Nov 4, 2015 ยท 6 minutes

Tellspec is having a bad week. But it might be about to get much worse.

On Monday, Pando exposed the company’s attempt to raise a $1.5 million angel round via Crowdfunder.com for a miracle food scanner, based on a string of misreprentations, half-truths and just plain bullshit. This, you’ll recall, is on top of the $380k they already took from Indiegogo backers two years ago, based on a faked demo video and promises that even they now admit they can’t keep.

A few hours after the story went live, Crowdfunder pulled Tellspec's campaign. And since then, things have continued to unravel for the company.

Tellspec and founder Isabel Hoffmann were due to speak at next week’s TEDMED event in Palm Springs, having been selected as one of the conference’s “Hive” of companies that are “challenging the status quo across health and medicine in areas like biotech, health IT, mHealth, life sciences, health tech, and more.”

Less than 24 hours after our story went live, and shortly after I asked TEDMED organizers for comment, all mentions of Tellspec were removed from the conference line up and the company’s logo was erased from the list of Hive companies.

Here’s are the featured companies before:

And now:

I emailed TEDMED to ask if Tellspec jumped or was pushed but they had not responded by press time. 

Either way, Tellspec isn’t going down without a fight. On Tuesday morning, in an apparent attempt at damage limitation, Hoffmann filed a DMCA takedown notice against Pando’s document host, Scribd, demanding they remove the documents we posted that prove Tellspec’s dishonesty.

THIS IS AN OFFICIAL NOTIFICATION THAT A USER OF SCRIBD (choose one): * 
has posted my copyrighted/trademarked work without my permission.

I am (choose one): * 
the duly authorized representative of the exclusive rights holder

for the following titles: 
Tellspec Executive Summary 09-30-2015 3 
Tellspec_TellSpec-Investor-Deck_09-30-2015-3 
Tellspec_QA-Tellspec_09-18-2015-3

These exclusive rights are being violated by material available on Scribd at the following URLs (include as many as necessary): * 
http://www.scribd.com/doc/288228641/Tellspec-Executive-Summary-09-30-2015-3#scribd 
http://www.scribd.com/doc/288228638/Tellspec-QA-Tellspec-09-18-2015-3 
http://www.scribd.com/doc/288228639/Tellspec-TellSpec-Investor-Deck-09-30-2015-3

I have a good faith belief that the use of this material in such a fashion is not authorized by the copyright holder, the copyright holder's agent, or the law. * I agree

Under penalty of perjury in a United States court of law, I state that the information contained in this notification is accurate, and that I am authorized to act on the behalf of the exclusive rights holder for the material in question. * I agree

I hereby request that you remove or disable access to this material as it appears on your service in as expedient a fashion as possible. Thank you.

Your full legal name (required) * 
Isabel Hoffmann

Company name (if applicable) 
Tellspec Inc.

Physical address: * 7B Pleasant Blvd, suite 991 
Toronto, ON M4T 1K2 
Canada 
Email address: * [redacted by Pando]
Phone number: [redacted by Pando]

In fact, the takedown had little effect, not least because Pando is protected by the doctrine of fair use.We quickly reposted the documents on a different server, and filed a counternotice to have them returned to Scribd. (As Matthew Keys pointed out on Twitter, Scribd didn’t have much choice but to act once the notice was issued.)

Unfortunately for Hoffmann and Tellspec, by filing the notice against Pando for documents she knows are protected by fair use, they may be opening themselves up to even more legal problems; the DMCA allows for severe financial penalties against companies and individuals who file false notices.

(And, of course, that would be on top of Tellspec’s other potential legal issues. As I wrote on Monday, it also now seems like the company is in violation of FTC regulations on deceptive advertising.)

It’s hard to imagine that things could get much worse for Tellspec.

And yet, based on their own admissions, this might actually be the calm before the storm.  

Tellspec had promised to start sending beta versions of its device to testers by late last month, with “finished” versions going out to their Indiegogo backers. The company claims it has pre-sold 2181 units, through Indiegogo and via its own site. According to Tellspec’s own investor materials, that totals $519,710 in pre-orders.

However, according to those same investor materials, Tellspec was intending to finance the manufacturing of the pre-sold devices using the funds raised via their Crowdfunder campaign.

Of course that was already essentially a pyramid scheme – crowdfunding cash to make good on previous crowdfunding promises. But now, with Crowdfunder having killed the campaign, the company by its own admission cannot afford to manufacture and deliver the devices it has already sold.

We have already heard from disappointed customers who have demanded refunds. One of those customers told Pando their demand was ignored and no refund received.

With word continuing to spread about Tellspec, and even previously friendly events like TEDMED apparently distancing themselves from the company, it can’t be long before the current stream of refund demands becomes a torrent.

The company’s website uses Paypal to process its pre-orders. Indiegogo payments are handled by Paypal and Stripe. Both payment companies make clear that Tellspec remains liable for paying back any refunded amounts (or chargebacks, if the company ignores refund requests.)

Here’s Paypal’s terms of service:

You are responsible for all Reversals, Chargebacks, Claims, fees, fines, penalties and other liability incurred by PayPal, a User, or a third party caused by or arising out of your breach of this Agreement, and/or your use of the PayPal Services. You agree to reimburse PayPal, a User, or a third party for any and all such liability.

And here’s Stripe:

For processed refunds, the Designated Bank will deduct the refund amount (including any applicable Fees) from (i) settlement funds owed to you from processing of other card transactions, or (ii) funds in any Reserve Account (as defined in Section C11 below). If these funds are not sufficient, you authorise Stripe to forward a debit entry issued by you in the amount necessary to complete the refund transaction to the Cardholder’s card, to each of the banks maintaining the Bank Account and the Settlement Account. In the event Stripe cannot access your Bank Account by means of a direct debit, you agree to pay all funds owed to Stripe upon demand. You are solely responsible for accepting and processing returns of your products and services; we have no responsibility or obligation for processing such returns.

In other words, if enough Tellspec backers or pre-orderers demand refunds – and, frankly, why wouldn’t they at this point? – the company could find itself owing hundreds of thousands of dollars to Stripe and Paypal. Money they themselves admit they’ve already spent.

I’ve asked Tellspec for comment and will update here if I hear back.