BULLETIN: (UPDATED 5:56 P.M. EDT U.S.A.) The Massachusetts Securities Division (MSD) has published a complaint form for TelexFree investors. Massachusetts Commonwealth Secretary William Galvin, who oversees MSD, also has published a brochure titled, “Illegal Pyramid Schemes Disguised as Multi-level Marketing Businesses (MLMs).”
Galvin’s investigators alleged on April 15 that TelexFree was a combined Ponzi- and pyramid scheme that had gathered more than $1.2 billion and sold unregistered securities. In November 2013, MSD alleged that WCM777, another “program” promoted in the state, also had sold unregistered securities. The U.S. Securities and Exchange Commission (SEC) later sued WCM777, alleging it was a “worldwide” pyramid scheme that had gathered at least $65 million. Likewise, the SEC has brought fraud allegations against TelexFree.
Both WCM777 and TelexFree were targeted at specific population groups, according to the allegations. Online promos show that the schemes had promoters in common and that prospects were encouraged to buy in at higher levels to receive higher payouts. Both “programs” were positioned as technology suppliers — TelexFree in VOIP and WCM777 in “cloud” computing.
As Galvin’s brochure notes (italics added):
In many illegal schemes the promoter spends little time explaining the product because the product is ancillary to the overall scheme. Recent schemes have involved products related to internet services, mobile marketing platforms, app sales, cloud computing services, and voice-over-internet applications.
These are just three of the bullet points in a warning by Galvin’s office today:
- Don’t invest because your friends tell you it’s a good investment — use your own judgment and make your own decision.
- Be wary of promoters who urge the purchase of higher positions in the distribution network to immediately increase payouts.
- Be wary of promoters who urge quick establishment of distribution networks by adding family members, children, pets, etc.
There are plenty more. Read the online warning here. Download the PDF of the brochure. Access the TelexFree complaint form here.