Beware of TelexFree – Review Part 2

Eighteen “victims” of TelexFree have won the right to “question the accuracy of TelexFree’s records.”

It’s a strange choice, since the “victims” have had a lot of time to prove what they say happened.

The 18 TelexFree investors who have challenged TelexFree records (Appellant Participants) are:

Abdeltif Bellagat
Abdelkhalak Toqi
Moukhtari Rachid
Joseph Nasr
Ruben Nieves
Merilio Rojas
Hazem Wehbe
Theresa Saint-Peter
Peter Said Rahhaoui
Marcio Costa
Saif Muhsen
Panagiotis Iatrou
Manal Hamadi
Hubert Lubin
Carlos DeAlvarenga
Rahima Boughalem
Earley Barbosa and George
Based on the facts, it looks like these people are net winners who are trying to cheat the system.

Many people had more than one user account, and each one showed different transactions.

Some people, like Appellant-Participant Panagiotis Iatrou, remembered having as many as thirty different user accounts.

Different user accounts had different amounts and types of personal information.

Logic would say that real victims of a Ponzi scheme don’t have thirty accounts. Scammers do.

In any case, the affiliates have questioned an algorithm that Huron Consulting Group’s Timothy Martin made.

The algorithm used the personal information that each user reported about themselves to link user accounts to participants.

There have been times when TelexFree net-winners have tried to beat Martin’s algorithm. At a hearing earlier this year, Judge Hoffman found that the results of Martin’s algorithm were, as District Judge Woodlock put it, “potentially unreliable.”

This is because of a number of technical flaws that are blamed on Martin

In all his years as an accountant, he had never dealt with the problem of “multiple user accounts and the need to link those accounts.”

Some of the problems that the District Judge’s order points out are:

It’s not possible to group accounts with names that are “too different.” The algorithm didn’t take into account fake or misspelled names. The data that Martin’s algorithm used came from TelexFree and was of “poor quality.” In short, Martin thought that the information given by scammers would be correct. He didn’t know that con artists use tricks like MLM Ponzi schemes.

To be fair, TelexFree also has some part to play in this.

TelexFree set up its business so that there would be little proof of transactions between participants.

Even though Martin’s algorithm had some technical flaws, it was still approved for use in deciding claims.

The 18 affiliates who fought against the findings couldn’t prove they owned the accounts and money that went with them.

In many cases, there was only a “TelexFree Participant Questionnaire” to back up the claim.

Some participants said that they didn’t have paperwork because they paid cash and didn’t get a receipt or because they were locked out of the TelexFree database.

Others backed up their proofs of claim with affidavits from third parties, copies of an agreement with TelexFree, or handwritten notes that didn’t say much.

Still others said in their questionnaires that there might be proof, but they didn’t give any. Some people could prove their claims with bank statements and checks.

I’m oversimplifying, but the court basically said, “No proof, no claim.”

When proof was given, the affiliate was usually labeled as a net-winner.

Mr. Martin came to the conclusion that many of these claims didn’t have enough proof to back up their claims that they paid TelexFree.

Some appellant-participants, like appellant-participant Carlos Dealvarenga, showed proof of their payments, but Mr. Martin found that they had other accounts with positive balances that were more than their proof of payments to TelexFree. Mr. Martin came to the conclusion that the people who took part were “net winners” and could not file claims.

This led to a request for more time so that more records could be given.

In the end, nothing was given. Instead, the affiliates gave affidavits that were already made.

In April 2020, the Appellant Participants gave more evidence to back up their claims.

In the boilerplate affidavits that were part of these documents, participants said that they were “net losers,” filled in the amount of their claim, and gave different levels of detail about their transactions with TelexFree.

Just believe us, dude.

Martin wrote in an affidavit in support of the Trustee that the disputed claims by the 18 affiliates were false.

Participants changed transactions or accounts without keeping enough records.

In August 2020, the bankruptcy court signed off on the claims being turned down.

The affiliates filed an appeal after their claims were turned down.

a full trial on the facts to settle important disagreements about TelexFree’s proof of payment and record keeping.

The Trustee holds that

There doesn’t need to be an evidentiary hearing because the participants didn’t give the required proof for their claims.

District Judge Woodlock said the following when he agreed to hold the hearing:

Even if the TelexFree database had full and accurate transaction history for each of the Appellant Participants’ user accounts, Mr. Martin’s algorithm might not have added up all of those accounts and linked them to the right Appellant-Participant.

I don’t think the Trustee’s evidence is strong enough to prove that the Appellant-Participants’ claims aren’t true at first glance, since that evidence hasn’t been fully looked at in an evidentiary hearing.

(The Appellant Participants) need to be able to test how reliable the Trustee’s aggregation process is, especially after Judge Hoffman’s recent concerns.

I don’t know how long this will take.

I think that, no matter how long it takes, the “just trust us, bro” issue will have to be dealt with at some point during the evidentiary hearing.

If you agree with “just trust us, bro” claims, you can say things like, “Hey guys, I invested 110 billion dollars in 110 billion accounts. Nothing. Please, money?” nonsense.

In the end, I think that if you take part in a Ponzi scheme, you have no right to get your money back.

If you can’t prove that you own the account and can’t show financial records, that’s your fault.

It’s not a perfect system, and some net-losers will definitely get caught. But I don’t see a way out of the “just trust us, bro” stalemate.

I’ll keep an eye out for news about what’s going on.

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