A Belated Herbalife Update: 2 states launch investigation, and endorsers freaked out

With TelexFree news coming fast and furious, other areas of interest aren't getting covered. Haven't covered any news about Herbalife for a while, so here's a bit of recap.

April 14th: New York State Attorney General Eric Schneiderman is investigating Herbalife as a suspect pyramid scheme. Apparently multiple sources have came forward with confessions / testimonies to prompt the investigation. Previously, NY Post had reported that no less than FBI and US Attorney office has started a criminal probe into Herbalife only a few days before that.

April 17th, Illinois State Attorney General Lisa Madigan has also started investigation into Herbalife as a possible pyramid scheme.

John Hempton, whom previously I've shown to have a blindspot for Herbalife, is apparently now regretting his decision to ride the Herbalife train. His fund apparently lost 2.4% of its value in a week and he apparently attributed it all to Herbalife's stock reacted "very badly" to recent regulatory notes mentioned earlier.

And finally, former secretary of state Madeleine Albright, who was apparently earning 10 mil over last six years consulting and shilling for Hebalife, is now worried about her own reputation. NYPost claimed that she met with Herbalife CEO Michael Johnson on a private strategy session.  However, she's not getting off the train yet.

TelexFree News Update 4/25/2014: millions deposited with lawyers in only 2 months

A series of disclosures by the lawyers involved with TelexFree yielded many interesting tidbits

1) According to disclosure by Greenberg Traurig, they were retained by TelexFree in February 2014, when Massachussetts started asking questions. Then on April 7th, when TelexFree started contemplating bankruptcy, they signed a new contract.

See http://www.kccllc.net/telexfree/document/1412524140425000000000008  paragraph 4 and 5

2) Greenberg Traurig has been paid over 3.72 MILLION dollars so far, but only spent about 557 thousand as of 4/24/14.

See http://www.kccllc.net/telexfree/document/1412524140425000000000008 paragraph 6

3) To handle bankruptcy in Nevada, another lawfirm, Gordon Silver, was retained on April 13th. That's the same day the bankruptcy petition was entered in Nevada. They were paid 750K, of which they spent 55K as of 4/24/14

See http://www.kccllc.net/telexfree/document/1412524140425000000000003 paragraph 4

4) Then Gordon Silver hired Kurtzman Carson  (i.e. KCCLLC), who were paid 350K, and spent very little of it thus far.

TelexFree News Update, April 24, 2014: Claim process starts (DO NOT FILE YET!), more investigation in Dominican Republic, and more legal motions

A flurry of news for past 24 hours, but all of them small. Here's the summary:

TelexFree Bankruptcy will Continue in Nevada for Now, Claim Deadline Set

Bankruptcy judge in Nevada has allowed the bankruptcy proceedings to continue for now (on an interim basis), with another court date for May 2nd among the parties such as TelexFree, SEC, and US Trustees. KCC has been appointed interim claims and noticing agent to handle paperwork. 

As a result of this appointment, court also has set tentative dates, including a "341 Meeting" (named for the bankruptcy law section) for May 22nd, and claim deadline of August 20.  The debtors will be present and if you are a creditor, there may be an opportunity to question the principles of TelexFree. 

The "341 Meeting" will take place May 22, 2014 at 3:00 P.M. in the Jury Assembly Room of the Lloyd D. George U.S. Courthouse in Las Vegas, Nevada

Any and all claims *must* be filed with the claim agent. Absolutely DO NOT file the claim with the court itself.  Jordan "Ponzitracker" Maglich will have a guide on how to fill out the claim and where to send it and it will be linked from here when it is published. You can wait a few days!

See http://www.ponzitracker.com/main/2014/4/24/claim-deadline-set-for-victims-in-telexfree-bankruptcy.html


ANALYSIS: Do not file any claims yet. Wait until after May 2nd at least. You don't even know if the claims will be staying in Nevada just yet. By then a guide to fill out the claim will be published.


TelexFree and SEC file a flurry of motions and briefs

TelexFree is arguing that bankruptcy would trump some parts of the TRO. This will be decided in Nevada court on May 2nd.   (SEC asked for April 30th, but judge took TelexFree's side and gave both May 2nd).

SEC's arguing that the case belongs in Massachussetts, where the creditors and the principal all reside. This will be heard on May 2nd.

The individual defenders, such as Labriola, Crosby, and so on have entered their own motions to fight the TRO. On Friday, April 25th, court in Massachussetts will decide whether the TRO will be made permanent.

You can read a full list of motions and order on BehindMLM.com

See: http://behindmlm.com/companies/telexfree/telexfree-court-status-24th-april-2014

ANALYSIS: May 2nd seem to be the big day. Wait until then.

Dominican Republic Authorities Expand TelexFree investigation

Dominican authorities, including anti-money laundering unit, National Prosecutor, and Superintendency of Securities, will coordinate efforts to trace the money of victims in Dominican Republic, which is believed to be tens of millions of pesos. They promised to track down the top promoters and find out where the money went, and if it did indeed left the country, will seek US help to retrieve the money. 

See http://www.dominicantoday.com/dr/local/2014/4/22/51221/Dominican-agencies-probe-TelexFree-ponzi-scheme

Why Italy Said Vemma's a Pyramid Scheme; Analysis by TINA

My Vemma Haul! (Photo credit: BenSpark)
But who's actually getting (keel)hauled? 

Truth in Advertising, i.e. TINA, has published a full analysis and translation of why Vemma was deemed a pyramid scheme in Italy back in March 2014.  From TINA article:

The investigation by Italy’s Competition and Markets Authority (AGCM), which sanctioned Vemma €100,000 (roughly $140,000), began in June 2013 after two consumers complained about the Arizona-based company’s marketing and sales practices. During the investigation, Vemma proposed changes to its Italian compensation structure. It also announced changes in its U.S. structure. But a TINA.org analysis has found that the changes to the U.S. compensation plan do not make the plan significantly different from the one Italian regulators found to be a pyramid scheme.

Here are some interesting facts about Vemma's membership in Italy, released by AGCM, where Vemma was given months to cooperate with the investigation, and even presented a defense.

• Only 27% of associates were eligible for bonuses by regularly ordering products from Vemma.
• Fewer than 100 individuals on average generated six-month sales commissions higher than €1,000 (about $1,300 in June 2013), while nearly all the other associates received quite low or even paltry compensation.
• A significant portion of the orders consisted of purchases made by associates themselves, presumably for their own consumption, which in the network are known as “autoship” sales.
• Approximately 20% of the total income generated from product sales was obtained from the sale of expensive Vemma packages called “Builder Packs” that cost €599 or €999 (about $700 to $1,300 in June 2013), and over 60% was generated from autoship sales.
• Only about 16% of the income was generated from the sale of products to third parties.
• Only 24% of associates had a VAT number (European version of "resale license"), which would enable them to sell products to third parties. 

BREAKING NEWS: SEC appears in TelexFree Nevada bankruptcy court, wants whole thing moved to Massachussetts

English: The Seal of the
United States Federal Bureau of Investigation.
(Photo credit: Wikipedia)

SEC has formally filed a motion to join the Nevada TelexFree bankruptcy hearing, and to move the Nevada Bankruptcy hearings to Massachussetts, according to court documents filed, as spotted by PatrickPretty.com. The filing revealed that there are two separate probes, one by Massachussetts secretary of state, securities division, and one by US Attorney's office (department of Justice), that involved FBI, HSI, ICE, and possibly other agents. It notes that while the company is registered in Nevada, it really exists only in Massachusetts.  Asset freeze obtained by SEC started April 16th, 2014.

The SEC motion can be viewed here, courtesy of KCCLLC

Breaking TelexFree News: TelexFree wants a 6 week delay, while DOJ wants bankruptcy trustee to take over ASAP

Here's your TelexFree update for 23-APR-2014.

TelexFree wants 6-week delay in bankruptcy

TelexFree, through KCC, has filed a motion for 6 week delay on 22-APR-2014, claiming that the SEC/FBI/ICE/local law/ who knows what else raid took all their documents and they can't fill out the rest of bankruptcy paperwork. Bankruptcy court originally gave them 2 weeks, though normally all such information should have been included. For the bankruptcy to be even considered.

According to Jordan "Ponzitracker" Maglich,

Federal Bankruptcy Rule 1007 sets forth a list of the required documents and schedules to be filed in connection with initiation of a Chapter 7, 9, 11, or 13 bankruptcy.  In addition to a bankruptcy petition, a debtor is also required to file:

• schedules of assets and liabilities;
• a schedule of current income and expenditures;
• a schedule of executory contracts and unexpired leases; and 
• a statement of financial affairs.

In addition, other required schedules include lists of creditors holding secured and unsecured claims, personal and real property holdings, and executory contracts and expired leases.
In the initial filings made by TelexFree, none of these required schedules were included. 

http://www.ponzitracker.com/main/2014/4/22/telexfree-seeks-six-week-extension-to-file-financial-informa.html


US Department of Justice wants company placed under bankruptcy trusteeship IMMEDIATELY

US Trustees, which is the side representing the public, has filed a counter motion also on 22-APR-2014, that seeks to have TelexFree immediately transferred to the control of a bankruptcy trustee (much like Bernie Madoff's trustee Irving H. Picard, but not completely the same).

Normally bankruptcy can be handled by the people declaring the bankruptcy. US Trustees has plead with the judge to appoint a bankruptcy trustee due to evidence of fraud already documented by Mass Securities Division and the SEC, and the newly hired officers such as acting CEO and CRA cannot be trusted as they have been hired by those who are suspected of fraud.

You can read the document here:

http://www.kccllc.net/telexfree/document/1412524140423000000000001

Please note both are merely INTENT, and has NOT BEEN APPROVE BY THE COURT!

TelexFree Update: SEC will intervene in bankruptcy, telecom licenses in jeopardy, victims may be trolled for reload scams

Every day the scope of TelexFree scam seem to expand, and getting more complex, as different people search for ways to cope with the situation, whether they are victims, or "leaders" who lead victims, or worse. Here are some choice updates.

TelexFree owners paid themselves and more millions with participant money

TelexFree, according to SEC, only sold $1.3 million dollars worth of VOIP over 2 years that it operated. However, its owners passed out checks worth much more in the last six months. Here's some highlights, according to SEC's forensic accountant:

Albers [SEC forensic accountant] said TelexFree transferred a total of $3.1 million to Merrill Dec. 26 [2013] and the following day. Over those same two days, the company moved $7.3 million to Wanzeler, who wired half that amount to a Chinese bank in Singapore a week later, Albers said in court documents. 

There’s lots more: TelexFree sent more than $2 million to companies controlled by chief financial officer Joseph Craft between last November and March of this year. He was in the office when FBI agents raided the company, and he tried to walk out the door with $38 million in cashier’s checks. Among those checks: one made out to Wanzeler’s wife for another $2 million.

Now consider this simple question: if they sold only $1.3 million worth of VOIP over 2 years, where did all that $7.3 mil, $3.1 mil, $2 mil, and $38 mil come from?



Nevada Attorney General will "Intervene" in TelexFree's telecom approval

According to documents spotted by PatrickPretty.com, Nevada Attorney General / Consumer Protection Bureau has filed "intent to intervene" in regard of TelexFree licensing issues with the Nevada Public Utilities Commission.

This appears to be in reaction to the Joe Isaacs / ISG Telecom letter apparently sent to all 50 states (and DC) that he was lied by TelexFree to and the information submitted to various commission to "prove" TelexFree is a viable company, many of which were "submitted under seal" and thus not for public review, may be utter fabrications.

What that really means is Nevada AG wants to throw out the entire application for telecom license to operate in Nevada in light of the new information, such as TelexFree's bankruptcy and charges by SEC and Massachusetts SecState of being a huge Ponzi scheme.

Expect other states to follow in the next few days. TelexFree should have all of its telecom license invalidated within a few weeks. They were likely fraudulently obtained through filing of false information.


Also see BehindMLM: TelexFree communications registrations in jeopardy?

But wait, there's more!

Ponzitracker explains What's Next for TelexFree Victims

Jordan Maglich, otherwise known as Ponzitracker (and runs Ponzitracker.com), has an article up titled  "What's Next for TelexFree Victims". 

The important stuff is at the end, and excerpted below:

One step that those affected parties can take today is to begin gathering all evidence of their relationship and investment with TelexFree.  This includes agreements, negotiated checks and credit card statements, and bank statements showing any deposits and/or withdrawals.  This information will be necessary, if not required, in connection with submitting claims to the Bankruptcy Court. 

Regarding claims, each interested party will most likely have the opportunity to submit Proof of Claim Forms to the Bankruptcy Court to properly document their entitlement to any earmarked funds.  Perhaps the most crucial guidance surrounding these claims is that attention must be paid to the deadlines imposed by the Court for submission of Proof of Claim forms and any other documents - untimely or tardy claims fare a much less chance of being approved than a timely claim.  A copy of a blank Proof of Claim Form is embedded below and downloadable here.  While the filing of a Proof of Claim may not be required if the case proceeds as a Chapter 11 proceeding and the particular debt is listed in the correct amount in the schedules filed with the Court, the submission of a Proof of Claim may still be advised.

While you don't need to fill out such a "proof of claim" for at this time (and please do NOT fill one out and send it to the court, it'll just delay the case), it should help you organize your claims when the courts got things sorted out and the reclamation process begins.

BREAKING NEWS: TelexFree's consultant "ISG Telecom" quits, calls TelexFree "alleged crooks"

TelexFree, despite its name, has NO license to operate long distance until recently neither in US nor Brazil. That only changed when they hired ISG Telecom and its head, Joe Isaacs and received an FCC license in the US in late 2013. It is in the process of applying to various states when the bankruptcy hit.

Mr. Isaacs has a history with MLM through FHTM, but that's a separate story altogether.

On April 18th, 2014 (Friday), Joe Isaacs issued a letter to all the state commissions he had applied to on behalf of TelexFree, stating that he had been lied to, the financial statements are utter fabrications, and the affidavits filed are probably lies too. He quit!

You can read the letter, as spotted by a BehindMLM member "Farao" on the Washington State UTC website:

Good job, Mr. Isaacs. Sure wish you never took on this "hot potato", eh? Better late than never.

Scam Absurdities: Why is TelexFree insulting law enforcement?

FBI and HSI agents collect evidence from TelexFree office after the raid
Photo by MetroWest Daily News, see original article at
http://www.metrowestdailynews.com/article/20140418/NEWS/140416010

Most suspects, when caught by law enforcement, would have the common sense to shut their mouths and let their lawyer do the talking, and their lawyer would not do any thing to insult law enforcement, calling them mistaken, unless they actually have proof, and only if they want to try this in the court of public opinion.

Given that TelexFree, which was already frozen in Brazil 8 months ago, and is under investigation all over the world, and was recently raided by no less than FBI, HSI, ICE, SEC, state police, deputy sheriffs, and who knows what else, you'd think they'd just shut the **** up. But no, they had to send out a press release that basically said the law enforcement are "mistaken and misleading" regarding the incident where they caught Joe Craft trying to take a bag containing a laptop and 36 million in cashier's checks out of the premise WHILE law enforcement are conducting a warrant search.


First, the report, as given to a judge:

Complaint given to judge, courtesy of Asdupdates.com
see original at https://sites.google.com/a/asdupdates.com/files-website/sec-v-telexfree-inc  DOC10.pdf

The facts are pretty clear:

FACT: Joe Craft lied (he's CFO and he said he's a "consultant")
FACT: Joe Craft tried to take assets worth almost 38 million USD out of office being searched
FACT: Joe Craft failed and all the cashier's checks are kept by HSI as evidence.
FACT: Checks are made out to TelexFree LLC, Katia B. Wanzeler, TelexFree Dominicana (but can also be deposited into accounts of Carlos Wanzeler and James Merrill as they are the purchasers).

But guess what TelexFree chose to interpret the event as?

QUOTE: "The reports that Mr. Craft attempted to abscond with a laptop and cashier’s checks are false."

So what sort of convoluted logic did they use to justify their reality distortion? That's in their press release.