Misleading Advertising Law

The SEC has announced that they have obtained a temporary restraining order against Universo Foneclub alleging that the Foneclub was pyramid scheme. According to their press release: "The Commission's papers charge Sanderley R. De Vasconcelos and Victor Sales with promoting a pyramid scheme known as "FoneClub" that targets Brazilians and Brazilian-Americans living in the area of Framingham, Massachusetts. The Commission alleged in its complaint that the defendants falsely promised members of the Brazilian community that they would earn substantial sums of money by paying approximately $2,000 to $5,000 to become members of a company referred to as the FoneClub that purportedly sells prepaid telephone calling cards through a multi-level marketing structure. However, the complaint alleged that the defendants, who have emphasized to potential investors that neither they nor the company will earn profits from the sale of phone cards, are in reality luring victims into a pyramid scheme in which its members only make money through the recruitment of new members. The complaint alleged that the defendants emphasized in their sales pitch, which was given in Portuguese, that God wanted the Brazilian community to prosper financially and that the FoneClub would provide the opportunity for it to do so." (my emphasis)

According to the SEC complaint, the defendants actually told the individuals they were recruiting that there was no way to make money by selling the FoneClub products and they could only make money by bringing in new marks, or sorry, new recruits. I suppose that they cannot be prosecuted for deception, stupidity explains why this scam lasted only from April, 2006. I suppose that many of the Brazilians wanted to know which members of the their community God wanted to prosper financially?

Here is some corporation background on the company and directors. Here are the directors in Universo Foneclub, which merged with Universo Gospel US Inc, earlier this year. None of the directors of the later company have been charged by the SEC, and only two of the directors of Universo Foneclub have been charged.

Congratulations to the SEC and all involved for shutting this down within several months of its existence.

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