U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20127 / May 23, 2007
SEC v. Universo FoneClub Corporation, et al., Civil Action No. 06-10940-MLW (D.Mass. May 30, 2006)
Federal Court Issues Judgments in Fraudulent Pyramid Scheme Targeting Brazilian Community
The Securities and Exchange Commission ("Commission") announced today that, on May 16, 2007, the Honorable Mark L. Wolf of the United States District Court for the District of Massachusetts entered Final Judgments against Universo FoneClub Corporation, Sanderley R. De Vasconcelos and Victor Sales in connection with a pyramid scheme targeting members of the Brazilian-American community that raised approximately $3.2 million. The final judgments, entered by consent, enjoin De Vasconcelos and Sales from violating Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 as well as Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, the final judgments hold De Vasconcelos and Universo FoneClub jointly and severally liable for $3,269,459 in disgorgement plus $151,928.49 in prejudgment interest but waive payment of all but $1,805,612.66 of that sum and do not impose a civil monetary penalty against De Vasconcelos or Universo FoneClub based on the sworn representations made in their Statements of Financial Condition and other documents and information submitted by them to the Commission. The final judgments also require Sales to pay, over a seven month period, $9,423.80 in disgorgement plus $437.92 in prejudgment interest and a $25,000 civil penalty.
On May 30, 2006, the Commission filed a complaint alleging that De Vasconcelos and Sales were promoting a pyramid scheme known as AFoneClub@ that targeted Brazilian-Americans. The complaint alleged 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 sold prepaid telephone calling cards through a multi-level marketing structure. However, the complaint alleged that the defendants, who had emphasized to potential investors that neither they nor the company would earn profits from the sale of phone cards, were in reality luring victims into a pyramid scheme in which its members would only make money through the recruitment of new members. The complaint further alleged that the defendants emphasized in their sales pitches, which were made in Portuguese, that God wanted the Brazilian community to prosper financially and that FoneClub would provide the opportunity for it to do so.
Simultaneously with the filing of its complaint on May 30, 2006, the Commission sought and obtained from the court an emergency order to halt this affinity fraud and to freeze the defendants' assets. This order froze approximately $1.8 million in assets, representing the bulk of the disgorgement and penalty payments set forth above. Under the terms of the final judgments, these payments will be transferred to the court's registry and the SEC may propose a plan, subject to the court's approval, to distribute these funds to the victims of the fraud.
For further information, see Lit. Rel. No. 19715 (June 1, 2006).
More information about affinity fraud is available at http://www.sec.gov/investor/pubs/affinity.htm