UPDATED 5:06 P.M. EDT U.S.A. See Comments thread below for breaking news that the judge overseeing the TelexFree bankruptcy case in Massachusetts will appoint a trustee. First reported by the Wall Street Journal. Original story on separate TelexFree matter in Oregon is below . . .
** ______________________________ **
The staff of the Oregon Public Utilities Commission has recommended that the agency open an investigation into TelexFree, citing the MLM “program’s” bankruptcy filing, civil actions against it by the Massachusetts Securities Division and the U.S. Securities and Exchange Commission and the criminal charges against alleged TelexFree co-owners James Merrill and Carlos Wanzeler.
Should TelexFree not respond appropriately in Oregon, the PUC staff said, the commission should strip it of its telecom license.
TelexFree faces similar regulatory encounters in Nevada and Minnesota. On May 23 in Minnesota, the state Department of Commerce added to its TelexFree file by pointing the Public Utilities Commission to a May 20 Boston Globe story with a headline of “TelexFree co-owner to stay in custody until trial.”
It was a story about a U.S. Magistrate Judge’s decision not to grant Merrill bail. The Globe story notes Wanzeler is considered a fugitive by the U.S. Department of Justice.
TelexFree’s licensing in Alabama also is at risk, and there could be trouble brewing in other states even as TelexFree continues to pursue Chapter 11 bankruptcy protection.
In addition, TelexFree faces multiple prospective class-action lawsuits, including at least two that allege violations of the federal racketeering statute. A report in Peruvian media last week suggests that racketeering at TelexFree cut both ways.
With U.S.-based litigants asserting TelexFree was a racketeering enterprise, La Republica in Peru published a report that suggested a TelexFree promoter in the country was kidnapped by fellow members last week and ordered to go to a bank to withdraw funds to make them whole. The extortion plan reportedly failed.
TelexFree has asserted in bankruptcy-court filings that its future business prospects involving VOIP and app products are exciting. A U.S. Bankruptcy Trustee argued that TelexFree was advancing a “rabbit hole” narrative and expecting the judiciary to follow it.
From the Oregon filing by the PUC staff (italics added):
The allegations facing the Company raise serious issues as to whether or not the Company should be permitted to retain its certificate of authority. Staff has been unable to reach anyone from the Company to obtain further information. Staff stated in its communications that the Company may request that the Commission cancel its certificate under the current circumstances. It is unlikely that any services will be offered in Oregon as the Company’s assets are frozen, it is in bankruptcy proceedings, and its offices are the target of federal government activity. Nevertheless, cancelling the Company’s certificate to provide services in Oregon would foreclose the possibility.
TelexFree asserts on its website that it has “suspended all business activity.”