Yesterday saw the mediation settlement conference between TelexFree and Acre’s Public Prosecutors take place and, not surprisingly, nothing came of it.

Public Prosecutors announced last month that they would accept nothing less than the dissolution of TelexFree and immediate return of invested funds to investors.

In addition to this, they also presented what appears to be a legitimate business model that would see TelexFree affiliates actually sell VOIP to retail customers, earning a commission on each sale.

The catch is that the company would have to first return all invested money to its affiliates.

Not wanting to give up their $20 a week ROI Ponzi business model, TelexFree rejected this proposal. Carlos Costa then presented two alternatives of his own.

The first proposal appears to be the continued operation of TelexFree (registered as Ympactus in Brazil). Why Costa even bothered to make this proposal I have no idea.

The second proposal was a little interesting. Costa again sought the restart of TelexFree’s Brazilian business operations, but only to the extent that existing investment contracts (52 weeks) would be honored. At the conclusion of said investments contracts, TelexFree’s Brazilian affiliates would then be required to re-register with the company via their US operations.

What’s interesting is that Costa seems to be of the opinion that the US has no problems with a company taking hundreds of dollars from affiliates and paying them $20 a week from newly deposited money, under the guise of placing ads on the internet.

It also signals a willingness by the company to withdraw officially from Brazil, giving up a registered presence in their largest affiliate investor market.

With both of Costa’s proposals being rejected by Acre’s Public Prosecutors, it now falls on Judge Thais Borges to make a decision on Carlos’ proposals. This decision is expected to be handed down within 10 days.

On one hand a decision in favour of TelexFree would effectively see the court sanctioned legalisation of Ponzi schemes in Brazil.

A decision against the company would see the greater legal case against TelexFree continue, with Judge Borges stating that due to the size of the case it would not be decided upon until sometime next year.

10 days puts us at next Sunday the 24th. I’d assume Judge Borges will have handed down her ruling by Friday the 29th at the latest (ten business days).

Thus far at least one Brazilian Judge has openly referred to TelexFree as a “pyramid scheme” in court.

Stay tuned…


Footnote: There was a civil case brought about by an affiliate that was dimissed yesterday for “lack of jurisdiction”.

In handing down her decision, Judge Menez remarked

There is strong evidence of the existence of a financial pyramid, formalized in the contract between the parties (affiliates and TelexFree).

The case was filed in the 3rd Special Court of Mossley by a TelexFree affiliate against the company, with its dismissal having no bearing on the Acre case.