TelexFree Charged With "Billion-Dollar Pyramid Scheme" - the Beginning of the End

MASSACHUSETTS CHARGE TELEXFREE WITH "PYRAMID SCHEME"

Ever since the U.S. Securities Exchange Commission (SEC) investigation against TelexFREE was officially confirmed, the company has desperately put in last minute efforts to escape the wrath, that seemed 'inevitable', by the SEC.

In an attempt to straighten out its operations, it announced and went ahead with a change in its compensation plans that was extremely 'unpopular' amongst many of its affiliates worldwide.

Telexfree Inc

Not yet feeling secure, and right after acknowledging an investigation against it, TelexFREE went ahead to unilaterally change agreements it had voluntarily entered into with promoters worldwide under its old compensation plan, thus generating misunderstanding and clashes with them.

All this while, the company had kept on lying to its affiliates that all was well, when in fact, it was neck-deep in troubled waters. Finally, yesterday, in a desperate last move, presumably aimed to 'legally' keep its loot to itself, TelexFREE declared itself bankrupt, although it kept insisting the move was to help it re-position.

Securities Division Charge Telexfree With "billion-dollar pyramid scheme"

In a swift response in the early hours of today, 15th April 2014, the Securities Division of the State of Massachusetts, which had been investigating TelexFREE for some months, rose to charge the company with "...running a billion-dollar pyramid scheme."

Early this morning, according to the Boston Globe:
Secretary of State William F. Galvin on Tuesday charged a Marlborough marketer of online phone service with running a billion-dollar pyramid scheme, primarily targeting Brazilian immigrants.

TelexFREE Inc. has offered fraudulent and unregistered securities in Massachusetts by running a multi-level marketing scheme, Galvin’s office alleged in its complaint, a copy of which was reviewed by the Globe, attracting as much as $90 million in the Massachusetts alone.
Listed as defendants, the following are named in the complaint by the State:
  1. Carlos Wanzeler – Treasurer, Director, Manager and CEO of TelexFree
  2. James Merril – President, Secretary, Director and Registered Agent of TelexFree
  3. Steven Labriole (aka Steve Labriola) – International Marketing Director of TelexFree
  4. Carlos Costa – Manager and Director of Marketing of TelexFree
  5. Fabio Wanzeler – Director of TelexFree
  6. Lyvia Wanzeler – signatory authority of TelexFree
  7. Sanderly R. De Vasconcelos (aka Sann Rodrigues) – previously barred by the SEC from making the offer and sale of securities, credited as a “top promotor of the world” of TelexFree
For their part in the orchestration of the $1 billion dollar TelexFree Ponzi and Pyramid scheme, they have been issued a "cease and desist" by the State (see below).

Securities Division of State of Massachusetts complaint against TelexFREE
Massachusetts State complaint against TelexFREE
Bearing in mind the recent Chapter 11 application by TelexFREE at the courts (which, by the way, was rejected because of “incomplete and/or insufficient filing”), the Securities Division explained that its move was necessary, because the charge against TelexFree would protect some assets for victims, which otherwise would be "...thwarted by the bankruptcy filing." See the emboldened letters below:
“While touted as a paradigm shift in telecommunications and advertising, TelexFREE is merely a veiled pyramid and Ponzi scheme targeting the hard-working Brazilian-American community,’’ the complaint said. It was not yet known how much money Massachusetts people have lost in the scheme.

Meanwhile, the company filed for federal bankruptcy protection Monday in Nevada, according to a note on its website. Galvin’s office had been investigating TelexFREE’s alleged scheme for several months, and with Tuesday’s action aimed to protect some assets for victims – an effort that could be thwarted by the bankruptcy filing.

“They clearly are responding to the fact that an investigation was underway,’’ Galvin said in an interview. “Now the thing is to act promptly and get whatever we can for these people.’’

The Beginning of the End for TelexFREE

Last summer, TelexFREE was ordered to shut down in Brazil, after a judge ruled it a “financial pyramid” scheme; but somehow, it survived that, and have also survived other similar rulings in other parts of the world.

With this new charge coming from its base, its home state of Massachusetts, it is obvious that this is the beginning of the end for TelexFREE, the company often touted as having a “Passive Income Scheme” with the opportunity of a lifetime.

Going further, the Massachusetts Securities Division is ordering a "cease and desist" against TelexFREE to stop all of its sales activities, which I believe would of course include sales of its TelexApp, of its 99Telex VOIPs and also opening of new affiliate accounts under the new comp plan:
Galvin’s office is looking to require TelexFREE to cease and desist from its sales activities...
Now tell me, if TelexFree no longer receives any payments from new affiliate accounts and/or products (TelexApp, 99Telex calling packs), how on earth would the company survive?

I see no escape from this for them. This is simply the end for TelexFree, an 'ending' process which began the moment it went into action creating decisions that brought in conflicts and divisions between it and its affiliates! It's now 'Twilight time'.

Regulators to Force TelexFree to "...compensate investors for their losses"

New and old affiliates and promoters may have cause to celebrate as there appears to be a glimmer of light in this long tunnel of increasing 'TelexFree darkness'.

This is so because the Massachusetts Securities Division has decided to ensure that TelexFree, aside paying penalties for this alleged 'fraud', also goes ahead to account for every single penny it has received so far. In addition, the State of Massachusetts intends to ensure all investors will be compensated.
Galvin’s office is looking to require TelexFREE...to provide an accounting of all the money it received as a result of its alleged wrongdoing. The regulators, in the state’s Securities Division, also are seeking to force the company to compensate investors for their losses, to disgorge any profits improperly earned, and to pay a fine.
Officially, the Massachusetts Securities Division requires the listed defendants, as named above, to:
  • provide an accounting of all proceeds which were received as a result of the alleged wrongdoing, and to offer restitution to and fairly compensate investors for those losses attributable to the alleged wrongdoing;
  • disgorge all profits and other direct and indirect remuneration received from the alleged wrongdoing.
And finally, the State of Massachusetts has also requested the court to “impose an administrative fine” on the defendants, as already listed above, the amount of which is to be determined at a later date.

So what does all this mean for affiliates and promoters, bearing in mind that the State of Massachusetts is TelexFree's home state? Does it mean that affiliates and promoters would get their monies back?

Well, for sure, if the home base is risen against it, I see no way TelexFree will survive this onslaught. For affiliates and promoters, it sounds good their welfare is seriously being considered by the State of Massachusetts in its action against TelexFree, however, it seems wiser to maintain a guarded expectation of hope, as re-imbursing/restituting/compensating every affiliate spread across the world will be no easy task. This is not to say it is not do-able.

12 comments:

  1. Hello Ikenna,

    I can imagine how this is happening to me. We had just invested a total of 100 accounts by early early march as well as some in the new compensation plan. We are in tears and since it was our first time, oh my God...

    How do we get our money back? any hopes?, I do believe God will enable the concerned in Massecusette to fight for us. I cant wait to get out our money. Keeeeep us posted please please. You are doing a great job and always link us to those that can help us.

    thanks again

    Jackson Uganda

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    1. OMG! Your first time? And 100 accounts all in one fell swoop? I can imagine, my brother! But what's done is done, and life has to go on. We're all praying that monies trapped 'therein' be released, but even if anything is going to come out, i know it's going to be a long and arduous legal process. It will be a long fight and we all have to be patient.

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  2. hey Ikenna, you're doing a really good job, I consider this situation is incredible, all-down in a week! my brother! your investigation lets us face the reality best way ....

    I have a question, I'm from El Salvador and I wonder if is it posible for me to participate in legal proceedings in support of Massachusetts promoter's interests? I mean, I havent seen any cent back yet, I just had invested by early march too and those who are in this situation here in El Salvador, we feel unsupported because of being so far

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    1. Hi carlos, I think that's a grand idea. That would really be a great thing to do; but how to go about it is what I really do not know. I really wish one of the readers reading this right now suggest something that would benefit many of us to get our money back.

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    2. Hi Ikenna, Am thinking we should be part of those that should be sending a message to Massachusetts authorities taking up the telex issue and let them know about the fact that we have been caught up in this kind of situation and express our request to be assisted to recover our funds back. I don't know what to say man but cant think straight from the time i got to know what is going on. I think i/we need to write to Massachustts to see how we can be helped and provide them with our accounts' details and seek for assistance in recovery. cant imagine loosing not only our savings but borrowed funds. Is there an address open to support this?

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    3. This is a very good point of note. I will ask around and check to see if such an address exists! Be strong my brother.

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    4. I have found something should satisfy your request. If you have concerns about TelexFree, you can contact the Public Inquiry and Assistance Center (PIAC), which handles consumer issues. Complaint forms can be filed online (https://www.eform.ago.state.ma.us/ago_eforms/forms/piac_ecomplaint.action), or people can call PIAC's hotline at 617-727-8400.

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    5. i think it may be better if i do a new post on this so everyone would know how and where to channel their grievances to. I'm thinking about it.

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  3. Thank you, and count on us as well in Florida and Dubai to add our details in this petition to the Massachusetts Court, whenever we know to whom and how to address it. We look forward to receiving at least the amount invested, which we never withdrew or recovered, since also we joined very recently (a few days from getting the investment back when Telexfree crashed).

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    1. Hi Christopher, I just replied @Mbabazi's request. So if you also have concerns about TelexFree, you can contact the Public Inquiry and Assistance Center (PIAC) via their online form (see link to it above) or call them (phone number is above).

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    2. Thanks Ikenna for your kind search and posting of an alternative form. I will be sending my submission using the details provided above. Am grateful. Please keep us posted on the progress and any other info helpful to this cause.

      Thanks man.

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    3. I'll do my best Mbabazi. Have a great day, friend!

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