On January 11, Brazil's Bureau of Consumer Protection, known as Procon, issued a press release stating it had found evidence of criminal activity within TelexFree. The agency began its investigation after receiving numerous inquiries about the company's business model, which promised returns on investment for performing simple tasks.
Procon's civil prosecution of Consumer Protection, under investigation number 01/2013, highlighted several controversial issues. These issues presented potential crimes and put consumers at risk when accepting the company's offers. The probe identified a possible breach of Federal Law No. 1.521/51, specifically Article 2. This law defines as criminal any act of "obtaining or attempting to obtain illicit gains at the expense of the people or of undetermined number of people through speculation or processes fraudulent ('snowball', 'chains', 'pichardismo' and any other equivalent)" including Ponzi pyramid schemes.
The investigation also cited a possible violation of the Code of Consumer Protection (CDC). This includes concerns over false advertising, insufficient product and company information, exploitation of consumer weakness or ignorance, and the imposition of unreasonable disadvantageous conditions.
Following its findings, Procon filed a formal complaint against TelexFree. The agency forwarded this complaint to the State Prosecutors Office, the Minister of Finance, and the Federal Police. None of these entities have yet commented publicly on the matter.
TelexFree's operational model involved a Ponzi scheme for its "AdCentral" commissions. New investor money funded returns for existing participants. The company also used a pyramid scheme structure, paying straight recruitment commissions and binary recruitment commissions. These payments directly compensated existing affiliates for bringing new members into the scheme.
TelexFree, after likely saturating the Brazilian market, began efforts to expand into the United States. As of the report's publication, Alexa traffic rankings placed TelexFree at 57th in Brazil, 462nd in Portugal, and 11,263rd in the US.