The TelexFree class-action Plaintiffs have failed to secure a preliminary injunction against Dustin Sparman and Vantage Payments.
Class action Plaintiffs had sought a preliminary injunction on the basis ‘Sparman received significant gains through his interest in Vantage Payments’.
As alleged in the injunction motion, Vantage Payments assisted TelexFree with laundering $86.9 million in stolen investor funds.
In denying the injunction motion, the court considered four factors;
- the likelihood of success on the merits;
- the potential for irreparable harm if the injunction is denied;
- the balance of relevant impositions; and
- public interest.
On the likelihood of success on the merits, first aiding and abetting was addressed.
Sparman and Vantage Payments argued ‘they did not knowingly and substantially assist in TelexFree’s wrongdoing.’
This didn’t convince the court.
Plaintiffs have established a reasonable likelihood of success against Defendants on tortious aiding and abetting.
Sparman’s emails with Hughes and his own staff show that he and Vantage were aware of the widespread public accusations that TelexFree was a Ponzi scheme and ongoing regulatory investigations when they solicited new payment processors for TelexFree, and they later learned that the payments processed in TelexFree’s Allied Wallet account supported those allegations.
Identified weaknesses in the Plaintiff’s claims were
- “none of the evidence in the record shows that Vantage processed payments for TelexFree”;
- there is no evidence that Sparman did a Google search of TelexFree, as alleged by the Plaintiffs;
- there is doubt that claims relied on in Joseph Craft’s affidavit were based on his personal knowledge; and
- TelexFree managed and staffed its Chargeback Dispute Resolution Network.
Nonetheless, the email correspondence between Defendants, Allied Wallet, Hughes, and TelexFree provide substantial evidence against Defendants.
Based upon the evidence in the record, there is a reasonable likelihood that a jury could find that Defendants knowingly and substantially assisted TelexFree’s wrongful conduct.
On Civil Conspiracy (still under “the likelihood of success on the merits”), the court pointed out Plaintiff’s had not brought up an agreement ‘between Sparman and any other co-Defendant to operate and maintain a pyramid scheme’.
On unjust enrichment, the court found that based on how the relationship between Sparman, Vantage Payments and TelexFree was set up, they didn’t have a valid claim.
Only Allied Wallet or TelexFree, not Plaintiffs, would have standing to recoup the funds they paid to Vantage or Sparman if they could prove those funds were unjustly conferred.
Irreparable harm failed due to Plaintiffs ‘only claim(ing) that irreparable harm “may” occur, not that it likely to occur’.
Furthermore, their delay in filing this motion calls into question the timeliness of their proposed order.
The remaining factors were addressed but not before the court stated ‘failure to show irreparable harm is fatal to Plaintiffs’ motion.’
Accordingly the class-action Plaintiff’s motion of an injunction was denied.