The TelexFree class-action plaintiffs are seeking a preliminary injunction against Dustin Sparman and Vantage Payments.
The TelexFree class-action plaintiffs allege Sparman and Vantage Payments ‘played an instrumental role’ in the operation of TelexFree.
Sparman received significant gains through his interest in Vantage Payments, LLC, which characterized itself as an “independent sales agent” and procured payment processing services for TelexFree.
Plaintiffs seek compensation for economic loss sustained as a result of Sparman and Vantage Payment, LLC’s conduct in aiding and abetting the TelexFree scheme.
The class-action plaintiffs put forth that Sparman (right) and Vantage Payments
have already transferred the assets of Vantage Payments, LLC to another payment processing company during the pendency of this litigation have already.
Defendants have already acted to transfer away the assets of Vantage Payments, LLC, Plaintiffs fear that said Defendants will further dissipate assets by various means, including transferring funds to banks in foreign nations, unless the relief sought is granted.
Sparman and Vantage Payments signed on as TelexFree’s payment processor, following the withdrawal of Global Payroll Gateway and Base Commerce in 2013.
The class-action plaintiffs put forth that Sparman and Vantage Payments had full knowledge of TelexFree running a Ponzi scheme.
Sparman and Vantage Payments were initially connected with TelexFree by (Base Commerce’s) John Hughes in or about August 2013, after Base Commerce had decided to terminate TelexFree’s account due to suspicious activity and a high chargeback rate.
In order to extricate Base Commerce from the scheme without causing incoming payments to immediately cease (thereby causing the scheme to immediately collapse), Hughes enlisted Sparman and Vantage Payments to locate a new payment processor for TelexFree.
After being informed of TelexFree by Hughes, Sparman and Vantage Payments proceeded with their required underwriting due diligence on TelexFree. During this process, Hughes and Amirie discussed their concerns regarding TelexFree’s illegality with Sparman.
In one email sent to Hughes in August 2013, Sparman wrote;
there’s quite a bit of negative press around the Brazil situation.
Would they be willing to sign a document stating that they are not currently under investigation with any federal organizations?
This merchant is currently under investigation in Brazil for being a Ponzi scheme.
Do they have anything to say about the current status of these matters. It is a highly negative element that they are selling much less product than they are selling the opportunity to sell product.
[includes links to five online articles accusing TelexFree of being a Ponzi scheme]
Seeing as TelexFree was increasingly finding it difficult to maintain banking channels, the class-action plaintiffs put forth “Sparman’s assistance was critical”.
In addition to payment processing services, Sparman and Vantage Payments
- provided TelexFree with a customer dispute resolution network service (used to deal with a high level of chargebacks)
- set up TelexFree LTD, a shell company set up in the UK with a false address, used to attempt to secure offshore banking (two attempts failed)
- managed TelexFree’s relationship with Allied Wallet, including negotiation of “more favorable processing terms”
Stunningly, despite the illegality of the TelexFree scheme, Sparman remained involved with the scheme until its bankruptcy filing in April 2014.
TelexFree kept Sparman involved with promises of increasing riches, with Merrill telling Sparman on January 17, 2014, in the midst of ongoing regulatory investigations:
If we are doing unlimited transactions there will be plenty of business to go around.
You deserve your share for getting us started and Tom [proposed Defendant Thomas Wells] deserves his share for getting us what we needed.
Whomever treats us best will get most of the business. I know this will work out. Look forward to continuing to work with you.
The class-action plaintiffs allege Sparman and Vantage Payments assisted TelexFree with processing $86.9 million in stolen investor funds.
In preparation for filing their lawsuit, the class-action plaintiffs learnt
In 2018 Sparman entered into an Asset Purchase Agreement with another payment processing company, the Canada-based Nuvei, Inc., for the sale of Vantage Payments, LLC’s assets.
Plaintiffs first learned of this sale of Vantage Payments’ assets in 2020 through independent research; neither Vantage Payments nor Sparman disclosed the existence of this asset transfer to Plaintiffs or to the Court.
When Plaintiffs’ counsel asked counsel for Sparman and Vantage Payments about this sale, Defendants’ counsel refused to discuss it.
Given the fact that the monetary damages caused by Sparman and Vantage Payments’ activities for TelexFree exceed $100 million, Plaintiffs are concerned that said Defendants will fully dissipate their assets prior to issuance of judgment
On LinkedIn Sparman cites two executive roles at Nuvei;
- Senior Vice President of Nuvei’s Strategic Accounts Group (Jul 2019 – Jun 2020)
- Vice President of Sales of Nuvei’s Stategic Accounts Program (Nov 2018 – Jun 2020)
Sparman appears to have left Vantage Payments in 2018. The company’s website is still up but is returning an SSL certificate security error.
Since 2013 Sparman has served as a Managing Partner and CEO of Transparent Merchant Services.
If a preliminary injunction is granted against Sparman and Vantage Payments, their assets will be frozen, regardless of where they wound up.
The court held a hearing on preliminary injunction motion on April 6th. The matter was taken under advisement.
Pending a ruling on the motion, stay tuned.