UPDATED 4:50 P.M. EDT (U.S.A.) The TelexFree LLC branch of the TelexFree enterprise posted more than $691 million in “total income” last year, according to a filing with the Alabama Public Service Commission. (The PP Blog retrieved the filing today and saved it as TelexFreeAlabamaApplication.pdf. See link below.)
TelexFree asked that the document be “FILED UNDER SEAL.” Regardless, the document was published on Alabama’s website. The date-stamp reads March 20, 2014. Among other things, the document asserts that TelexFree LLC, a Nevada entity, was formed with three “initial” managers.
These include Brazil-based manager Carlos Costa (30 percent), Massachusetts-based manager Carlos N. Wanzeler (50 percent) and Massachusetts-based manager James M. Merrill (20 percent), according to the document.
TelexFree, a two-year-old MLM company, says it offers a VOIP telephony service and is expanding into services such as cell phones, apps, credit repair and financial advice.
Other filings in Alabama show that TelexFree requested a hearing scheduled April 10 to consider its application for “Resale Interexchange Authority” to be postponed “for a month” owing to unspecified “scheduling conflicts.” Alabama has reset the hearing for May 13.
A week ago TelexFree promoters jammed themselves into a small office in Massachusetts that is the base of another TelexFree enterprise — TelexFree Inc. The promoters claimed that recent changes to the TelexFree compensation plan eliminated or negated payments to them. Police responded to the office in Marlborough.
In its Alabama filings, TelexFree LLC asserted it incurred expenses last year of “[$]572,240,960.21” in a category dubbed “Agent Commission – paid through system.” It also incurred expenses of “[$]50,424,998.61” in a category dubbed “Agent Commission – paid through bank.” Other line-item expenses are listed in the document, which says the firm’s “net income” last year was more than $36.4 million.
The Alabama filing did not cover TelexFree LLC revenue and expenses year-to-date in 2014. Nor did it cover revenue and expenses for 2012 or revenue and expenses for related TelexFree enterprises. Some affiliates have said they believe TelexFree has gathered $1 billion or more since its inception in early 2012.
How much revenue TelexFree Inc. of Massachusetts has posted is unclear. In early 2013, affiliates said recruits could deposit money into a TelexFree Inc. bank account in the state. Those instructions closely resembled instructions given to members of the $119 million AdSurfDaily Ponzi scheme in 2008.
So-called “AdCentral” packages purchased for sums ranging from $289 to $1,375 might be (or might have been) TelexFree’s key revenue-generator. Affiliates have claimed that $289 sent to TelexFree returned $1,040 in a year and that $1,375 returned $5,200. On an annualized basis, the asserted returns equate to roughly 365 percent, fueling claims that TelexFree is a pyramid scheme, a Ponzi scheme — or both.
Under a scenario based on the assertions of TelexFree affiliates, BehindMLM.com estimates that TelexFree may have AdCentral-related liabilities of more than $4 billion. On March 24, the PP Blog reported that an ad offering 550 AdCentrals for $16,760 appeared online, leading to questions about whether some affiliates had created a black market for the AdCentrals and were trying to sell them in advance of a TelexFree payout suspension.
TelexFree is under investigation by the Massachusetts Securities Division. It’s also under investigation in Brazil, amid pyramid-scheme allegations. Among the concerns is that TelexFree’s VOIP telecommunications product is a front to mask an investment scheme. Certain TelexFree assets are frozen in Brazil.
In 2012, the SEC charged a “program” known as Zeek Rewards with operating a massive, international Ponzi- and pyramid scheme that had gathered more than $600 million in less than two years. TelexFree’s filings in Alabama assert that it gathered more than $691 million last year alone.
Filings by the SEC now suggest Zeek may have gathered $850 million or more. If claims by TelexFree affiliates that their “program” gathered more than $1 billion are true — and if TelexFree later is deemed a fraud scheme — it could surpass Zeek as the largest MLM HYIP Ponzi/pyramid scheme based on U.S. soil and reaching into other countries.
TelexFree has purported to have more than 1 million members in Brazil alone. There may be 50,000 or more TelexFree members in the United States.
The Alabama filing asserts that TelexFree LLC has a “parent company” known as “TelexFree Group Inc.” Where it is based is unclear. A provision of the TelexFree LLC “Operating Agreement” included in the Alabama application purports to permit TelexFree LLC “[t]o lend money upon terms acceptable to the Managers to any person or entity, and to enter into contracts and agreements which are not arms-length if they are consistent with the best interests of the Company.”
Based on filings in both Alabama and Washington state, TelexFree appears to have made loans totaling more than $6.6 million to other TelexFree enterprises. (See March 9, 2014, PP Blog story.)
Read the Alabama filing, parts of which appear to confuse Alabama with the state of South Carolina. (For example, the Alabama Public Service Commission is based in Montgomery, the state capital. TelexFree LLC’s Alabama application, however, appears to direct Alabama residents to contact the “Office of Regulatory Staff” in South Carolina’s capital of Columbia if a billing dispute arises.)
If there is a dispute, TelexFree LLC says, “the Customer may appeal to the Alabama Public Service Commission for its investigation at the following address and/or phone number:
“Office of Regulatory Staff
“Consumer Services Division
“1401 Main Street, Suite 900
Columbia, SC 29201”
In its role as a watchdog for consumers, the FTC has sued third-party companies and individuals who have published the logos of prominent news agencies and falsely traded on their trusted identities to sanitize a purported product or opportunity. (See screen shot of Evidence Exhibit from one FTC case below.)
In a new video promo announcing it somehow has gained 550,000 new American customers in less than a month during a probe into its business practices, TelexFree is publishing the logos of 18 prominent media firms, including logos of local-market affiliates of major American TV networks. In certain instances, the logos of the so-called “mother ships” — media parent firms or brand/content licensors of the local affiliates — appear in the TelexFree promo. This could prove to be an epic blunder.
The move by TelexFree occurs on heels of SEC allegations that a Ponzi/pyramid scam known as WCM777 traded on the names of famous brands outside of media.
On Feb. 28, the Massachusetts Securities Division confirmed it was investigating TelexFree. The agency earlier gave WCM777 the boot.
Hong Kong may be emerging as a hotbed of MLM fraud.
TelexFree goes to Hong Kong.
Does anyone in TelexFree’s MLM leadership have a clue — we mean, Freaking Clue One?
More . . .
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UPDATED 10:51 A.M. EDT (U.S.A.) Be skeptical of “programs” that imply media ties or suggest media vetting or an endorsement by the media or a famous company in another discipline, including high finance. Brand-leeching “works,” which is why so many fraudulent companies adopt it as a strategy.
On the “we’ve-been-endorsed-by-the-media” fraud front, several instances of this have occurred. In both 2011 and 2012, the blood-sucking, $850 million Zeek Rewards Ponzi scheme pretended that puff pieces about it that appeared in Network Marketing Business Journal constituted real news. Zeek’s court-appointed receiver later auctioned off the puff pieces and the impressive-looking plaques to which they’d been attached.
Zeek and many of its affiliates preferred fantasy constructions. Put another way, they weren’t all that keen on paying attention to actual news occurring in the direct-sales sphere. In April 2011, for example, the Federal Trade Commission brought actions against several alleged scammers pushing acai weight-loss products and making deceptive claims. Among other things, the FTC alleged that the Internet-based hucksters created fake news sites and often used “the names and logos of major media outlets” such as “ABC, Fox News, CBS, CNN, USA Today, and Consumer Reports” to plant the seed the products had the backing of the brands and had been vetted approvingly by reporters.
As the PP Blog wrote in an Editor’s Note at the time (italics added): If this federal and state action doesn’t get the attention of the out-of-control, direct-sales crowd that divines itself the right to plant the seed that an “offer” is endorsed by famous companies and people, well, perhaps nothing will. Even as this story is being written, affiliates of Club Asteria, a purported “passive” investment company, are planting the seed that the firm is endorsed by Google, Yahoo, MSN and America Online. Club Asteria promoters also routinely trade on the name of the World Bank. Club Asteria is being pitched on forums populated by serial Ponzi scheme promoters.
Club Asteria, which had a presence on the Ponzi boards and purportedly had a satellite operation in Hong Kong, had roots in the cash-gifting fraud sphere and planted the seed it provided a return of at least 3 percent a week. It stopped making weekly interest payments to affiliate-investors before 2011 had come to a close.
Flash forward to April 2014, three years to the month after the FTC brought the acai fraud cases against direct-selling companies and individuals using the names and logos of famous media brands. Indeed, on April 5, a new pitch by the TelexFree MLM “program” began appearing in video form online.
And indeed it uses the logos of a whopping 18 media companies famous in local markets. And because some of those locally famous brands also incorporate the logos of their even more famous parent brands or licensors, TelexFree potentially could be risking the wrath of the upstream mother ships, too.
Like Club Asteria, TelexFree has an affiliate presence on the Ponzi boards. Also like Club Asteria, TelexFree has wildly enthusiastic pitchmen who claim the “program” provides preposterous, “passive” returns. (The TelexFree promo referenced in this report by the PP Blog first was noted by a TelexFree skeptic and reader of BehindMLM.com, a site that covers emerging MLM schemes.)
From YouTube. As TelexFree executive Steve Labriola narrates a video, the logos of prominent media companies roll in the background. Red highlight by PP Blog.
At approximately the 4:55 mark in the April 5 TelexFree video, the logos of local television stations — including affiliates of Fox, NBC, ABC and CBS — begin rolling on the screen. (The logo of the Las Vegas Review-Journal, the biggest newspaper in Nevada, also rolls on the screen.)
Says TelexFree executive Steve Labriola, while continuing to narrate the video after complaining about Bloggers who are negative on the company:
“But let me tell you what is out there that you haven’t quite seen yet: media that’s talking positive about us. There are articles. There are things out there that you’re gonna have in your back office that you can print, you can read, you can use as a tool within the next few days. These are all media articles that are talking great things about your company. So, we’re excited about that. We’re excited that you can be excited about that. It’s all good news. It’s all reprinted. And it’s all available for you.”
From an FTC evidence exhibit in a 2011 case that alleged pitchmen used the logos of media companies to sanitize an online fraud scheme. Red highlights by PP Blog.
What are these “media articles” to which Labriola refers while logos of local affiliates of the major broadcast networks and the logo of a major American newspaper roll in the background?
Well, unless the media firms published any other “great things” about TelexFree, they’re puff pieces TelexFree itself submitted via one or more PR wires. In instances we observed, several local broadcast affiliates of the major networks republished TelexFree-authored content — but not before slapping on a disclaimer. To see an example of the disclaimer we observed, visit the website of News9.com (KWTV-DT as a broadcast channel), a CBS affiliate in Oklahoma City. From the station’s website (italics added):
Information contained on this page is provided by an independent third-party content provider. WorldNow and this Station make no warranties or representations in connection therewith. If you have any questions or comments about this page please contact [deleted by PP Blog]
SOURCE TelexFREE
You’ll see the same disclaimer at KTEN.com, the website of an NBC affiliate in Denison, Texas, that covers parts of Oklahoma. (KTEN’s logo, which incorporates NBC’s famous “peacock,” is the first to roll in the TelexFree promo.)
In yet another example, a disclaimer appears at the website of KTRE, an ABC affiliate in Pollok, Texas. Other channels or newspapers that might have published TelexFree’s PR talking points also likely added disclaimers or attributions to TelexFree, so readers would make a distinction between actual news content and verbatim PR puff.
Labriola doesn’t mention the disclaimers as famous logos roll in the background. The audience easily could conclude that each of the news outlets whose logos are reproduced had published objective reports about TelexFree and championed the company.
With all things possible in the HYIP sphere, we’re wondering if TelexFree affiliates soon will start whipping those republished PR releases into endorsements of TelexFree by major media firms locally and nationally. After all, some TelexFree affiliates have planted the seed the “program” is endorsed by the SEC and is backed by President Obama.
Earlier in the video, Labriola claimed, “Since March 9, since our compensation plan has changed, we have 550,000 new customers in [the] U.S.A. alone. And remember, we’re a global business.”
Whether those talking points later will end up in videos or print material that displays the logos of well-known media companies is, for now, unknown. The stage nevertheless has been set for disingenuous MLM constructions of all sorts, including hypothetical (as of now) constructions such as this one: “according to [Famous Media Company A], TelexFree is in a stunning growth phase that has seen more than 550,000 new American small-business customers enlist since March 9 alone. Because TelexFree is a worldwide phenomenon, tens of millions of customers are destined soon to be in the fold.”
And what about proof? Well, just wrap the logo of a famous media brand around the claim.
This won’t go well if this is TelexFree’s new media strategy.
Branding concerns aside, the practical reality remains that how TelexFree is defining “customers,” like Zeek before it, is far from clear. Beyond that, current TelexFree affiliates are complaining publicly about not getting paid after the company changed its compensation system.
Hong Kong
In the video promo with the media logos, Labriola goes on to note that “I just came back from a Hong Kong trip.” Whether that trip had anything to do with an asserted March 26 TelexFree “conference” in Hong Kong wasn’t explained.
Hong Kong may be emerging as a hotbed of MLM HYIP fraud. For instance, it is a venue in which Club Asteria claimed a presence and also a venue in which a “program” known as “Better-Living Global Marketing” purportedly conducts business. (See reference and related links here.)
In addition, Hong Kong is referenced in the SEC’s Ponzi- and pyramid case last month against WCM777, an alleged $65 million fraud scheme. Hong Kong also is referenced in the SEC’s fraud complaint last month against an entity known as “Mutual Wealth.”
In October 2013, the SEC alleged that enterprises known as CKB and CKB168 were “at the center” of a worldwide pyramid scheme that allegedly featured a purported office in Hong Kong and operations in Canada, the British Virgin Islands and the United States.
TelexFree, alleged in Brazil to be a pyramid scheme, is under investigation by the Massachusetts Securities Division. Some affiliates are deeply concerned about changes in the TelexFree compensation scheme that appear to have dried up or negated payments to them. These affiliates packed themselves like sardines into the “program’s” office in Greater Boston last week. Police were called to the scene.
Just four days after TelexFree affiliates jammed the TelexFree office, the Labriola video with rolling media logos, claims of hundreds of thousands of new customers and the reference to Hong Kong appeared on YouTube. Whether TelexFree has opened new can of worms remains to be seen.
What’s been clear for months is that TelexFree has no cohesive message and throws just about anything against the wall, including rants at prosecutors by a Brazil-based executive while investigations in that country are under way.
A maxim sometimes attributed to Mark Twain and often cited by PR companies and politicians goes like this: “Don’t pick fights with people who buy ink by the barrel.”
To that, we’ll add that it’s also not prudent to tempt fate with media companies that buy bandwidth by the terabyte and employ note-taking reporters and editors and videographers who take spectacularly detailed footage.
This Blog has grave doubts that any of the media firms whose logos appear in the TelexFree promo will be pleased. Their own names could be sullied. If those logos start appearing on marketing materials and plaques, well, hang on to them. They could become the same type of souvenirs the Zeek receiver sold to raise money for victims.
One of the issues in the SEC’s case against WCM777, of course, was the alleged republication of famous logos (nonmedia) and the namedropping of famous companies (nonmedia) to sanitize the alleged WCM777 fraud scheme.
Is any famous company, be it nonmedia or media, safe from MLM hucksters on the Internet? The answer is probably no, given that the vultures apparently think nothing of swiping the brands of government agencies and even of the President of the United States to advance their schemes.
Why TelexFree has ventured down the minefield-laden path of publishing logos of locally or nationally famous brands is truly baffling, especially given the nature of the allegations in the WCM777 case and the fact TelexFree itself already is under investigation.
This circumstance reminded us not only of the Zeek debacle and the SEC’s WCM777 case and the FTC’s acai-berry cases, but also of efforts by the AdViewGlobal Ponzi schemers in 2009 to use an in-house puff piece distributed on PR wires to plant the seed the 1-percent-a-day “program” was endorsed by Forbes magazine, the Washington Business Journal and The Business Review.
Prior to the filing of the SEC’s fraud complaint against WCM777, some apparent cheerleaders for the firm tried to plant the seed that the “program” had been vetted favorably by Yahoo Finance and the Wall Street Journal. One individual tried to drop both famous names at BehindMLM.com, a site that covers emerging MLM schemes.
BehindMLM’s negative coverage of WCM777 was “real non-sense,” the critic asserted on Oct. 11, 2013, pointing to a purported favorable story on WCM777 in the Wall Street Journal. That “story” proved to be a PR puff piece republished with a disclaimer at WSJ.com.
“The Wall Street Journal news department was not involved in the creation of this content,” the disclaimer read.
But with the purported Wall Street Journal “story” in his hip pocket, the WCM777 “supporter” and BehindMLM critic asserted, “I will make the most of it to my enemies’ disgust!” (See this story and Comments thread at BehindMLM.com.)
The SEC was in federal court about five months later, alleging that WCM777 had targeted a massive fraud scheme at Asians and Latinos and had caused the logos of famous brands to be republished as part of a bid to sanitize the $65 million scam.
Honestly, does anyone in TelexFree’s MLM leadership these days have a clue — we mean, Freaking Clue One?
TelexFree’s name is referenced on Page 14 of Exhibit 3 in an SEC affidavit filed as part of the WCM777 pyramid- and Ponzi prosecution. Information in the exhibit was gleaned from the California Department of Business Oversight’s investigation into WCM777. Red highlights by PP Blog.
UPDATED 8:51 P.M. EDT (U.S.A.) Already under investigation in Massachusetts, is TelexFree destined to encounter trouble from state regulators in California and perhaps the U.S. Securities and Exchange Commission (SEC)?
At least by Nov. 14, 2013, the California Department of Business Oversight (DBO) was asking questions about the TelexFree MLM scheme, according to filings in federal court. The filings, which appeared in affidavit form and included exhibits, were docketed March 27 after being submitted by the lead investigator in the SEC’s case against WCM777, an alleged $65 million Ponzi- and pyramid fraud.
Some pitchmen in HYIP schemes promote multiple purported opportunities simultaneously and use money from one scheme to join another, a situation that may put banks and payment processors in possession of tainted proceeds from interconnected and ongoing frauds. A federal judge has frozen at least 54 bank or vendor accounts linked to WCM777 or accused operator Phil Ming Xu.
California investigators asked Stanley Stephan Huntsman, who identified himself as a “spokesman-ambassador” for WCM777 with Xu as his “employer,” whether he had any “relationship” with “TelexFree,” according to the SEC filings.
It may be the first reference to TelexFree in a federal court filing, albeit one that is not a charging document. At a minimum, however, it demonstrates that both the California DBO and the SEC are aware of TelexFree and believe that the Massachusetts-based “program” has promoters in common with WCM777.
“I have no relationship with TelexFree,” Huntsman responded.
The SEC announced the WCM777 prosecution on March 28, one day after its lead WCM777 investigator submitted the documents and exhibits from California’s WCM777 probe. Huntsman was not named a defendant in the SEC’s WCM777 action.
WCM777 was targeted at Asians and Latinos, the SEC alleged.
In addition to identifying himself as a “spokesman-ambassador” for WCM777, Huntsman told California investigators that he “was required to read power points prepared by WCM, which was also displayed on the WCM website,” according to an SEC affidavit.
Worried members wedge themselves into TelexFree’s broom closet in Marlborough, Mass, Tuesday. Source: YouTube.
UPDATED 12:15 P.M. EDT (U.S.A.) The Boston Red Sox were at the White House Tuesday to receive recognition for winning the 2013 World Series. There were plenty of smiling faces, perhaps particularly when slugger David Ortiz, the MVP of the series, posed for a selfie with President Obama.
But back home in Massachusetts, particularly in Marlborough, specifically in the stylized broom closet the MLM delusion merchants call TelexFree “corporate” as part of a long-running linguistic conspiracy to sanitize HYIP Ponzi cesspits, smiles were absent. In fact, the police were dispatched to prevent things from getting out of hand.
That’s because too many unhappy and confused TelexFree members who appear to believe they’ve been duped by the firm and its stable of serial delusion merchants wedged themselves into the broom closet to demand answers about why TelexFree either wasn’t paying them or why only certain members were getting paid.
But TelexFree — whom some affiliates say is a $1 billion company with a VOIP product — has only seven employees at its Marlborough office, according to regulatory filings in Tennessee. These employees work in “administration, sales and marketing, accounting, and operations positions.”
Our guess is that they work in staggered shifts, given the size of the office. All seven showing up at one time would appear to create sardine conditions.
According to the Tennessee filings, TelexFree’s two corporate officers are James Merrill and Carlos Wanzeler, who also own something called “Clarity Communications.” It’s unclear whether TelexFree’s seven employees also work for Clarity and several other firms associated with TelexFree.
Merrill is in charge of the money at TelexFree and has the ability to “motivate and instill trust in a company,” according to the Tennessee filings.
So, a company affiliates say has global reach, has gathered $1 billion and has the responsibility to pay hundreds of thousands of affiliates, does it all with just seven workers and owns another company called Clarity and several other firms. And when unhappy affiliates show up in the broom closet to demand answers . . . well, there isn’t a whole lot of wiggle room to begin with.
Filings in Tennessee confirm that TelexFree lacks its own underlying telephony infrastructure. Indeed, according to the filings, TelexFree “will resell or utilize the services of existing facilities-based national interexchange carriers in Tennessee, including the services offered by incumbent local exchange carriers.”
The issue here is almost certainly about margins — not only in Tennessee, but in other states — and whether TelexFree can squeeze any profits after it pays for everything else. This question leads to questions about why so many TelexFree affiliates seem to believe they’ll prosper through TelexFree. To put this in context, imagine that any presumptive TelexFree telephony competitor in a low-margin business had put additional pressures on itself by suggesting that $289 sent to the firm would return $1,040 in a year and that $15,125 would return $57,200.
Next imagine that these payouts were “guaranteed.”
This is an epic problem for TelexFree. For starters, the returns are absurd on their face and bring issues such as Ponzi scheme, pyramid scheme, the sale of unregistered securities and securities fraud into play. Moreover, TelexFree relies on banks to conduct business. And yet no legitimate bank ever would assert that a deposit account would provide such a whopping return. Even so, TelexFree affiliates effectively say the company outperforms its own banking vendors by orders of magnitude.
The same company now mysteriously says it is branching out into credit repair, something that potentially makes it a nemesis of the same banks its uses as vendors — while affiliates claim banks are laggards when it comes to producing income, a proposition that leads to questions about why banks haven’t followed TelexFree’s lead in recruiting affiliates and guaranteeing returns that would make Bernard Madoff blush.
At the same time, filings in Washington state show that TelexFree LLC, a Nevada entity, had made intracompany loans to other TelexFree businesses — and had more than $18 million parked at Fidelity Investment. Why does TelexFree have any money parked at Fidelity when, according to affiliates, it can earn 347 percent in a year “guaranteed” by investing in itself?
Where did affiliates get these ideas? Well, from TelexFree itself. In a “Be our promoter” pitch that once appeared on its own website, TelexFree told the troops to send in $299 (the sum also has been reported as $289) and start receiving $20 a week for a year. Meanwhile, TelexFree had an in-house scheme in which it entitled itself to 20 percent of affiliates’ earnings at the end of a year, something that became the subject of affiliate complaints.
As the PP Blog reported on Nov. 17, 2013, at least some TelexFree affiliates were told at a company event in Orlando that the 20 percent payback requirement had been waived. But the requirement appears not to have been lifted. The logistics of collecting 20 percent from each affiliate on a worldwide basis raises questions about whether some TelexFree rainmakers received secret deals that included no payback requirement (or payback discounts) and whether the company structured transactions or relied on a hidden money-moving system to evade bank-reporting requirements when policing up cash from affiliates, whether they received a waiver/discount or not.
Here we’ll point out that the Zeek Rewards MLM Ponzi scheme ($850 million) and the AdSurfDaily MLM Ponzi scheme ($119 million) both made sweetheart deals with insiders. Like Zeek, TelexFree has a purported “advertising” component in which members purportedly get paid for posting ads online. At 1.5 percent a day, Zeek promised to pay the most. On an annualized basis, TelexFree and ASD are in the same ballpark.
Zeek and TelexFree members purportedly get (or got) paid for posting ads. ASD members purportedly got paid for clicking on ads. The concern with TelexFree — as was the concern with Zeek and ASD before it — is that its “product” is just a front to mask an investment scheme.
Maximum Incongruity
As this Blog has pointed out many times, HYIPs are all about incongruity. Tuesday, however, set a new standard for irreconcilable images: cops and citizens potentially in harm’s way in an MLM HYIP broom closet.
Officers appear not to have known that TelexFree is under investigation by the Massachusetts Securities Division. Nor do they appear to have known that TelexFree is under investigation in Brazil and that a judge and a prosecutor reportedly have been threatened with death. Nor do they appear to have known that TelexFree affiliates in Brazil have staged protests in support of the company, something that was the exact opposite of what occurred in Massachusetts on Tuesday.
Our conclusion from observing videos of the broom-closet debacle is that TelexFree, now fueling tensions in the United States and creating worries about economic security after gorging itself nonstop at the 24/7/365 Portuguese and Spanish buffet it created and potentially hoping to establish an Asian smorgasbord, poses a risk to public safety.
Today we call for the Massachusetts Securities Division to brief police. And we call on TelexFree affiliates in Greater Boston and the whole of the state to remain calm and to steer clear of the broom closet occupied by a company that might have put $1 billion on the table. As righteous as your anger is, your answers are not there.
Rather, they are within the part of you that knows an annual return that beats Madoff on the order of 30 to one is too good to be true, that knows the videos and artwork online that suggest TelexFree is much bigger than a broom closet were deliberately designed to deceive, that the “private jet” and monster SUV and other shiny props were cynically calculated to reinforce your dream before cruelly destroying it.
Police did a good job of easing Tuesday’s tensions. And videos made by TelexFree affiliates suggest that reason was the order, not the exception. So, hats off to both the police and duped affiliates for exercising restraint.
We urge affiliates to see TelexFree “corporate” for what it is: the stylized broom closet used by a company that is not paying you after renting ornate hotel accommodations in Madrid, staging the entrance of limousines, posing with giant SUVs, shuttling top recruiters around on a “private jet,” dangerously pandering to the masses in Brazil and Portugal and even sponsoring a professional soccer team in South America.
Steve Labriola, another TelexFree executive, now pathetically calls the HYIP firm alleged in Brazil to be using a VOIP product as a front, a “customer-acquisition company.”
Say no. Avoid TelexFree “corporate” and any fellow member who calls it that. If you are concerned, call the FBI. Call the SEC. Call the Massachusetts Securities Division. Republican or Democrat, right, left or in between, write to President Obama and tell him his 2009 message about domestic and offshore frauds and corporate broom closets was slow to sink in — but that now you understand it because you’ve encountered one up close and personally. In fact, some of you were in the TelexFree broom closet — with police.
In closing, find joy in your Red Sox! May you and they always be “Boston strong.”
BULLETIN: What happens if it is alleged by law enforcement that you’re a Ponzi schemer/affinity fraudster, a business associate of a Ponzi schemer/affinity fraudster or a vendor of a Ponzi schemer/affinity fraudster?
A federal judge has frozen at least 54 bank or financial accounts the SEC has linked to WCM777, an alleged $65 million Ponzi- and pyramid scheme with domestic and offshore conduits.
Accused operator Ming Xu had “authority” over at least 16 of the accounts, according to court filings. Who controlled the others was not immediately clear.
WCM777 was accused of targeting the Asian and Latino communities in a ribald HYIP scam that in part traded on the names of famous businesses, perhaps particularly companies in the hospitality industry. Many immigrants work in the hospitality trades.
The order has a provision that covers “all accounts at any bank, financial institution or brokerage firm, or third-payment payment processor, all certificates of deposit, and other funds or assets.”
Banks/vendors expressly covered by the order include Bank of America, Wells Fargo, Merrill Lynch, Comerica, HSBC, E*Trade, JPMorgan Chase, Citibank, East West Bank and American Continental.
It also became known today that Krista L. Freitag of E3 Realty Advisors of Los Angeles has been appointed receiver. The receiver already has taken control of at least two websites linked to WCM777, including WCM777.com.
U.S. District Judge Christina A. Snyder of the Central District of California has approved the asset freeze and the appointment of Freitag, a forensic accountant.
Snyder has authorized the SEC to conduct depositions “on two days’ notice” and cleared the agency to perform depositions even on Saturdays.
“Depositions may be taken Monday through Saturday,” according to the order.
And Snyder also authorized the SEC to bypass subpoenas and serve “a deposition notice by facsimile, hand or overnight courier” upon “agents, servants, promoters, employees, brokers, associates, and any person who transferred money to or received money from the bank accounts . . .”
Meanwhile, Snyder ordered Freitag “to conduct such investigation and discovery as may be necessary to locate and account for all of the assets of or managed by Defendants World Capital Market Inc., WCM777 Inc., WCM777 Ltd. d/b/a WCM777 Enterprises, Inc., and Relief Defendants Kingdom Capital Market, LLC; Manna Holding Group, LLC; Manna Source International, Inc.; WCM Resources, Inc., and their subsidiaries and affiliates, and to engage and employ attorneys, accountants and other persons to assist in such investigation and discovery.”
The judge also ordered the defendants and relief defendants not to destroy records and to repatriate assets.
UPDATED 8:45 PM EDT (U.S.A.) Already under investigation in Brazil and Massachusetts and linked to at least one affiliate allegedly involved in an earlier pyramid- and affinity-fraud scheme aimed at the Brazilian community, TelexFree acknowledged in a news release this morning that it had a presence in the economically challenged nation of Rwanda.
But TelexFree said it was not the firm banned from the African country by the Ministry of Trade and Industry on March 14.
TelexFree’s pushback at African media reports came on the same day the SEC announced a pyramid- and Ponzi case against WCM777, another MLM “program.” WCM777, which has some promoters in common with TelexFree, was accused of targeting Asians and Latinos and using multiple names to gather and move money.
A recent ad on an auction site offered 550 TelexFree “AdCentrals” for $16,760, a purported discount of $8,190. The AdCentrals, according to the ad, would provide a “minimum” return of $56,100. Where the ad originated is unclear.
Rwanda, TelexFree claimed, was not even on its “radar” until reports of tax evasion and money-laundering linked to the TelexFree name surfaced in African media.
“As far as we can tell, this has nothing to do with us other than the fact that somebody is making illegal use of our name,” TelexFree said in a news release. “We have in the neighborhood of half a million customers worldwide, and 121 of them are in Rwanda. But we have no connection with P.L.I. Telexfree Rwanda Ltd., the company shutdown in Rwanda. That company allegedly has been in business for 14 years, whereas we just celebrated our second year in business. We’ve checked our records and find no evidence of the names of the persons associated with that company registered as either our customers or agents. Rwanda wasn’t on our radar until this report hit the Internet.”
TelexFree did not say how it defined “customers.” Some promoters have claimed $15,125 sent to the firm returns $57,200 in a year through the purchase of “AdCentrals” offered alongside a VOIP service.
Massachusetts-based TelexFree said it believes the Rwanda matter “to be a case of mistaken identity” and that it had “not been contacted by the Rwandan government.”
Nor does TelexFree “have any reason to believe any action has been taken against it” in Rwanda, the firm said.
TelexFree, an MLM company, says it is in a number of businesses, including VOIP, an Internet telephone system.
Claims in the TelexFree news release were not attributed to a TelexFree corporate officer or executive. Rather, the assertions were attributed only to TelexFree itself. Why the firm chose not to quote an executive to refute the serious allegations in news reports was not immediately clear.
“It’s both the power and the challenge of VOIP,” TelexFREE explained in its news release. “Virtually anyone can register and use the system. The best we can figure out right now is that somebody is using our sales program to channel their own agenda, and that kind of repackaging is strictly prohibited by our Policies and Procedures. Our attorneys are doing all they can to find out what is going on.”
A Facebook site styled “telexfreerwanda” and dubbed “Telexfree Rwanda Team” has been promoting TelexFree since at least Jan. 17.
Here is one of the claims on the Facebook site (italics added):
A 14 year old Company with an Opportunity for YOU to get hired (as a Promoter) and you start getting paid on average 100 US$ each week for 52weeks. JOIN IT.
The prompt to “JOIN IT” appears to be a reference to TelexFree itself. And the assertion of a “14 year old Company” appears to reflect similar claims about TelexFree that have appeared on the web since at least July 2013, even though TelexFree says it is only two years old.
American MLMers have made claims similar to the claims on the Facebook site.
Any number of TelexFree affiliates appear to be confused about how long the company has been operating. Last summer, some affiliates claimed nine years. Others said 11 and 13 years.
In addition, the Facebook site says TelexFree can be visited “above Viva Supermarket.” On March 18, RwandaEye reported that the banned Rwandan enterprise operated from the top floor of a Viva supermarket in Remera. At least three links from the Facebook site resolve to the website of TelexFree, suggesting the operator or operators of the Facebook site are TelexFree affiliates.
The Facebook site uses affiliate identifiers such as “innosantana,” “innosanta01” and “innosanta1301.” Here is one example of a URL from the site: http://www.telexfree.com/innosantana
TelexFree did not say whether Haiti was on its radar. At a Boston pitchfest earlier this month, a man claimed from the stage that TelexFree reps recently flew on a “private jet” from the Dominican Republic to Haiti, perhaps the poorest nation in the Western Hemisphere.
TelexFree is based in a shared-office facility in Massachusetts, sharing a suite with at least 25 other firms. Promos have sought to plant the seed that TelexFree occupied the entire structure. The firm has been associated with a growing list of companies in various states, some of which use the name “TelexFree” and others that simply use “Telex.”
A document dated-stamped March 20 and on file at the Idaho Public Utilities Commission claims “[a]pplicant’s legal name is TelexFREE Telephone Company, LLC, with its principal place of business located at 225 Cedar Hill Street, Suite 200, Marlborough, MA 01752.”
That’s also the address of TelexFree Inc. at the shared office facility. There’s also a TelexFree LLC in Nevada.
The Idaho filing stressed in all-caps that TelexFree wanted its financial information kept “CONFIDENTIAL.” In Washington state, the Utilities and Transportation Commission published a document in February that asserted TelexFree LLC had made millions of dollars in intracompany loans to other TelexFree-related enterprises, including to TelexElectric LLLP, Telexfree Financial Inc., TelexMobile and Ympactus.
Filed by a self-identified TelexFree “consultant,” the Washington document also claimed TelexFree LLC had “21,613,289.00” in “Federal Income Taxes Payable” and another “3,924,262.30” in “State/Local Income Tax Payable” on its balance sheet as of Dec. 31, 2013.
URGENT >> BULLETIN >> MOVING: (16th update 5:42 p.m. EDT U.S.A.) The SEC has gone to federal court in Los Angeles, alleging that the WCM777 “program” is a “worldwide” pyramid scheme, a Ponzi scheme and an offering fraud that targeted Asian and Latino communities and gathered more than $65 million.
A federal judge has granted an asset freeze, the SEC said. The agency brought the case in an emergency complaint.
“[Phil Ming] Xu and his entities claimed they were using investor funds to build a strong cloud services company that would then ignite other high-tech companies and ultimately make their investors very wealthy,” said Michele Wein Layne, director of the SEC’s Los Angeles Regional Office. “In reality, they were operating a pyramid scheme that preyed on investors in particular ethnic communities, leaving them with nothing left to show for their investment.”
Some MLM promoters have pitched WCM777 alongside the TelexFree “program.” TelexFree is not referenced in the SEC complaint. But the complaint does reference a Massachusetts probe into WCM777 last fall. TelexFree has been under investigation by the Massachusetts Securities Division since at least February 2014.
Charged in the SEC’s WCM777 case are WCM777 Inc. of Nevada, World Capital Market Inc. of Delaware, WCM777 Ltd.( dba as WCM777 Enterprises Inc.) of Hong Kong and Ming Xu, also known as Phil Ming Xu, of Temple City, Calif.
Several firms are listed as relief defendants, amid allegations they received ill-gotten gains. These include Kingdom Capital Market LLC of Delaware, Manna Holding Group LLC of California, Manna Source International Inc. of California, WCM Resources Inc. of Texas, Aeon Operating Inc. of Texas and PMX Jewels Ltd. of Hong Kong.
Even as WCM777 was under investigation by state regulators in the United States, the SEC said, the “program” raised “more than $37 million from investors which has been deposited into [the defendants’] Hong Kong bank account.”
During the state-level probes in Massachusetts and elsewhere, “Defendants stopped depositing investor funds into their United States bank accounts, although the WCM777 offering continued,” the SEC alleged.
Xu, the SEC charged, is “involved in all aspects of the fraud.”
From the SEC complaint (italics/bolding/carriage returns added):
The bulk of the investor funds have been used to pay cash for real property purchased in the United States, purchased in many cases with funds transferred through Defendant World Capital Market Inc. (“WCM”), and held in the names of Relief Defendants Manna Holding Group LLC and Kingdom Capital Market LLC, which are affiliated with Defendant Xu.
The properties include two golf courses, a warehouse, vacant land, and several single family homes. Defendants have also used investor funds to play the stock market and to make investments, through intermediary companies, in an oil and gas offering of Relief Defendant Aeon Operating, Inc.
Defendants have also sent investor funds to Relief Defendant PMX Jewels, Limited, which is a rough diamond jewel merchant in Hong Kong, and to Relief Defendant Manna Source International, Inc., which is affiliated with Defendant Xu.
The golf courses were identified as Glen Ivy Golf Club in Corona, Calif., and the Links at Summerly in Lake Elsinore, Calif. To acquire Glen Ivy, WCM777 plunked down $6.5 million in cash, with the money coming from “WCM777 accounts that held investor proceeds,” the SEC charged.
Meanwhile, the Links at Summerly was acquired for $1.65 million in cash. Again, the SEC charged, the money to acquire the course “originated from WCM777 accounts that held investor proceeds.”
Along the pyramid and Ponzi path, the SEC charged, WCM777 bought a single-family home in Walnut, Calif., for “$2.4 million in cash,” a single-family home in Monrovia, Calif. for “$980,000 in cash,” a single-family home in Lake Elsinore, Calif., for “$500,000 in cash,” vacant land in New Cuyama, Calif., for “$700,000 in cash,” a warehouse in El Monte, Calif, for “$1,051,750 in cash” and used “$1,456,041.56” to close on the purchase of a single-family home in Monrovia, Calif.
This Monrovia sale never closed, the SEC said.
And “Ming Xu opened an account at a major brokerage firm in June 2013 in the name of WCM,” the SEC charged. “Between June 2013 and January 2014, Defendants deposited a total of $2.155 million into this brokerage account. The cash originated from WCM777 accounts that held investor proceeds.”
Moreover, the SEC charged, WCM777 disbursed $200,000 in investors proceeds to ToPacific Inc., $210,000 to Agape Technology and $230,000 to Media for Christ.
All of these entities, the SEC charged, were “associated or otherwise affiliated” with Xu.
Media for Christ — apparently before Xu’s alleged involvement — found itself at the center of an international firestorm in 2012 over a film production known as “Innocence of Muslims.” (See PP Blog report dated Nov. 21, 2013.)
Among the alarming allegations is that WCM777 falsely planted the seed that it had partnerships “with more than 700 major companies such as Siemens, Denny’s, and Goldman Sachs,” the SEC said.
WCM777 also asserted a false association with Stouffer Hotels and Resorts, a company that “has not been in business since 1996 when it sold its real estate portfolio to another company, and that was then purchased by Marriott in 1997,” the SEC said. “Marriott does not have any relationship with Defendants.”
As the PP Blog reported in October 2013, affiliates of WCM777 helped spread the claims about ties with famous businesses across the web.
Commingling
The WCM777 enterprises “opened and used numerous accounts located at three different banks in the United States, to move and commingle most of the investor proceeds before they were disbursed to third parties,” the SEC said.
It is common for HYIP scams to use banks and payment processors to warehouse proceeds from fraud schemes, a practice that brings national-security concerns into play.
HYIP schemes often also purport to offer interest-earning “packages” while using a “points” system and touting future public offerings, things allegedly in play at WCM777.
From the SEC complaint (italics added):
Through publicly available websites and promotional materials, Defendants offer packages or membership units in “WCM777.” Defendants portray WCM777 as a profitable multi-level marketing venture that sells packages of “cloud media” or cloud services. In the WCM777 offering, Defendants promise investors that they will earn 100% or more returns in 100 days. Defendants represent that the “points” investors receive for their investments will be convertible into equity in initial public offerings (“IPOs”) of “high tech” companies Defendants are purportedly incubating. Defendants have facilitated a “secondary market” in the points they award to investors, and Defendants estimate that $890 million of the points have traded on this market.
But in reality, the SEC said, the WCM777 enterprises “do not realize any appreciable revenue other than from the sale of ‘packages’ of cloud services to investors. WCM777 is not profitable, and is a pyramid scheme. Defendants use some of the investor funds to make Ponzi payments of returns to investors.”
The SEC, which says WCM777 was selling unregistered securities as investment contracts, is seeking the appointment of a receiver, a request the judge has approved.
Like other HYIP schemes, WCM777 preemptively denied it was a “Ponzi scheme.”
“Is WCM777 a Ponzi Game?” WCM777 wrote on its website, before answering its own question, the SEC said. “In summary, we are not a Ponzi game company. We are creating a new business model.”
In reality, the SEC said, “The cash paid to investors were Ponzi payments made with funds received from other investors, and were not paid from net income or profits of the WCM777 enterprise.”
At a 2013 business event in California, Xu was photographed alongside luminaries such as former U.S. Vice President Al Gore and Apple co-founder Steve Wozniak. It is somewhat common for Ponzi schemers to trade on the names and reputations of prominent individuals.
Zhi Liu, another WCM777 executive identified in state-level filings, is not directly referenced in the SEC complaint. There may be an oblique reference, however.
“On January 27, 2014, WCM777 Ltd. filed a lawsuit against a former employee in the Superior Court for the State of California, County of Los Angeles,” the SEC said.
Liu is known as “Tiger.”
A Twitter site under the name of “Dr. Phil Ming Xu” has a March 14 entry that claims, “Tiger created the system and took $30M worth of unauthorized ecash from WCM777. WCM777 sued him.”
As noted above, however, the SEC has alleged that Xu was involved in all aspects of the fraud. And also as noted above, the SEC further alleged that “more than $37 million from investors” had been deposited in a Hong Kong bank account.
Whether Liu had a role in the Hong Kong deposits is unclear. Also unclear is whether Liu remains in the United States or has relocated elsewhere.
In its emergency filing, the SEC said the WCM777 enterprise constituted an “ongoing” fraud.
UPDATED 7:15 P.M. EDT (U.S.A.) The website of TelexFree has been promoting a March 26 (today) “conference” at the Kowloonbay International Trade & Exhibition Centre in Hong Kong, with tickets priced at $150. Whether the event actually took place is unclear. A search of the KITEC website returned no result for TelexFree — on the 26th or any other date.
Whether TelexFree qualified for a listing on KITEC’s events calendar and search index was not immediately clear. It is now March 27 in Hong Kong. The KITEC site showed no March 26 conference events for any sponsor.
Other than a rolling promo on TelexFree’s website, there appears to have been virtually no publicity surrounding the advertised March 26 Hong Kong event.
Separately, the PP Blog has learned that TelexFree may have gathered as much as $270,600 if a Boston confab earlier this month sold out. Tickets to the Boston event were advertised at $164, with capacity originally set at 1,000 before being expanded to 1,650.
TelexFree is under investigation in Massachusetts, its home state. It’s also under investigation in Brazil, amid pyramid-scheme allegations. TelexFree recently got kicked out of Rwanda.
UPDATED 12:21 P.M. EDT (MARCH 28, U.S.A.) Whack-A-Mole. Here’s the latest disturbing incarnation: On March 20, the Autorité des marchés financiers (AMF) published a warning on a gold “program” known as Karatbars International GmbH. BehindMLM.com spotlighted the warning yesterday.
From the AMF warning (bolding added): “With the company’s ‘Affiliates’ program, investors can make Internet-based purchases through Karatbars plans and they are encouraged to recruit two other Affiliates. These Affiliates are in turn encouraged to recruit two other Affiliates each, and so on. Affiliates are lured by the possibility of earning large payouts, in particular through a percentage of amounts collected from the Karatbars plans and gold products purchased by referrals.”
These things apparently meant little to former Zeek Rewards’ pitchman Lloyd Merrifield, who “defended” Karatbars International on BehindMLM. Zeek was an international Ponzi scheme that gathered at least $850 million, according to court records.
AdViewGlobal was an international Ponzi scheme that gathered an unknown sum before vanishing mysteriously in 2009. U.S. federal prosecutors linked it to ASD in April 2012.
Merrifield also was a pitchman for Ad-Ventures4u (ADV4U), an ASD-like HYIP scam tied to shiny-object scam known as “TradingGold4Cash.” And why not Tazoodle, a search-engine “program” whose “board” consisted of former ASD members who had the big idea they were going to unseat Google? Yep. Merrifield was there, too.
Along with ADV4U and Tazoodle, Merrifield pitched something called “20Clicks” as part of an overall package known as “The Golden Eggs.” (In 2009, the 20 Clicks website said it was “Powered by USHBB.com.” USHBB later was associated with the Zeek Rewards Ponzi scheme and is listed as a “winner” in a document assembled by the court-appointed receiver in the Zeek Ponzi/pyramid case.)
At least one HYIP pitchfest site that describes Merrifield as a “featured speaker” for Karatbars International has led cheers for “programs” such as AdHitProfits and MyFunLife and BannersBroker — and an emerging darling known as FlexKom. The site also has pushed “ProfitClicking,” one of the JSSTripler/JustBeenPaid reload scams linked to former ASD pitchman Frederick Mann.
Mann, among other things, may have ties to the “sovereign citizens” movement.
Merrifield, perhaps ignoring this 2010 FINRA warning on HYIP schemes and social media, pitches Karatbars International on YouTube and coaches viewers to line up recruits via craigslist.
Source: YouTube
On BehindMLM, Merrifield says he’s been “in the Investment Banking industry for over 35 years.”
As always, HYIP “programs” and similar ventures that may lack licensing in individual jurisdictions across the world raise the prospect that banks and payment processors are coming into possession of funds tainted by fraud. In some cases, those funds have circulated between and among various schemes.
A quick Google search shows that some pitchmen are promoting Karatbars International alongside TelexFree, a “program” under investigation in North America, South America and Africa. TelexFree also has been promoted in concert with the WCM777 MLM scam.
From a video pitch that simultaneously pushes Karatbars International and TelexFree.
UPDATED 12:14 P.M. EDT (U.S.A.) Being under investigation in Brazil and Massachusetts and getting kicked out of Rwanda apparently isn’t viewed in MLM La-La Land as a strong-enough clue that it’s time to give up the TelexFree ghost.
Or maybe it is — and the TelexFree-related fire sales have begun. It wouldn’t be the first time that members of an HYIP tried to sell their holdings while regulators were circling.
At least in the United States, one of the TelexFree issues is whether the purported “opportunity” is selling unregistered securities as investment contracts. That’s bad enough.
But things potentially could get worse. Individual TelexFree members now may be creating bundles of securities and fueling even more questions about a dangerous TelexFree black market.
An ad for a package of 550 TelexFree AdCentrals appears on a site known as “TripleClicks.” The asking price? $16,760.
Good grief.
The bundle, according to the ad, ships from the United States.
“You Save: $8,190.00 (33%),” the ad contends.
It goes on to say this (italics added):
1) you will pay 16,760$ to get a value of 24,950$ of voip subscription that you can use by your self 2) you will earn up to 110,000$ in one year (minimum guarantee 100% 56,100$ only posting 55 adtext for day) 3) You will get a lot of Vpoints that will be useful for your SFI Business 4) you will be refunded 100% if within about 18 weeks you will not have fully recovered the money spent initially. If of course you did all needed to get back money (it mean 30 minutes copy and paste everyday without sponsoring or sale nothing at all)
so nothing to loose here but only to get…
How the “refunding” would be accomplished wasn’t explained. The ad suggests, however, that TelexFree would “repurchase” the packs over time.
In addition, the ad contends that BehindMLM.com, a site that reports on emerging MLM frauds, has “what I believe is a more skeptical perspective on what is going on behind the Telexfree name.” The ad that bundles TelexFree “AdFamily” packs then asks and answers its own question:
“Does Telex Free Work? I confidently say it works, with Capital Y as in Yes! You see this company has a track record already.”
Visit BehindMLM.com. Among other things, BehindMLM has reported on money-laundering allegations involving TelexFree.
California-based WCM777, an MLM “program,” got booted out of Massachusetts in November 2013, amid allegations of securities fraud and affinity fraud targeted at the Brazilian community through hotel pitchfests. WCM777, purportedly operated by Ming Xu and recruiting affiliates to conduct business over the Internet, later got booted out of California. In addition to the Brazilian community, WCM777 targeted people who speak Spanish and people who speak Chinese, perhaps Christians in particular.
Massachusetts launched a probe into TelexFree, another MLM “program” associated with hotel pitchfests and affiliate recruitment over the Internet, at least by Feb. 28 of this year — probably sooner, given the nature of WCM777. TelexFree largely is targeting speakers of Portuguese and Spanish, perhaps Christians in particular. It also has an affiliate presence in India and Africa (at least).
Although the schemes do not appear to have common ownership, both WCM777 and TelexFree offered plans that encouraged recruits to buy in at higher levels to get higher “earnings.” Affiliates of each scheme appear to have engineered subschemes in which their recruits could buy in at higher levels than the “programs” themselves advertised, potentially introducing a second layer of fraud.
What this means, in essence, is that neither TelexFree nor WCM777 may know their real bottom lines and that the firms created an environment that encouraged back-alley, illegal sales of securities and secret deal-making among individual promoters. Individuals ostensibly acting as brokers for TelexFree and WCM777 could be cherry-picking cash and not even sending it to the “program” operators. In short, certain people could be creating personal and organizational underground economies and fleecing TelexFree and WCM777 even as they fleece their own marks and recruits.
Hidden members of both “programs” may be getting paid in cash by their upline sponsors or ostensible brokers, with no record of their participation — even if they supplied cash or an equivalent to join the “programs.”
The only safe assumption in HYIP Ponzi Land is that any system that can be abused will be abused. That’s why these “programs” necessarily must be viewed through the lens of national security.
Presented below are some screen shots that demonstrate promotional ties between TelexFree and WCM777. In certain instances, the websites pictured below are promoting not only TelexFree and WCM777, but also other “programs.” One of them, for instance, is promoting the almost indescribably insidious and bizarre Banners Broker “program.”
As always is the case in HYIP investigations, the concern is that banks locally, regionally, nationally and internationally are being used by corporate scammers first as warehouses to store illicit proceeds — and later, by individual promoters at potentially thousands and thousands of locations, as virtual ATMs that provide the service of offloading the “earnings” of the promoters.
The interconnectivity of these schemes endangers local, regional, state, provincial and national economies. In many cases, promoters engage in willful blindness and simply move to another MLM HYIP scam when the current “hot” one encounters regulatory intervention or craters on its own.
It’s often the case that promoters plant the seed that a scheme has been endorsed by a government or that a corporate registration is surefire “proof” that no scam exists. Social media invariably is used to help a scheme proliferate or achieve Internet virality.
One of the shots below is from a YouTube video in which a TelexFree promoter seeks to plant the seed that TelexFree is backed by the Better Business Bureau. The narrator’s words in the video suggest he sought to plant the same seed about WCM777 but had to backtrack when he discovered a BBB listing that referred to WCM777 as a Ponzi scheme.
“Today we’re going to compare two of the most dynamic companies out there taking over right now,” the narrator said.
After recording a search of the BBB site for a TelexFree listing and finding one, the narrator suggested that the listing alone was proof that TelexFree was not a scam. He thereafter performed a search for WCM777 and found a Ponzi reference, thus triggering what appeared to be backtracking from his earlier claims that TelexFree and WCM777 were “dynamic companies.”
It also could be the case, we suppose, that he already knew about the WCM777 Ponzi listing before performing the search and that the design all along was to get people to go with TelexFree because WCM777 was a scam. Even under that interpretation, however, the video still demonstrates the underhandedness within the HYIP sphere.
The HYIP sphere always screams incongruity. Keeping that in mind, we’ll point out that one of the screen shots below shows TelexFree executive James Merrill in the same affiliate-manufactured frame as Massachusetts Commonwealth Secretary William Galvin. It was a clear bid to suggest that because TelexFree was registered as a corporation in Massachusetts, the “program” couldn’t possibly be a scam.
That is hogwash, of course. Galvin did not endorse TelexFree when his office approved a corporate registration. Besides, Galvin — as Commonwealth Secretary — oversees both the Massachusetts Corporations Division and the Securities Division. The Securities Division is probing TelexFree and possibly can rely on various documents in the Corporations Division to help investigators connect dots.
Beyond that, the website from which the screen shot promoting TelexFree by marrying images of Merrill and Galvin was taken also is promoting WCM777. Also shown below is an image from the same site in which Merrill is shown posing beside a giant SUV. Contrast that image against the image of Merrill posing in front of a large Massachusetts building as though TelexFree were its only occupant. TelexFree promoters have used the same approach, planting that seed that TelexFree owns the building and has a large physical presence in the United States.
That’s hogwash, too. TelexFree was an occupant of Suite 200 at a Regus center in Marlborough, along with dozens of other companies.
Finally, before observing the shots below, recognize that MLM itself — never a stranger to scandal — may be on the verge of experiencing a PR and legal crisis of unprecedented proportions.
People have harshly criticized hedge-fund manager Bill Ackman for attacking Herbalife. Among his contentions is that Herbalife is a pyramid scheme that targets vulnerable populations. Say what you will about Ackman’s Herbalife claims, but it is crystal clear that affinity fraud and the viral looting of impoverished/disadvantaged people have existed in the MLM realm for a long time and continues to be seen. One might even be inclined to say a market-making fraud blueprint exists within MLM: mow down one affinity cluster or population group and then move to another.
At a minimum, “programs” such as TelexFree and WCM777, which clearly have positioned themselves as wealth recipes for immigrants and vulnerable populations, can help Ackman shape and inform his Herbalife hypothesis.
James Merrill is TelexFree’s president and thus an MLM executive. TelexFree and Merrill, to date, have played into virtually every MLM stereotype that exists — everything from private jets, monster SUVs and stretch limos to business registrations and mail drops in Nevada.
Most disturbingly, though, Merrill represents an American MLM company that has been banned in Rwanda, an African nation that is trying to reverse poverty and receives aid from the World Bank. It’s hard to conceive that MLM — particularly American MLM — could card a worse PR disaster. Regardless, one could be in the offing.
Picture Story
1.
A TelexFree promoter who also promoted WCM777 extends the myth that TelexFree has a large physical presence in the United States and plants the seed that Massachusetts Commonwealth Secretary William Galvin endorsed TelexFree. Galvin’s office is investigating TelexFree after previously booting WCM777 from the state.
2.
A promoter simultaneously pitches TelexFree and WCM777. This shot is from the same site described in the photo above. The site may be based in Ecuador.
3.
This shot is from the same two sites described in the captions above — and features TelexFree President James Merrill posing with a giant SUV.
4.
This shot was taken on the same site described in the three preceding captions above. In this fourth shot, a person promoting both TelexFree and WCM777 claims that the purported parent company of WCM777 provided a loan of $20 million to a restaurant chain that sells Mexican food. The PP Blog has deleted an image of the chain’s logo that appears in the WCM777 promo. The same site plants the seed that WCM has provided hundreds of millions of dollars in loans to jewels of American business.
5.
This site features promos for various purported “opportunities,” including TelexFree and WCM777. Though not shown in the photo, the site also is promoting the uber-bizarre Banners Broker “program.” The site may be based in Italy.
6.
This site also is simultaneously promoting TelexFree and WCM777.
7.
This YouTube site describes TelexFree and WCM777 as “dynamic companies” and plants the seed that TelexFree is endorsed by the Better Business Bureau.
