The road to holding two of TelexFree’s biggest promoters accountable has been a long one, but the SEC is one step closer following a dismissal of two motions to dismiss.
Faith Sloan and Santiago De La Rosa were two of TelexFree biggest earners. This earned them a place in the SEC’s TelexFree lawsuit as named net-winner defendants.
The SEC allege Sloan stole $160,400 from TelexFree victims and received $51,000 from the company itself. De La Rosa is alleged to have stolen over $2.2 million.
Unfortunately parallel criminal proceedings against TelexFree’s owners saw the SEC’s civil case stayed until resolution.
The DOJ’s criminal case against Carlos Wanzeler is ongoing (Wanzeler is a fugitive in Brazil facing extradition to the US), however his partner James Merrill was sentenced to six years in prison a year ago.
Merrill’s sentence was enough to lift the stay on the SEC’s civil case, with proceedings resuming around September, 2017.
Once again facing an active case against them, Faith Sloan and Santiago De La Rosa filed respective motions to dismiss last November.
On March 16th those motions were denied.
The court found the SEC has met the burden of alleging Sloan committed unlawful conduct with sufficient particularity.
The SEC, in its second amended complaint, identifies specific statements that Sloan allegedly made to investors and provides the substance and dates of those statements.
Thus, the SEC alleges fraud with specificity.
As part of her “I knew nothing” defense, Sloan argued ‘her statements were neither manipulative nor deceptive‘.
The court was having none of it, ruling
The SEC has plausibly alleged that Sloan omitted material facts about TelexFree being a Ponzi and pyramid scheme.
Accordingly, the SEC has sufficiently alleged that her statements were manipulative or deceptive.
Sloan also argued the SEC failed to allege scienter. Not surprisingly, this defense was also rejected.
The SEC has plausibly alleged that Sloan possessed material knowledge of TelexFree’s business model with respect to revenue from AdCentral and retail sales.
Drawing all reasonable inferences in the nonmovant’s favor, the SEC has plausibly alleged that Sloan was at least reckless in not becoming aware that TelexFree was a Ponzi and pyramid scheme.
Accordingly, Sloan’s motion to dismiss will be denied.
De La Rosa’s motion to dismiss was pretty much a copy of Sloan’s (or vice-versa), and was thus denied under the same reasoning.
Not really sure what comes next or when (discovery?), but we’ll keep you updated as the case progresses