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  • Topic: TelexFREE Scam - FBI Raid and Shutdown

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    • April 19, 2014 3:04 PM PDT
    • TelexFREE Scam - FBI Raid and Shutdown

      I have seen many absurd statements posted by companies trying to mitigate the damage to their image when they crash and burn.

       

      None have come close to the ridiculousness of TelexFREE's statement today in the wake of an SEC investigation, an FBI and Homeland Security Raid, and their CFO being detained trying to leave the building with 38M ( yes, 38 Million - capital M ) in unchashed checks from their headquarters in Marlborough, MA.

       

      Their "statement" today, let's call it creative writing, makes the following circular logic statements in the first paragraph:

       

      "Earlier this week, TelexFREE filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. The Chapter 11 filing is intended to protect TelexFREE assets, quantify legitimate claims, restructure our operations, and establish a firm foundation for the future.  The Chapter 11 filing further demonstrates our belief in the strength of our core business and products and the enthusiasm and dedication of our independent sales associates as well as our determination to protect the assets of the Company and maximize the recoveries for all constituents."

       

       

      Let's parse this out.

       

      TelexFREE filed for 'voluntary' bankruptcy just a day or two before they were to be raided. Sounds like someone read the writing on the wall.

       

      A bankruptcy doesn't "protect" your assets unless you are insolvent. In other words, unless your business has already tanked, and you can't pay your reps, vendors, rent, whatever, you can't legitimately file. You can't file bankruptcy so you can keep your money in the bank while you duke it out with the SEC, and you most definitely can't have your CFO try to wander off with 38 million in checks.

       

      If you have 38 MILLION DOLLARS in uncashed checks, how can you possibly be insolvent? What's your monthly overhead, if 38 Million won't instantly pay off all your rent and bills.

       

      Unless you're a ponzi scheme and you owe far more that to ponzi victims who have already put up cash and are expecting a return.

       

      In a legitimate bankrupcty, a court appointed trustee takes control of all the assets and disperses them based on priority to qualified debtors. This doesn't mean TelexFREE gets to keep doing business and/or pay reps what their comp plan promises.

       

      Their statement goes on further to say:

       

       

      "We remain confident in the Company's long-term business prospects and the value of the services we provide to customers. Unfortunately, the precipitous and unnecessary actions taken by the state and federal agencies have temporarily suspended the VoIP services TelexFREE customers rely on.  The Company disputes the material allegations made by these agencies and regrets that their actions impede our ability to continue to serve our customers, restructure our operations, and thereby emerge as a stronger and more competitive company.

      TelexFREE believes the Chapter 11 process is the most effective vehicle available to address the concerns of all constituencies, including the purported concerns of the state and federal agencies.  We intend to address the pending legal proceedings against it through the Court process. "

       

      Confident in the business's long term prospects? You have 38 million in checks waiting to be depositied, but you file bankruptcy to 'protect your assets'.

       

      Here's your prospects: Your US based CEO and CFO are going to jail. For a long time.

       

      Those who invested in this scheme may have some chance of seeing some small fractional return, only because they caught the CFO red-handed before he got out the door with the 38 million.  Any qualified CFO would know that hiding assets is a serious federal crime in a bankruptcy case. So either he was not a qualified CFO, or, he is and caught caught making a major criminal mistake.

       

      This company was already shut down in Brazil and I truly have compassion for anyone preyed upon in the US in this scheme.

       

      Even Zeekler's crash and burn doesn't compare to the doesn't compare to the scale and scope of the TelexFREE shutdown.

       

       

       

    • April 25, 2014 5:13 AM PDT
    • TelexFREE Scam - FBI Raid and Shutdown

      http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370541520559#.U1pQ-5PD8_w

       

      FOR IMMEDIATE RELEASE 2014-79

      Washington D.C., April 17, 2014—                       

      The Securities and Exchange Commission today announced that on Tuesday it filed charges against the Massachusetts-based operators of a large pyramid scheme that mainly targeted Dominican and Brazilian immigrants in the U.S.  The charges were filed under seal, in connection with the Commission’s request for an immediate asset freeze.  That asset freeze, which the U.S. District Court in Boston ordered on Wednesday, secured millions of dollars of funds and prevented the potential dissipation of investor assets.  After the SEC staff implemented the asset freeze, at the SEC’s request the court lifted the seal today, permitting public announcement of the SEC’s charges.

      The SEC alleges that TelexFree, Inc. and TelexFree, LLC claim to run a multilevel marketing company that sells telephone service based on “voice over Internet” (VoIP) technology but actually are operating an elaborate pyramid scheme.  In addition to charging the company, the SEC charged several TelexFree officers and promoters, and named several entities related to TelexFree as relief defendants based on their receipt of investor funds. 

      According to the SEC’s complaint, the defendants sold securities in the form of TelexFree “memberships” that promised annual returns of 200 percent or more for those who promoted TelexFree by recruiting new members and placing TelexFree advertisements on free Internet ad sites.  The SEC complaint alleges that TelexFree’s VoIP sales revenues of approximately $1.3 million from August 2012 through March 2014 are barely one percent of the more than $1.1 billion needed to cover its promised payments to its promoters.  As a result, in classic pyramid scheme fashion, TelexFree is paying earlier investors, not with revenue from selling its VoIP product but with money received from newer investors.

      “This is one of several pyramid-scheme cases that the SEC has filed recently where parties claim that investors can earn profits by recruiting other members or investors instead of doing any real work,” said Paul G. Levenson, director of the SEC’s Boston Regional Office.  “Even after the SEC and other regulators have alleged that such programs are a fraud, the promoters of TelexFree continued selling the false promise of easy money.”

      According to the SEC’s complaint, the defendants have continued enrolling new investors but recently changed TelexFree’s method of compensating promoters, requiring them to actually sell the VoIP product to qualify for payments that TelexFree had previously promised to pay them.  The complaint also alleges that since December 2013, TelexFree has transferred $30 million or more of investor funds from TelexFree operating accounts to accounts controlled by TelexFree affiliates or the individual defendants.

      In addition to the TelexFree firms, the complaint charges TelexFree co-owner James Merrill, of Ashland, Mass., TelexFree co-owner and treasurer Carlos Wanzeler, of Northborough, Mass., TelexFree CFO Joseph H. Craft, of Boonville, Ind., and TelexFree’s international sales director, Steve Labriola, of Northbridge, Mass.  The SEC also charged four individuals who were promoters of TelexFree’s program:  Sanderley Rodrigues de Vasconcelos, formerly of Revere, Mass., now of Davenport, Fla., Santiago De La Rosa, of Lynn, Mass., Randy N. Crosby, of Alpharetta, Ga., and Faith R. Sloan of Chicago.  The SEC’s complaint alleges that TelexFree, Inc., TelexFree, LLC, Merrill, Wanzeler, Craft, Labriola, Rodrigues de Vasconcelos, De La Rosa, Crosby, and Sloan violated the registration and antifraud provisions of U.S. securities laws and the SEC’s antifraud rule. The SEC also charged three entities related to TelexFree as relief defendants based on their receipt of investor funds.

      The SEC’s investigation was conducted by Scott R. Stanley, James M. Fay, Mark Albers, John McCann, Frank Huntington, and Kevin Kelcourse, all of the SEC’s Boston Regional Office.  

       

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