report. Just unbelivible.
The report makes out that TF has been a victim and was forced to shutdown the voip service to 50 Million customers that where using it at the time. He is clearly a promoter or has been instructed to say nothing against TF.
My view is very cltear as nothing about the truh of what is going on was said. dnoticias.pt is just as bad. If you what to complain maybe correio da manha news paper. SIC and TVI channels never reported anything about TF in the past and not sure they want to now unless they do a full feature investigation report.
Problem in Madeira is that members of the government, Church and police as well as media where involved. This alone would merit an international media agent to review the situation. A case study for sure.
I asked myself the same thing and don’t see where the window of opportunity is for them. I liked their complaint though.
The weirdest part is when he claims “Telexfree has now began being seen again as a viable company, after the judge dismissed SEC attempt to get Telexfree into bankruptcy”.
Next weirdest part is the claim that about 50 million people were using Telexfree app when the servers were shutdown.
Speechless.
@P.Hunter
That’s an unsigned proposed order. Actual order is due out on Tuesday 6th.
yeah this is unbelieveable .. everybody here in Paraguay is talking about how TF is back on business and telling everyone who’s a “pseudojudge” (us who are interested on the developing news) to suck it..
This is frustrating… I really hope this sinking ship actually sinks and doesnt turn into a ghost ship or something.. lol
Footnotes 11, 12 and 13 are hearsay about Gerald Nehra’s previous involvment as a legal advisor for AdSurfDaily and Zeek Rewards. They’re not about anything illegal, only about that Nehra legally has acted as a counsel for 2 other Ponzi schemes.
Then he go on and claim that Nehra knew it was fraudulent, and helped to disguise the fraudulent parts? Point 224 etc., page #28.
We have just listened to 7+ hours of recorded bankruptcy proceedings. The eagerness to sue here seems to be greater than the solidness of evidence.
Nehra CAN be accused of SOMETHING, but accusing him of knowingly having assisted fraudulent activity is a bit over the edge.
Well, him seeing some real chaos and revolt on the main pro-telexfree blogs and facebook pages in Brasil and Portugal in the last few hours, it look like they are getting the feeling they are not winning and more of the telezombies are questioning the veracity of the so called “win” on the 2 of May…
I think they are preparing for the seatback tomorrow our they are finally understanding the world of problems that are coming there way…
Look carefully and you will see that it is a Proposed Order submitted by the party (the SEC) that requested the appointment of the Trustee. It is submitted word for word as the SEC wants, but the judge is not obliged to sign it. At this point he has not.
Do they understand what the bankruptcy is about? About terminating both old and new contracts, and start selling VOIP. All their investments will be lost.
If I remember it correctly, it’s mentioned 33-34 minutes into part 5 of the audio files, the cross examination of William Runge. Both the old and the new contracts will be terminated.
People will understand it better if they listen to a few minutes before and after the 34 minute mark, e.g. 30-36 minutes.
yourlisten.com/ponzitracker/part-5
And then you can tell them that I’m very curious (I’m from Norway) about why people from Paraguay feel happy about losing their investments. 🙂
Oral Ruling expected tomorrow. see below
So uh… BehindMLM is being cited in lawsuits now?
That’s something…
In the class-action complaint Carlos Costa is cited as having a Massachusetts address? Can anyone confirm this? First I’m hearing of it…
4 new docs at ASD Updates Files Website 2.0, mainly about Craft motion to release client funds frozen by the current TRO (unwanted side effect). Also something about TELEXFREE FINANCIAL, INC acknowledging they are being sued. Nothing of great importance, it seems.
It likely they will get some of their investment back, maybe not much, but some.
That is awesome. Really. Next up a Pulitzer! You’ve done a great job analyzing and then covering events as they unfold.
Tomorrow hearing schedule for Nevada Court: http://www.nvb.uscourts.gov/calendars/webcalendars/Calendars/ABL%2005-06-2014.pdf
Has someone noticed the judge (if I well understood) is ruling on First Motions tomorrow, despite SEC request to only rule on that after proper argument (if it comes to that)?
If I’m not wrong, this can mean only one thing…
Here’s CARLOS COSTA
They may have found another Carlos Costa living there?
Here’s LABRIOLA:
Here’s JOE H. CRAFT
Here’s MERRILL
Here’s WANZELER
Can I already order a floral wreath for Telexfree bankruptcy case, or still to early? 😀
I’m not putting up more of these zombie telex saying that tomorrow they win in court
@Restelo
My (lack of) legal expertise is already stretched to its limit. Other than the absurdity of a Ponzi bankruptcy case, I’m not trying to preempt any of what will be handed down tomorrow :).
But there is only one reason to give a final decision on First Day Motions without previous argument (not coming to that), or am I getting it wrong?
It’s a possibility, but I’m not familiar enough with bankruptcy proceedings to make a call either way with confidence.
I’ll be up covering the hearing tonight. It’s only fourteen or so hours away so I think we’re better off waiting.
Your finding is certainly indicative of a dismissal/abstention/suspension (or whatever the term is) though.
You shouldn’t want people to use this website as a source for a lawsuit? Even if the information is factual, it will still be hearsay, e.g. Gerald Nehra’s role as an expert witness for ASD is from a third party source.
It’s acceptable if people find information here, e.g. information about where to find original sources. It’s not acceptable if they use it as an original source for a lawsuit (because it isn’t that type of source).
I’m just as surprised as anyone else. They did cite some of the Brazilian media sources we cited, but most of the citing is BehindMLM itself.
I’d hardly expect analysis to pop up in a lawsuit as that’s not usually the type of evidence courts rely on.
Still, there it is… whether the Judge comments on it will be interesting. (Hi Landis! If you’re reading…)
The KCC and the tax payment stuff which were supposed to be in an hearing at 28 May are also there, apparently it’s all there, this thing is certainly dead.
If Landis is punting it over to Massachusetts, that also might explain why everything has seemingly been pushed forward to tomorrow?
The first thing I noticed is that most of those “housekeeping” motions (the first day motions) are unopposed. I take from that that they are of little moment.
The main decisions are the venue, abstention, and Trustee motions. Decisions on those three issues will determine whether or not the first day motions are even relevant. I suspect not, as the Debtors First Day Motions are moot – meaningless if the debtor is not in possession.
I don’t see how that can be, change of venue should not interfere with final decisions on significant stuff like that, even more without any argument being made about them, at least as far as we know.
Yes but a venue-change would affect the scheduling would it not?
If there’s a May 28th hearing scheduled in Nevada and Landis punts the case to Massachusetts tomorrow, obviously that 28th case is not needed anymore (and it would be up to Massachusetts to set a new date).
Not so. The SEC specifically requested that Landis transfer before making any decisions. To the extent possible I think Landis will honor that request. The Mass judge should be able to to run the case as he sees it and not be burdened by prior decisions.
I’ve seen there are some significant differences. Some say “oral ruling”, others say “continued hearing” and “final hearing”.
First Day Motions are “final hearing” and “continued hearing”.
In any case, KCC and tax stuff, which if I well recall from May 2 hearings were both scheduled for 28 May, are both “final hearing”.
You are right, it may also mean a change of venue.
Does a “final hearing” imply a decision?
I think it only means the end of argument. The Judge can rule from the bench or wait and sign a prepared order later. I would like to see the Judge hear final arguments and delay his decision (signing an Order) until he knows the outcome of the Preliminary Injunction Hearing in Mass which I think is on the 7th or 8th.
To me that seems the most prudent thing to do and would provide him with ample justification for his decisions.
It will imply a decision about:
* Change of venue / dismiss the case etc. (SEC’s arguments)
* Appointment of a Trustee (U.S. Trustee’s arguments)
* Whether the TRO violated automatic stay (TelexFree’s arguments)
* 11 other points (points from the First-Day motion, etc.)
SEC is objecting to the bankruptcy itself. “Transfer the case to Massachusetts” is simply an alternative solution to “dismiss the case as a whole”.
U.S. Trustee is concerned about potential bankruptcy fraud, and want the court to appoint a Trustee rather than a bankruptcy agent hired by the owners.
Oz WHAT should happen in court today?
What should happen?
Well in an ideal world (and ignoring legal constraints/procedure etc.), the bankruptcy should be tossed out entirely – leaving TelexFree to face whatever regulatory action is bearing down on them in Massachusetts.
We’re just under six and a half hours till kickoff, we’ll know soon enough!
Oz Big work yours! Thanks.
Today’s Hearing is a continuation of the Hearing commenced on May 2nd. The Judge has notified the parties of his intention to issue an “oral ruling” at the proceedings.
At what point of the 2 May hearings is this said? Does anyone remember?
Not sure if it came up at the hearing, I was just using common-sense.
If the application is rejected/suspended etc., there’s no reason to employ KCC (and all future hearings will be cancelled).
If the application is moved to Massachusetts, a new hearing will have to be scheduled there.
But why 28th May then? And there is indeed an hearing scheduled to 28 May…
That was scheduled a few days prior to the May 2nd hearing. It’s not a priority and the bankruptcy court isn’t just dealing with TelexFree’s case.
I don’t, but Landis is not going to grant first day motions unless he first rules that the BK case goes forward in Nevada. Doing otherwise would just muddy up the water if the case got transferred to Massachusetts.
I’ve find out what 28th hearing is about at the KCC list.
Possibly all those points scheduled for today were already expected and there are no hints there about today’s outcome.
I recognize this is way above my skills, so I’ll quit playing Tarot with today list of points and wait.
Its a matter of case management. Some things need to be decided before others.
I heard the audio clips 5 and 6 in it’s entirety. The one issue that escapes me is why are they grilling this guy Runge when he’s only been at the company 3 days before they filed the petition ? Why aren’t Merrill, Wanzeler and Labriola being interrogated?
They’re the ones that know everything that’s happened with the company and the ones responsible for the outcome!
Can anyone please advise and tell me what is actually happen. I am a promoter of telexfree here in Nigeria, though I had just join about 5 months ago.
Prior this bankruptcy of a thing, they have been paying but not I don’t no my fate. Can I still recoup my money from all that is happening now?
Someone please help!!!
judge would never accept a bankruptcy that or I’m wrong?
The Hearing was about transfer of venue, abstention and the appointment of a Trustee. The SEC’s allegations concerning Merrill and Wanzeler were already part of the record so the judge was aware of the “Ponzi allegations.”
The truth of those allegations will be taken up at the Preliminary injunction Hearing scheduled in Massachusetts later this week which is where Merrill and Wanzeler’s actions will be answerable.
The person’s who testified in Nevada were witnesses for the Debtor. They were offered to support the legitimate purposes of the bankruptcy filing, to whitewash Telexfree’s past actions, argue for Nevada venue and to explain away the actions of CFO Craft. These persons all made Declarations to the Court which means they were subject to further questioning.
The Debtor’ attorney examined them and then the SEC cross examined them. That is why Meighan, McMillan and Runge appeared.
For obvious reasons the Debtor did not want Merrill or Wanzeler to testify and be cross examined so they were not offered as witnesses by the Debtor and did not make Declarations. They did not appear.
That hearing was not the place for the SEC to prove its allegations against the insiders of Telexfree.
Mainly, it was an opportunity for Telexfree to prove it was capable of reorganizing without Court supervision. The SEC effectively refuted that assumption during cross examination and Runge’s recent hiring and lack of detailed knowledge supported the SEC’s position.
This could end up in bankruptcy but its not at all likely that Telexfree will continue in business. Bankruptcy can be used to liquidate a companies assets and payoff creditors to the extent possible too. That might happen.
You may recoup some of your investment over the next two to ten years. Eventually you should receive notice of what to do via e-mail or by visiting your back office account.
Mainly, it was an opportunity for Telexfree to prove it was capable of reorganizing without Court supervision. The SEC effectively refuted that assumption during cross examination and Runge’s recent hiring and lack of detailed knowledge supported the SEC’s position.
The questioning of these characters that felt they were going to be able to make a legit business out of Telexfreewas very amusing to say the least.
Before going to any job interview it is best practice to do as much research on the company, product, and the position you are being interviewed for. So regardless of the fact that these fellows were on the job for a miniscule amount of time is not an excuse for not having more background on the company.
A quick google the night before their accepting the position with Telexfree would have given them a wealth of information. Hell, they would have found BehindMLM and realized they may want to walk away from this one.
Thanks for the explanation. So now I wonder, how are the examinations against the TF insiders mix in with what’s going on in Nevada.
IOW, how can the judge in Nevada rule on throwing away the Chapter 11 petition because there was fraud when he hasn’t yet heard from the 3 TF insiders yet ?
Mr. Costa is not MIA anymore. A few minutes ago they have published to vídeos and some photos on their FB page.
Basically, CC recorded a video inside his car, telling that “today is a very important day here in Brazil, regarding Ympactus, and in Nevada, regarding Telexfree International”.
He says he is going the meet the auditors to present their “business” to them. Cites God… blah blah blah… The auditor will understand how they work… blah blah blah.
He says today Nevada judge can approve the BK and that in Brazil the audit is starting today, and the audit will prove they are completely legal. He also mentions that media does not publish any victory they had in the US (like what?!?). He says he and the promoters are “used to that media behavior”.
He mentions that they had put a lot of stuff together to allow the auditors to have no doubt about their business and that the lack of YT videos is due to a lot of work they have been doing to prove they are legit. He says he wants to film everything the audit is doing.
In the second part, he complains about traffic jam and about being fined 5.5 million reais by Consumer Protection Agency, saying that promoter have no comsumer relation with Ympactus/TF and that they could not be fined by that agency. He calls it an absurd… blah blah blah… there is no proof… blah blah blah… everybody (the justice/government) wants to put their hands in Ympactus/TF money… blah blah blah…
Source (all in Portuguese):
Video Part 1
Video Part 2
Audit Photo 1
Audit Photo 2
I supposed they were coached to act uniformed about past practices, to be intentionally vague about methods and plans, while being optimistic about future prospects. I thought they did exactly what they were hired and coached to do.
They really need to get Costa on the stand in the US.
Feds: Mr. Costa, how many retail customers does TelexFree have?
Costa: None, we don’t sell anything to anyone. We have no consumers.
Feds: I see…
Looks like “things are getting too spicy for the pepper”. 🙂
@Hoss
I couldn’t agree more but we’ll find out how affective a strategie it is to play moron. : )
Perhaps the money was good enough for the short gig. : )
As I listen to that audio clip 5, I don’t think the SEC attorney nailed down the fact that TF was paying promoters out of other newer promoter’s money or even ask what they intend to do with the thousands of Promoter’s contracts. As if it’s OK for the company to not honor the contracts and screw people out of millions.
So they know they’re seeking Chapter 11 but what about all the contracts and the Ponzi allegations. The SEC knows that TF filed hastily for bankruptcy on a Sunday night because they were probably going to get busted that week but they’re not clear enough in their questioning as to the motivation behind TF’s move.
It surprises me that the SEC is not insisting in that line of questioning and letting this guy Mac Millan go on about the company and how they’re going to be wonderful when they re-organize while being vague about the old contracts and how they plan on dealing with that. So it’s OK to file Chapter 11 after you screwed millions of people and then just hire a new CEO ? Just fire the old members and you’re good to go.
Something’s not going right for the SEC here.
This is neither here nor there, but after the SEC pointed out TelexFree were providing false information in court (regarding the whole “you’ll be the first judge to decide this” nonsense), TelexFree have now filed a motion to strike the SEC supplemental authority.
TelexFree aren’t disputing the fact they were wrong, but rather the SEC’s pointing out they are wrong shouldn’t be accepted by the court because it was “untimely filed”.
Boo hoo.
Considering TelexFree’s lawyer spent so much time building arguments around porky-pies, I think it’s only wholly appropriate it be pointed out they are as such.
They do try to make the argument that a Receiver hasn’t been established, thus differentiating the cases, but the fact remains, a decision on this matter has been made before.
Oh and get this, TelexFree’s lawyers actually filed this as something to distinguish their case from that the SEC cited:
Replace Burton Douglas with TelexFree and tell me it’s not true? Sure a Receiver hasn’t been filed, but the SEC are acting in the best interest of all creditors. TelexFree meanwhile are trying to negate owing any money to anyone (they can’t pay anyone with fictional VOIP revenue).
TelexFree lawyers ultimately conclude:
Give them an Oscar for best comedy. Please.
http://www.kccllc.net/telexfree/document/1412524140506000000000001
Meanwhile Landis’ decision is an hour away, and these guys are still filing motions…
Listening to Part 5 of the audio files, it appears to me that when defendant’s lawyer, Mr. Gordon was asking the questions, they had their answers on the “tip of their tongue” – kind of like rehearsed. It was pathetic to hear all the “I don’t knows”!
The bankruptcy is about reorganizing TelexFree WITHOUT promoter contracts. Both old contracts and new ones will be terminated. All debts to promoters will be terminated, if TelexFree get what it want.
The company can then be reorganized around selling VOIP services = you can become a customer, and you can potentially become a VOIP seller for TelexFree.
SEC and U.S. Trustee has filed objections to the bankruptcy. U.S. Trustee is probably suspecting bankruptcy fraud, and want the court to appoint a bankruptcy Trustee. SEC is referring to the Ponzi / pyramid scheme cases in Massachusetts, and want the bankruptcy stopped or transferred to the Massachusetts court.
MAY 2ND HEARING
You will find a brief transcript plus audio files from the May 2nd hearing a couple of places (if you want to know more about the details).
Brief transcript
ponzitracker.com/main/2014/5/2/live-blogging-the-telexfree-bankruptcy-hearing.html
behindmlm.com/companies/telexfree/ponzitracker-telexfree-may-2nd-bankruptcy-hearing-live-updates/
Audio files
yourlisten.com/ponzitracker/part-5
ponzitracker.com/main/2014/5/3/listen-to-the-telexfree-bankruptcy-hearing-here.html
MAY 6TH
The ruling from the May 2nd hearing will soon be available.
Carlos Costa would probably say, “Olha que maravilha pessoal, sim… está é a Nova Telexfree. Esquece tudo que aconteceu, Deus fez tudo novo!” — “Look folks how wonderful, yes… this is the New Telexfree. Forget about the past, God has made everything new! lol
He may not “throw away” the Ch. 11 petition at all , so we can not assume that he will. However, we should find out the answer to that this afternoon.
The existence of fraud, the illegality of Telexfree may not be proven beyond a reasonable doubt for years. A final determination of that is a separate action all of its own called SEC vs Telexfree.
For now, A TRO was, and a Preliminary Injunction may be, issued based on the rather vague premise that the SEC is “likely” to prevail in proving its allegations.
This uncertainty is exactly what the Nevada judge has to take into consideration before making his ruling. He may not assume that Telexfree is a Ponzi because it has not yet been proven and won’t be for years, while he also must give great weight to a reorganization plan when a credible one is brought before him.
So what will he do? I don’t know but his decision will be based on what he has already heard and case law precendents not what Merril and Wanzeler have to say on the matter. They could no more convince him that the SEC was wrong (or right) than you or I.
I still don’t understand how they’re not making it clear that TF was running a Ponzi the whole time therefore it can’t qualify for chapter 11 ?
Not relevant to the bankruptcy. Bankruptcy process is about where are the existing money, can the business be saved, and so on. And we haven’t even gotten to that yet. We’re simply at “should we accept the bankruptcy at all”.
That’s already clear in the bankruptcy declaration, but it’s in lawyer language: “rejected contracts”
They are, actually, but we don’t always see it because we don’t speak lawyer language / legalese. There are several motions back and forth that states outright that our restraining order trumps your bankruptcy automatic stay because we have enough proof that you all declared that as a fraud. AND we have precedents (old cases) to back us up.
And Greenberg Traurig is like “No you don’t! We have cases to back up our side too!”
Again, not relevant in bankruptcy. This is NOT the Ponzi trial, and SEC/DOJ attorneys have already demonstrated that Runge / MacMillan look like dupes and know nothing about the business they are trying to reorganize. That, and they were hired by the suspects, does not make them look very credible.
Right…so if the creditors are the promoters who they owe millions to with said contracts, then what is the point of re-organizing under Ch 11 ? If they can’t pay the creditors then it’s a Ch 7.
I think it’s ridiculous for them to say they want to reject all contracts and seek to re-organize. It’s either one or the other. If you plan on re-organizing then you have to address all your creditors and come up with a plan on how you’re going to pay them back otherwise if you can’t it’s a Ch7.
You just can’t say we want to “reject all contracts” but re-organize.
Their line is “we can’t pay everybody, so we want to reorganize as PURELY a VOIP seller, so free us from all the contracts.”
The issue is whether Judge Landis believe that, not you and me. But IMHO, odds are quite bad for TF now.
Its done all the time. Pension plans are gutted, people are laid off, vendors get stiffed, medical plans are changed, leases are broken, contracts are rejected, bondholders take a haircut, stockholders are wiped out.
It’s all negotiated with a the purpose of permitting the company to remain in business and it sucks to be a creditor.
Incase anyone’s wondering what the game-plan is. Maglich @ PonziTracker will be covering the ruling. I’m hoping it’s a quick one.
If so, I’ll have a short update about it and then will get some shut-eye. Hopefully the order is out come breakfast, otherwise we’ll sit tight till tomorrow.
Either way I’m not expecting the hearing to take too long. I came down with something over the weekend and need my sleep!
Lets hope not.
Live coverage – http://www.ponzitracker.com/main/2014/5/6/live-coverage-of-the-telexfree-ruling.html
I’ll put something up once the decision is announced.
Looks like most of the lawyers are phoning it in (despite TelexFree arguing that having their lawyers rock up to Nevada is not inconvenient).
Thanks for all your work !
Here we go… “Addressing business model”.
SUSPENSE:
First nail 😀
I have the popcorn ready but nothing’s happening yet…
Saw that. Although I think first nail was acknowledgement of board changes coming into effect just before the application. Looks dodgy.
Here we go… here comes the venue-change order…
I wish we had audio for this…
They’re warning the garbage will be destroyed if not collected, already? – http://www.kccllc.net/telexfree/document/1412524140506000000000004
Court concludes Nevada is “proper venue” for TelexFree LLC bankruptcy case.
Also TelexFree Financial.
BUT
Court concludes that venue of Inc. is not proper in Nevada.
The suspense is killing me, so what happens now ?
I don’t want to pre-empt, but I think the TelexFree Inc. improper venue is enough. Judge is talking about decision to stay or transfer the case.
Looking good on the “convenience of parties prong”…
The court also warned Telexfree to remove all evidence used in the First Day Motions, it was issued this morning at 9.30 – Get your crap together and go away!
Slam dunk, both “convenience of parties” and “proximity of debtors” prongs point to transfer of case to Massachusetts.
NOTE ORDER HAS NOT BEEN PASSED YET.
If Nevada is Out, then I bet Telexfree will try to transfer the case to “Ilha da Madeira”, claiming (incorrectly as they always do) that it belongs to the US ! 🙂
This is excruciating.
Damn straight. I thought this was going to take like 20 minutes or so.
Proximity of Assets –> move to Massachusetts
GAME OVER.
article will be up shortly.
I have a question: If TF just wants to buy some time, why would they care whether BK is being judged in Nevada or MA? If things are going to be moved to MA, why would that be bad to TF now? Is MA more restricitve?
As Roberto said, won’t they just start appealing on other absurdities?
As I understand it, the Massachusetts bankruptcy court will be better briefed on the civil and/or pending criminal charges against TelexFree.
And Massachusetts law is less forgiving in the cancelling of Ponzi scheme ROI contracts. Basically Nevada law offered a much favourable environment for TelexFree’s “bankruptcy will get rid of our Ponzi scheme problems” ploy.
Massachusetts isn’t going to play out nice for them. That’s why the didn’t want it moved there. TF’s lawyers made multiple references to “Nevada law” favouring the debtor (TelexFree) in their May 2nd arguments.
Goodbye.
OK so MA it is….when do the proceedings start there now ?
Wait… there’s more to come.
Doesn’t this give TF more time to delay the inevitable. I have a feeling this case will take a long time to resolve…
Court can still abstain from hearing or suspend, no?
Holy shit. It looks like he’s going to grant abstention too!
Damnit. I’m going to hold off writing till it’s concluded. Too many surprises.
Just take a look at the mess TF did in Brazil justice for the las year: they appealed in state justice, national justice, state BK court, lied to justice, denied access to databases (playing the “we have no access too” fools) and so on. You bet they’ll try anything they can to postpone any law action.
BAM. Nevada bankruptcy court is abstaining from the case until it’s moved off to Massachusetts.
Now let’s just wait and see how that translates into “a great victory” in the words to come from TF blogs and Mr. Costa videos.
I’m sure they’ll distort everything.
And we’re live: https://behindmlm.com/companies/telexfree/telexfree-bankruptcy-suspended-pending-massachusetts-move/
All action suspended concerning the Bankruptcy until taken up in Massachusetts Court.
Almost certainly both the SEC complaint and the BK applications will be heard by same judge in Mass and he will decide if there is to be a BK Trustee or whether the BK will be dismissed entirely in favor of a Receivership or some other arrangement. Telexfree is toast.
Something like, Great News! Nevada Judge maintains Telexfree bankruptcy filing! Big reunion of Telexfree promoters expected to attend next hearing in Massachusetts the birthplace of our beloved company. Hurray for our lawyers who brought Telexfree home safe and sound.
Meanwhile Greenburg Truarig is daily checking to see if their retainer check did not bounce.
When looking at whether or not people can use this website as a source, look at the RULES they have to follow.
* Court documents may need to follow proper rules of evidence and similar rules, e.g. about correct types of sources.
* News reporters have certain rules they will need to follow, e.g. about original sources and balanced information.
It’s generally better to say “No, we’re not an original source” than to say the opposite.
We’re not original source, but we’re a good CONSOLIDATOR of disparate bits of data.
Still, I do agree that the class action lawyers gotten lazy and they should have cited the ORIGINAL sources rather than BehindMLM, but crediting BehindMLM for bringing it to their attention, like (as cited by BehindMLM)
FAITH CANE MOVE MOUNTAIN TRUST IN JESUS.