TelexFree executive James Merrill shows off his Botafogo jersey. (Source: YouTube promo.)
What do you do when a Brazilian court freezes money and blocks new registrations for your “program” in that country, amid serious pyramid-scheme allegations?
Well, if you’re TelexFree, you file losing appeal after losing appeal. And then, while continuing the pyramid battle, you change your logo so no one can get the idea you ripped it off from the 2010 World Badminton Championship in Paris.
After that, you arrange for cameras to be rolling in the United States to capture the arrival of the limousine at the self-staged event (in Miami?) to announce your sponsorship of the Botafogo soccer club in Rio de Janeiro.
Then, with great fanfare, you videotape the signing of the Botafogo contract — and make sure the cameras capture your top executives at the signing ceremony wearing a Botafogo jersey. (Among the executives are James Merrill and Carlos Wanzeler.)
Finally, you make sure that Carlos Costa — your most well-known executive — gets a chance to be shown evangelizing for TelexFree and gesticulating wildly on YouTube while wearing a Botafogo jersey with the new TelexFree logo affixed.
(If you’re TelexFree, it apparently also helps if you use a split screen to show happy TelexFree affiliates wearing the old logo, a man holding what appears to be a check while the logo of the Best Western hotel chain and the old TelexFree logo appear in the background — and the arrival of a limo, of course.)
UPDATED 7:36 P.M. ET (U.S.A.) Let’s say you’re out there feverishly flogging the TelexFree MLM even as the pyramid-scheme probe moves forward in Brazil, a judge and prosecutor have been threatened with death and TelexFree executive Carlos Costa is pulling an Andy Bowdoin and telling the world that God used him to bring the purported opportunity to the flock.
There’s always risk associated with HYIP schemes. Now, however, it seems those risks are becoming even greater.
Here is a key fact: The sender used an IP based in France that has been associated by Project Honeypot with comment-spamming — pitches for porn sites and sites that purport to give you a good price on designer goods in advance of a predicted “downturn,” for example. (Basic message: You can look wealthy even if you’re not, even after the economy tanks. Buy your knockoffs now and look good when the sky is falling on your life.)
The sender, now adding HYIP schemes to the porn and designer-good mix from that specific IP, used a handle that incorporated the word “Silver” within its overall handle and sought to plant a URL at the PP Blog to a Panamanian venture that advertises a custody service for precious metals. The PP Blog is declining to publish the URL and the name of the enterprise which, among other things, reproduces on its website the logos of an internationally famous insurer based in London and an internationally famous accounting firm based in Chicago. The site also publishes various contact phone numbers in the United States, Panama, New Zealand, Australia, Switzerland, the United Kingdom and Hong Kong. Although there is a chance that the service is legitimate, the PP Blog questions why someone or some thing is spamming links to the precious-metals site and loading them up further with links to “positive” coverage of seemingly unrelated HYIPs.
For the purposes of this PP Blog post, the Panamanian venture is a sidebar tidbit. Far more interesting was the body content of the spam, which appears to be a compendium of gushing affiliate pitches for TelexFree that appear on the net. The spam appears to have been cobbled together by a human scraper or scraping device of some sort that had visited one or more TelexFree-related websites. Links embedded in the spam are the “real story” in the context of this PP Blog post.
So, for starters, TelexFree’s name is being used as part of a bid to drive traffic to a precious-metals website on which visitors curiously are told they must provide 15 days’ notice if they wish to visit the office in Panama City. The PP Blog likely was targeted by the spammer simply because the word “TelexFree” appears here many times in reports about TelexFree-related events in Brazil and the United States.
The spammer — be it bot or human — appears to have made the calculation that TelexFree members might be the perfect customers for the precious-metals venture. Contained within the spam were three links: One to a site styled TelexFreeUnitedStates and two to a URL-shortening service that redirected visitors to Photobucket, the popular image-hosting and story-sharing website.
Here’s where the story really begins . . .
One of the picture stories told at at the Photobucket site was told inside a subfolder of a folder labeled “aaronsharazeek.” (Emphasis added.) The subfolder was slugged “First Zeek Red Carpet Event April 18th 2012.” Zeek conducted a Red Carpet event on that date.
The SEC moved against Zeek on Aug. 17, 2012. On the same date, the Secret Service said it also was investigating Zeek. Court records suggest the SEC began the Zeek probe at least by April 17, 2012, one day before the April 18 Zeek Red Carpet event highlighted within the “aaronsharazeek” folder on Photobucket.
On April 17, 2012, according to court filings, the SEC tasked an IT specialist to “conduct Website/video capture” of ZeekRewards.com.
Paul Burks appears to have been in deep thought on April 18, 2012, one day after the SEC tasked an IT specialist to capture content from Zeek Rewards.com. This is a slice of a photo from a larger photo that appears on Photobucket in a folder labeled “First Zeek Red Carpet Event April 18 2012.”
Precisely when Zeek operator Paul R. Burks found out about the SEC probe remains unclear. But photos inside the “First Zeek Red Carpet Event April 18th 2012” subfolder at the Photobucket site show a Burks who appears to be in deep thought. One can only wonder what 66-year-old Burks was thinking about on that date. His health? His wife’s stress level, given the noise Zeek was creating in the small town of Lexington, N.C.? His ability to keep Zeek going? The prospect that investigators were closing in?
There are 18 other photos in the Red Carpet event subfolder, some showing Zeek luminaries such as former SEC defendant Keith Laggos, former Zeek COO Dawn Wright-Olivares, former Zeek videographer OH Brown (looking happy), former Zeek trainer Peter Mingils (identified in one photo as the “V.P. of the Association of Network Marketing Professionals”). Other photos of Zeek personalities/staffers appear in the folder, as do photos showing attendees.
Absent the “Silver”/TelexFree spammer, the PP Blog likely never would have seen these photos.
Also within the “aaronsharazeek” folder at Photobucket is a subfolder slugged “Zeek Trip,” and subfolders slugged “Banners Broker” and “telexfree.” The “Zeek Trip” folder appears to contain four photos of Zeek-related real estate in Lexington, N.C. (In the ASD Ponzi case, affiliates suggested that ASD couldn’t possibly be illegitimate because ASD had an office. The same thing has been asserted by TelexFree promoters.)
Meanwhile, the “Banners Brokers” folder contains a video of a sales pitch, and the “telexfree” folder contains images of government documents from the state of Massachusetts and the country of Brazil that appear to have been designed to plant the seed that TelexFree couldn’t possibly be a scam.
Taken as a whole, the various folders and photos demonstrate the interconnectivity of MLM HYIP schemes, regardless of who actually controls the Photobucket site. It is known from other sources that some Zeekers also were in the JSSTripler/JustBeenPaid scam and the exceptionally murky Profitable Sunrise scam shut down by the SEC and various state regulators earlier this year.
Banners Broker is an uber-bizarre Ponzi-board program. On July 2, 2013, the PP Blog reported that MLM attorney Kevin Thompson said that the name of his law firm had been used by scammers in a bid to dupe members of Banners Broker and Profit Clicking, the JSS/JBP-associated “program” linked to Frederick Mann that may have ties to the extremist “sovereign citizens” movement. The July 2 PP Blog post was titled, “Law Firm’s Name Used In Bid To Dupe Members Of Banners Broker, Profit Clicking, MLM Attorney Says.”
Within the July 2 post, the PP Blog reported that it had received menacing messages in apparent “defense” of Banners Broker. As the Blog reported at the time (italics added):
WARNING: The next paragraph includes quoted material from one of the Jan. 18, 2013, spams, and the PP Blog is reproducing it to illustrate the bizarre and often menacing nature of the HYIP sphere. Indeed, the apparent Banner’s Broker supporter wrote (italics added):
” . . . I am Big Bob’s cock meat sandwich. Your mom ate me and made me do press ups until I threw up . . . I am gonna report you. When you make false accusations, you can get done. Maybe you will be seen in court soon . . .”
It is as ugly today as it was on the January date the PP Blog received the communication.
Why “programs” such as TelexFree, Zeek Rewards, BannersBroker and ProfitClicking become popular with people of faith is one of the head-scratching mysteries of current times. Gold fever, of course, is nothing new; it’s been around for centuries. What’s at least relatively new in the Internet Age is that the gold- and silver-sellers appear to be piggybacking off HYIP pitchmen, apparently hoping to rope in customers for shiny-object schemes.
This “comment” sent to the PP Blog on Nov. 22 sought to drive traffic to a precious-metals site by planting a link to the site and also planting links related to TelexFree.
On Oct. 25, the PP Blog reported that an alleged shiny-object scheme had taken root in Zeek’s back yard in North Carolina. On June 19, the PP Blog reported that the receiver in the Legisi HYIP Ponzi case was going after assets linked to E-Bullion, a collapsed payment processor with shiny-object woo. James Fayed, E-Bullion’s operator, is sitting on death row in California after a jury found him guilty of arranging the brutal contract slaying of his own wife.
The Legisi scheme was targeted at Christians, and E-Bullion’s cheerleaders included the Canadian clergyman Brian David Anderson, who was sent to U.S. federal prison in 2010 for the Frontier Assets Ponzi scheme. Anderson also was linked to the Flat Electronic Data Interchange (FEDI) HYIP scheme that put Abdul Tawala Ibn Ali Alishtari, also known as “Michael Mixon,” in federal prison after his September 2009 convictions for financing terrorism and fleecing FEDI investors.
Yes, financing terrorism.
Alishtari traded on his purported ties to prominent politicians, just like ASD’s Andy Bowdoin. At least one of the schemes linked to Alishtari and Anderson used the term “rebates,” just like ASD. The narrative surrounding FEDI read like impossibly outrageous fiction, a mind-bending example of a shiny-object scheme. Ten members of purported “Royal families” in the Middle East were said to have set aside “50 Billion in Gold” ($5 billion each) to advance the scheme. Another entity in the Middle East was said to have supplied a “total of 100 Billion in Gold.” Still another entity was said to have put up “500 Million dollars in liquid gold assets.”
FEDI marks were solicited to purchase what effectively were trading desks that somehow would enable them to profit on the coattails of Middle East royals interested in escrowing huge sums to fund worldwide construction projects, with money purportedly flowing to the “labor” force. If that weren’t enough, the scheme purportedly was married to a venture that purportedly would put vending machines in at least 50,000 locations. The vending machines purportedly would sell debit cards, and were purportedly backed by $150 billion in gold and an insurance policy in Canada.
In March 2012, the PP Blog reported on FTC allegations that three Florida companies and a Florida man had roped customers into a shiny-object scam, a precious-metals boondoogle allegedly carried out by telemarketers.
Imagine what would happen if a scamming telemarketing firm had the customer lists for TelexFree, Zeek, Banners Broker, Profit Clicking, AdSurfDaily, Legisi and others.
If the MLM industry seeks to win favor on Main Street and stop being the brunt of jokes, it needs to act forcefully to eradicate these schemes. MLM attorneys need to stop permitting schemes to trade on their names, thus potentially setting the stage for prospects to believe that no scam could be occurring because no lawyer would permit his name to be used in this fashion.
But even today, what does one get when one visits the website of TelexFree? A pitch in which the alleged TelexFree pyramid scheme announces its pride at having MLM lawyer Gerald Nehra on board.
Zeek traded on the name of MLM attorney Kevin Grimes, who comes off in Red Carpet Day shots as a Zeek crowd prop, and also the name of Nehra. Bidify traded on Kevin Thompson’s name. The lawyers should not permit this to happen. And they should stop making personal appearances at “opportunity” events and start questioning why so many of these “programs” are targeted at people of faith and promise or suggest the likelihood of absurd returns.
Profitable Sunrise — perhaps recognizing that an MLM scheme can be made to appear legitimate if affiliates simply are provided the name of a purported lawyer — appears to have conjured up an attorney’s name out of thin air. It then allegedly proceeded to run off with millions and millions of dollars. When ASD’s Bowdoin switched from the two scams that eventually put him in prison (ASD and AdViewGlobal) and began pitching the alleged OneX pyramid scheme, one of the first things he did was assure the former ASD members he was pitching in a webinar that OneX had an “attorney,” adding that the venture was a great fit for college students. Bowdoin, mixing in God talk during the October 2011 webinar, never identified the purported lawyer by name. Neither did a former ASD pitchwoman pitching the OneX scheme alongside Bowdoin.
In the absence of self-imposed, self-regulatory restraints in the MLM industry — lawyers restraining themselves from becoming accidental or purposeful stage props and sanitizers of “programs,” for example — MLM prospects may be well-advised to view any MLM “program” with the highest degree of skepticism, regardless of the programs’ wares.
Every single one of the “programs” referenced in this story has ridden on the coattails of a deity and lawyers. It did not matter whether the lawyers were real or imagined.
And it did not matter that the Gods of many faiths were observing it all, perhaps mournfully wondering how the precious Children of the Earth had come to view MLM money as the maximum deity.
The FaithSloan Blog bizarrely announces that TelexFree has “killed” GPG, a payment processor.
If continuing to recruit during multiple pyramid-scheme probes even as a judge and prosecutor reportedly had been threatened in Brazil with death were not enough, another MLM PR disaster is unfolding: The Blog of Faith Sloan, late of Zeek Rewards and Noobing, an HYIP Ponzi scheme that ripped off people with hearing impairments, wants TelexFree members to know why the alleged pyramid scheme no longer is using Global Payroll Gateway (GPG).
“We killed them,” FaithSloan.com reports flatly on the fate of GPG.
No so, according to FaithSloan.com, which is claiming TelexFree “killed” GPG because it “Could not handle the 50,000 accounts that came into their system.”
TelexFree now has turned to “ipayout’s globalewallet,” according to FaithSloan.com.
Whether TelexFree planned to “kill” IPayout if any hiccups developed in its purported processing of money for TelexFree was not disclosed in the undated post announcing that TelexFree had “killed” GPG. The apparent message in the TelexFree branch of MLM La-La Land, however, is that affiliates will ignore or downplay unsettling events in Brazil such as the pyramid probes and reported death threats and will blame any company that fails to find favor with TelexFree and its international army of cross-border pitchmen.
TelexFree appears to have sought to transition to GPG in mid-August, with affiliates trumpeting the firm on the web as the answer to TelexFree’s troubles. But problems developed within weeks (if not days), and TelexFree affiliates then announced the firm was switching to IPayout. In about a month, GPG went from the penthouse to the doghouse in the minds of certain TelexFree promoters. Now, IPayout apparently has been given the chance to occupy the penthouse in the incongruous world of TelexFree. Will it slip into the TelexFree doghouse and perhaps be “killed” by the firm, like rival GPG before it?
Within days of the announcement that TelexFree had brought IPayout aboard after the purported failure of GPG, TelexFree executive Carlos Costa announced that TelexFree was seeking bankruptcy protection in Brazil. While making the announcement, Costa curiously waved the flags of Portugal and Mediera. Like former AdSurfDaily President Andy Bowdoin, Costa also suggested God was on the company’s side.
Bowdoin is serving a 78-month prison sentence in the United States. His ASD “program” was a $119 million Ponzi scheme. Among other things, Bowdoin claimed a 2008 raid on his “program” that promised a precompounding payout of 1 percent a day was the work of “Satan.”
Some TelexFree affiliates claim that $15,125 sent to the company fetches a profit of at least $42,075 in a year. Images of Jesus Christ have been used in TelexFree promos.
A court-appointed receiver determined that Noobing was impossibly upside-down. Affiliate Strategies Inc., the U.S.-based parent company, registered several corporations offshore, including Noobing, formed in the Caribbean island of Nevis; ASI Management Inc., formed in Belize on March 24, 2009; Landmark Publishing Group LLC, formed in Nevis on March 25, 2009; Landmark Publishing LLC, formed in Nevis on March 25, 2009; International Research and Writing Group LLC, formed in Nevis on July 1, 2009; and International Publishing Group LLC, formed in Nevis on July 1, 2009.
All in all, the receiver said in 2009, “the ASI defendants have formed and operated eighteen additional Kansas LLCs as subsidiaries of Defendant Apex Holdings International LLC.” The receiver proposed a plan by which all assets tied to Noobing’s parent would be sold — right down to a stainless-steel wastebasket in the women’s restroom.
In 2010, the PP Blog interviewed a 64-year-old woman with a profound hearing loss. The interview was conducted through the woman’s interpreter. The woman told the PP Blog she has lost $5,300 in Noobing and could not sleep at night. Noobing later was added as a receivership defendant. The receiver said that Noobing and 14 other companies under the ASI umbrella had become the subjects of “numerous inquiries” from “tax authorities,” creditors and “former independent contractors.”
TelexFree has U.S. footprints in Massachusetts and Nevada. The firm also now purports to be operating in England. TelexFree is the subject of multiple pyramid-scheme probes in Brazil, where it operates through an entity known as Ympactus Comercial Ltd.
There have been reports that at least one judge and one prosecutor involved in the Brazil probe have been threatened with death.
HYIP fraud schemes spread in part because promoters engage in serial disingenuousness and ignore red flags such as unusually consistent returns, claims of guaranteed payouts and the circuitous flow of money. Some TelexFree affiliates have provided ASD-like coaching tips to prospects on how to speed the flow of money to the firm.
Carlos Costa displays the flag of Madeira while announcing TelexFree is seeking bankruptcy protection.
UPDATED 7:21 A.M. ET Jan. 21, 2013, to correct misspelling. With pyramid-scheme probes under way in multiple Brazilian states and affiliates also filing actions against the company, TelexFree says it is seeking bankruptcy protection in Brazil. Early details are sketchy.
Here’s TelexFree executive Carlos Costa making the announcement while waving the flags of Portugal and Madeira and referencing God:
TelexFree operates in Brazil through Ympactus Comercial Ltd. The firm has U.S. arms in Massachusetts and Nevada. Affiliates appear to have established TelexFree-related firms in Florida and California.
Scott Miller goes for a “Carlos Danger” laugh line at a TelexFree event in California.
EDITOR’S NOTE: TelexFree has two executives named Carlos — Carlos N. Wanzeler, and Carlos Costa. Neither of them is “Carlos Danger.”
TelexFree, an MLM “opportunity,” has been under investigation in multiple states in Brazil since at least late June. There have been reports of death threats against a judge and a prosecutor — and there have been reports of assaults against journalists covering the alleged scam in Brazil.
Scott Miller, according to a video playing on YouTube, was one of the featured TelexFree speakers at the Newport Beach event. Members of his group claim in videos that, if one sends $15,125 to TelexFree to purchase a “contract,” one will emerge with guaranteed earnings of at least $1,100 a week for a year. The math of the claim is basically this: $1,100 a week for 52 weeks equals $57,200. Subtract the original outlay of $15,125, and emerge $42,075 on the plus side.
Put another way, plunk down a little more than $15,000 and watch it virtually triple or quadruple in a year. Would Bernard Madoff have dared to be so bold?
The plain answer is no. Madoff roped in his Ponzi victims with suggestions of vastly lower annual returns.
But all of this TelexFree tripling or quadrupling of money is possible — to hear the firm’s cheerleaders tell it on YouTube — if recruits carry out a simple task: place an ad for the “opportunity” at free classified sites online. And you can make more in pure dollar terms by sending more, the cheerleaders say.
If you find it strange that TelexFree is continuing to conduct business in the United States against the backdrop of alleged threats against judicial officers in Brazil even as some TelexFree promoters try to drive business to the firm by videotaping a statue of Jesus Christ in Rio de Janeiro, you may find it stranger yet that New York City mayoral candidate Anthony Weiner’s name has made its way into a TelexFree sales pitch.
Nothing suggests that confessed sexting aficionado and former Congressman Weiner has anything whatsoever to do with TelexFree. But his in-the-news name apparently was one too rich for Miller to ignore from the stage in Newport Beach.
Miller told the assembled TelexFree masses in California that 75 percent of the people in MLM are women.
“Even Anthony Weiner — ‘Carlos Danger’ — can meet someone in this industy,” Miller cracked. Carlos Danger reportedly was an online name name used by Weiner.
MLM and/or affiliate schemes have been known to trade on the names of famous politicians of both major American political parties, occasionally even planting the seed that the famous politicians even had endorsed the “opportunity.” The $119 million AdSurfDaily MLM Ponzi scam traded on the names of (Republican) President George W. Bush and Vice President Dick Cheney, for example. The Mantria Ponzi scheme ($54.5 million) traded on the name of former President Bill Clinton, with one of the pitchmen encouraging prospects to join the [Donald] Trump network after the 2009 collapse of Mantria. Clinton is a Democrat who continues to be a major figure on the world stage after an affair with an intern nearly toppled his Presidency; Trump is a billionaire, an occasional MLM cheerleader and an often-rumored GOP Presidential candidate who appears to enjoy trying to tweak President Obama, a Democrat, by pandering to the “Birther” conspiracy-theory vote.
In 2010, an affiliate of the MPB Today MLM “program” tried to drive traffic to the now-shuttered “opportunity” whose operator is jailed by positioning Obama and then-U.S. Secretary of State Hillary Rodham Clinton as Nazis, with Obama’s family being positioned as welfare recipients eager to eat dog food.
With each passing day, MLM seems to be creating bigger and bigger PR disasters for itself. We’re left wondering: What is funnier? The joke about Anthony Weiner or the fact it was told by an MLMer whose group apparently believes that sending an entire year’s salary for many Americans to TelexFree during an active investigation will cause the investment to mushroom while Bernard Madoff is knocking another year off his 150-year sentence?
In any event, the apparent message in some U.S. MLM circles today is that you can build a downline in TelexFree even during an offshore pyramid probe by ignoring or downplaying the investigations and deflecting the attention of the audience further by trotting out your best “Carlos Danger” lines.
And you can triple or quadruple your money while doing so, of course.
TelexFree affiliates have shared a photo of President James M. Merrill posing in front of an office building in Massachusetts. The photo, however, is not proof of TelexFree’s legitimacy and raises questions about whether the company was trying to plant the seed it had a massive physical presence in the United States.
UPDATED 10:22 P.M. EDT (U.S.A.) The purported TelexFree “opportunity” is under investigation by multiple agencies in Brazil, its purported base of operations despite competing claims the company is headquartered in the United States. The notes below concern TelexFree’s U.S. presence and positioning. They are presented in no particular order of importance. TelexFree says it is in the communications business.
TelexFree has a footprint in Massachusetts at 225 Cedar Hill Street, Suite 200, Marlborough. It is a shared office facility. Ads for the building suggest a conference room with video capabilities can be rented by the hour. One suggested use of the room is for attorneys to rent it to conduct depositions. Some attorneys practicing in the state and federal courts use the building as a business address.
Other lessees include the Massachusetts Library System (MLS), which describes itself as “state-supported collaborative” to foster “cooperation, communication, innovation, and sharing among member libraries of all types.” MLS uses Suite 229, according to its website.
TelexFree operates as an MLM. One of the problems in the MLM sphere is that purported “opportunities” and their promoters have been known to dupe participants by leasing virtual office space to create the illusion of scale or of a massive physical presence. Such was the case with a Florida entity associated with AdViewGlobal, an AdSurfDaily knockoff scam that purported to pay 1 percent a day. As the PP Blog reported on May 31, 2009 (italics added):
Research suggests a company with which AVG has a close association is headquartered in a modern office building in the United States. The building was constructed in 2003. Office functions and conferencing can be rented by the hour. Two large airports are nearby, and a major Interstate highway is situated one mile from the building.
It is a virtual certainty that AVG, which purported to operate from Uruguay, actually was operating from the U.S. states of Florida and Arizona and using a series of business entities to launder the proceeds of its fraud scheme. AVG disappeared mysteriously in June 2009.
On Dec. 14, 2011, the PP Blog reported that Text Cash Network (TCN) — another purported MLM “opportunity” — was using a virtual office in Boca Raton, Fla., in a bid to create the illusion of scale. TCN promoters published photos of a glistening building with TCN’s name affixed near the crown of the building. The Boca Raton Police Department, however, said the firm’s name did not appear on the building.
Although the PP Blog is unaware of any bids to Photoshop TelexFree’s name on a large office building, affiliates have shared photos of TelexFree President James M. Merrill posing in front of the large Massachusetts building. So there can be no confusion, TelexFree does not own the building. TelexFree affiliates/prospects should not rely on the photo of the building as proof of the legitimacy of the company. The photo itself raises questions about whether Merrill and TelexFree were trying to create the illusion of scale. Even though the answer could be no, the negative inferences that can be drawn from the photo contribute to MLM’s reputation for serial disingenuousness.
TelexFree also has a presence in the state of Nevada. Records show that an entity known as TelexFree LLC is listed as “Domestic Limited-Liability Company” situated in Las Vegas. Listed managers include Carlos N. Wanzeler, Carlos Costa and James M. Merrill. TelexFree operates in Massachusetts with an “Inc.” version of the name — i.e., TelexFree Inc., having undergone a name change in February 2012 from Common Cents Communications Inc. In Massachusetts, James Merrill is listed as the registered agent, president, secretary and director of the firm, with Carlos Wanzeler listed as treasuer and director. Unlike the Nevada “LLC” version of TelexFree, Carlos Costa appears not to hold a title in the Massachusetts “Inc.” entity.
The footprints in the United States are important in the sense that they establish a business presence in the country should TelexFree become the subject of U.S. investigations akin to what is happening now in Brazil, where pyramid-scheme and securities concerns have been raised. Along those lines, records of the Financial Industry Regulatory Authority (FINRA) appear not to list TelexFree — despite the fact affiliates in the United States have claimed members acquire “stock” from TelexFree that can be sold through TelexFree and that affiliates purchase “contracts” from TelexFree.
One YouTube video viewed by the PP Blog shows a TelexFree affiliate purportedly cashing out his stock through his TelexFree back office. The affiliate appears to be speaking in U.S. English, citing the date as March 19, 2013. In the video, the affiliate describes his pitch as a “quick withdrawal video” — i.e., proof that TelexFree is legitimate because it pays.
“OK,” the narrator intones. “I’m going to sell all my stock.” The video shows a tab labeled “Stock” and a subtab styled “Repurchase” in the back office.
The narrator then clicks on a series of graphics styled “REPURCHASE” and tells the audience that he wants to show it all the “stock that I have that converts to actual money.” He then proceeds to a “Withdraw” subtab under a “Statement” tab. These actions eventually expose a screen that shows an “AVAILABLE BALANCE” of $927.61 for withdrawal.
For a brief moment, the acronym “BT&T” flashes on the screen, suggesting the TelexFree affiliate is seeking to have his earnings from stock sales relayed through North Carolina-based Branch Banking & Trust. The interesting thing about that is that the alleged $600 million Zeek Rewards Ponzi- and pyramid scheme claimed it had a banking relationship with BB&T.
In May 2012 — on Memorial Day — Zeek mysteriously announced it was ending its relationship with BB&T. It was unclear from the TelexFree affiliate’s video whether he was a BB&T customer or whether TelexFree was. What is clear is that the SEC moved against Zeek in August 2012, accusing the company of securities fraud and selling unregistered securities as investment contracts. The U.S. Secret Service said it also was investigating Zeek.
In this TelexFree promo running on YouTube, the acronym BB&T flashes on the screen in a TelexFree affiliate’s back office.
Among the problems with HYIP schemes is that banks can become conduits through which illicit proceeds are routed or stockpiled. Zeek used at least 15 domestic and foreign financial institutions to pull off its fraud, according to court filings.
Because HYIPs offer commissions to members who recruit other members along with “investment returns,” legitimate financial institutions can come into possession of money tainted by fraud.
Like Zeek (and AdViewGlobal and AdSurfDaily), TelexFree has a presence on well-known forums listed in U.S. court records as places from which Ponzi schemes are promoted.
TelexFree shares some of the characteristics of fraud schemes such as Zeek, AdViewGlobal, AdSurfDaily, Profitable Sunrise and others. ASD, AVG and Zeek, for instance, had a purported “advertising” element. So does TelexFree.
TelexFree affiliates claim they get paid for posting ads online for the purported “opportunity.” Zeek affiliates made the same claim.
It is highly likely that Zeek and TelexFree have promoters in common, a situation that potentially is problematic, given that some affiliates may have used money from Zeek to join TelexFree — and the court-appointed receiver in the Zeek case is pursuing clawbacks against “winners.” In short, some of the winnings could have been spent in TelexFree.
An online promo for Zeek in July 2012 claimed North Carolina-based Zeek had 100,000 affiliates in Brazil alone. TelexFree affiliates are claiming that their “opportunity” now has hundreds of thousands of affiliates, which suggests TelexFree has achieved Zeek-like scale. Whether it enjoys Zeek-like, money-pulling power on the order of $600 million is unclear.
What is clear is that TelexFree, like Zeek before it, is spreading in part through the posting of promos on classified-ad or similar sites across the United States. Profitable Sunrise, another HYIP, spread in similar fashion. Dozens of U.S. states issued Investor Alerts or cease-and-desist orders against Profitable Sunrise, which the SEC accused of fraud in April 2013.
To gain an early sense of the scale TelexFree may be achieving in the United States, the PP Blog typed into Google the term “TelexFree” and the names of several U.S. states known to have taken actions against Profitable Sunrise. This revealed URLs such as “TelexFreeOhio” and “telexfreetexas.blogspot.com,” for two examples. It also showcased classified-ad (or similar) sites on which TelexFree promos are running or have run.
Finally, the state of Massachussets was the venue from which the prosecutions of the infamous World Marketing Direct Selling (WMDS) and OneUniverseOnline (1UOL) pyramid-schemes were brought in federal court. Those fraud schemes were targeted at Cambodian-Americans. The state does not take kindly to affinity fraud. In March, Massachusetts securities regulators charged a man in an alleged fraud bid against the Kenyan community.
Among the claims of the MLM hucksters pitching WMDS and 1UOL was that members could purchase an income. Some TelexFree affiliates are making similar claims.
The WMDS and 1UOL frauds became infamous as the source of death threats, including one against a federal prosecutor.
Media outlets in Brazil have reported that death threats have surfaced over the TelexFree scheme.
For the reasons cited above and more, it would be surprising if things end well in the United States for TelexFree, which has Zeek and ASD-like signatures of MLM disasters waiting to happen.
