TelexFree: Faith Sloan Files A Response and Amended Response

Today, Faith R. Sloan, through her attorney C. Peter R. Gossels, filed her response to the Plaintiff’s Opposition to her Motion to Dismiss.  It starts off with this:

“the Plaintiff argues that “the Court must accept all factual allegations in the Amended Complaint as true and must draw all reasonable inference in the Commission’s favor.”

What the Commission ignores is that its Amended Complaint must plead sufficient facts to render its entitlement to relief plausible, and not merely possible.”

A bit farther down the filing:

“Ms. Sloan submits that the Plaintiff has not pleaded sufficient facts to render its entitlement to relief plausible, because it has not pleaded sufficient facts to prove cogently that Ms. Sloan made any material misrepresentations in connection with the sale of a security or that she consciously intended to defraud anyone or acted with a high degree of recklessness in selling a security.”

Then, we have a few references to the Amended Complaint (AC):

¶ 103 alleges that Ms. Sloan was a “prominent promoter of TelexFree”, a “great leader”, that she operated websites touting TelexFree and appeared in promotional videos posted on YouTube. Although Ms. Sloan operated and was called a “great leader” by the Defendant, Steve Labriola, during a corporate phone call, Plaintiff’s allegations in ¶ 103 do not constitute a violation of Section 10(b) of the Exchange Act in the light of ¶ 81 of Plaintiff’s Amended Complaint, because promoters like Ms. Sloan were “not permitted to use marketing materials that … had not been approved by the (TelexFree and its owners)”.

This filing concludes with this:

As we have pointed out above, the Plaintiff has failed to plead sufficient plausible facts to render it entitled to the relief it seeks against Ms. Sloan.

What utter nonsense.

I put the “Amended” response next to the one filed first; I can see no material difference, unless their sole point was to show the same thing happened with the SEC’s Complaint, namely,  their Amended Complaint has nothing materially different than the original Complaint?  Who knows with these clowns?

BehindMLM: Brazil’s SEC says TelexFree is “undoubtably a pyramid scheme”

Brazilian SEC: “No doubt TelexFree is a pyramid scheme”

telexfree-logoAfter a flurry of action these past three months as US regulators took action against TelexFree, things have finally settled into a lull.

One owner, James Merrill, is currently out on bail and awaiting trial. The other, Carlos Wanzeler is on the run in Brazil. Regulators boned his wife’s attempts to flee to the US to join him, and Wanzeler remains cut off from his family.

The US Trustee is currently investigating TelexFree, with the results expected to lay the foundation for possible bankruptcy fraud charges against the company at a later date.

One could argue that in the grand scheme of things, US regulators should have acted much sooner. Despite there being signs well in advance, I will say that these cases take time to build.

With the speed with which US regulators shutdown TelexFree, raided their offices, threw one owner in jail boned the other owner’s wife’s plans to leave the US, ongoing concerns over the pace of regulatory action in Brazil remain.

James Merrill, recently released on bail, has been left holding the bag after his partner-in-crime fled to Brazil. And at least one top promoter, who earned millions and sees himself as a victim, is also hiding out there.

Earlier this year it was hinted that the criminal case against TelexFree might be “resolved by mid-2014“.

With auditors Ernst & Young recently granted an extension to file their report though (due to the “complexity” of TelexFree’s business operations (read: fraud)), and then time granted for both TelexFree and the Acre Public Prosecutor’s Office to file replies, all of which then must be considered by a Judge before a ruling is made, that the case will be resolved anytime soon seems unlikely.

The end of 2014 might be more realistic, but with the ongoing fluidity of regulatory action against TelexFree in the US, even that might be a stretch.

Not helping the existing impression that regulatory justice in Brazil moves slower than a quadriplegic turtle, comes the revelation that the Brazilian SEC concluded TelexFree was “undoubtedly a pyramid scheme”.

Wait for it… all the way back in January 2013.

[Continue reading…]