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Tag: TelexFree Inc

  • BULLETIN: U.S. Trustee Says ‘Compelling Evidence Of Fraud’ And ‘Reasonable Grounds’ To Believe ‘Criminal Conduct’ Occurred On Road To TelexFree Bankruptcy Filing

    breakingnews72BULLETIN:  (11th Update 2:35 p.m. EDT U.S.A.) The United States’ trustee who serves the region (Nevada) in which TelexFree’s bankruptcy case was filed on April 13 has alleged there are “reasonable grounds” to believe that “criminal conduct” occurred at TelexFree.

    Trustee Tracy Hope Davis, who works for a division of the U.S. Department of Justice, says in Bankruptcy Court filings that the court should appoint a Chapter 11 trustee because “[t]here is compelling evidence of fraud, dishonesty and gross mismanagement of the affairs of the TelexFree debtor entities, TelexFree, LLC, TelexFree, Inc. and TelexFree Financial, Inc.

    Davis was appointed trustee of the region by U.S. Attorney General Eric Holder in November 2013.

    The motion by Davis cites separate fraud actions against TelexFree filed April 15 by the Massachusetts Securities Division (MSD) and the U.S. Securities and Exchange Commission (SEC). MSD is the state-level securities regulator in Massachusetts. The SEC is the top securities regulator in the United States.

    “In response to subpoenas issued by the MSD in January and February, 2014, TelexFree changed its compensation plan so that promoters would now be required to sell its VoIP product in order to qualify for the payments that TelexFree had previously promised to pay them,” Davis alleged. “The rule change has generated a storm of protests from promoters who cannot recover their money. The change has also caused a precipitous decline in investor revenue which has pushed TelexFree into bankruptcy.”

    Meanwhile, the Davis motion cites an SEC complaint and emergency motion in Massachusetts federal court on April 15 that successfully sought an asset freeze against alleged TelexFree co-owners James Merrill and Carlos Wanzeler and TelexFree CFO Joseph Craft (and others), along with a Temporary Restraining Order.

    “Millions of additional investor funds received by TelexFree are presently unaccounted for,” Davis alleged. “Fortunately, the TRO was granted by the District Court for the District of Massachusetts and all of the Debtors’ accounts have been frozen pending a preliminary injunction.”

    As a result of TelexFree, Davis alleged, “[t]wo companies controlled by Craft received more than $2,010,000.00 between November 19, 2013 and March 14, 2014.” Millions more allegedly went to Merrill and Wanzeler.

    Among the assertions by Davis:

    • The Debtors did not disclose that several banks and at least one payment processor stopped doing business with them, apparently due to concerns about the legality of its multi-level marketing program.
    • It appears that part of the reason for the Debtors’ cash flow problems was the diversion of funds to insiders.
    • Craft was caught “holding the bag” when the U.S. Department of Homeland Security was executing a search warrant at TelexFree headquarters in Massachusetts on April 15.

    “When Craft was caught ‘holding the bag’ during the execution of the HSI search warrant on April 15, 2014, nine of the ten cashier’s checks that were confiscated were dated April 11, 2014 and were remitted to Merrill,” Davis asserted. “Of these checks, five were made out to TelexFree, LLC totaling $25,548,809.00, and one was made out to Katia B. Wanzeler (Wanzeler’s wife) in the amount of $2,000,635.00. The tenth check, dated April 3, 2014, was remitted to Wanzeler and was made out to TelexFree Dominicana SRL in the amount of $10,398,000.00.”

    Davis also expressed concern about a TelexFree board meeting that occurred in the hours leading up to the bankruptcy filing. (See April 21 PP Blog story that references the same meeting.)

    From the Davis motion to appoint a trustee (italics added):

    The minutes of the special meeting of the Board of Managers of TelexFree, LLC held on April 13, 2014, indicate that Merrill and Wanzeler comprise the entire Board of Managers (the “Board”). . . At this meeting, Merrill and Wanzeler selected Craft and [Stuart] MacMillian as the Debtors’ “Authorized Persons,” empowered to execute and file pleadings on behalf of the Debtors, to employ counsel and other professionals (including Craft’s accounting firm), and to exercise signature authority over the Debtors’ accounts. Although the minutes include language revoking any prior signature authority of other individuals, there is no language stating that Merrill and Wanzeler are stepping down from the Board or that anyone else is stepping up to serve as their replacements. On information and belief, the new interim CFO and CEO still report to and take direction from the Board which is still comprised of 2 individuals – Merrill and Wanzeler.

    And, Davis alleged, “Merrill, Wanzeler, Craft, and possibly others have engaged in securities fraud, withheld material information from investors, and improperly diverted millions of dollars of estate property to themselves or their entities, as set forth in the SEC Complaint and Memorandum.”

    In the trustee’s view, according to the allegations, “[t]he modus operandi of Merrill and Wanzeler and their cohorts suggests that it is more likely than not that anyone handpicked by them to manage their wholly owned companies will be another cohort.”

    Davis asserted “on information and belief” that there have been “no allegations to date regarding the involvement of MacMillan (the new CEO) or [William] Runge (the new CRA) in the Debtors’ Ponzi scheme, neither is there any indication that these interim officers are truly independent of the fraud of ‘former’ management.”

    And, Davis continued, “[t]he only way to ensure honest and independent management of these Debtors going forward is for the Court to direct the United States Trustee to appoint a Chapter 11 trustee.”

  • URGENT >> BULLETIN >> MOVING: SEC Charges TelexFree, Executives And Key Promoters — Including Sann Rodrigues And Faith Sloan

    Faith Sloan as show in a YouTube video promoting TelexFree, an alleged pyramid scheme that "mainly targeted Dominican and Brazilian immigrants in the U.S," the SEC said.
    Faith Sloan as shown in a YouTube video promoting TelexFree, an alleged pyramid scheme that “mainly targeted Dominican and Brazilian immigrants in the U.S.,” the SEC said.

    URGENT >> BULLETIN >> MOVING: (19th Update 5:45 p.m. ET U.S.A.) The U.S. Securities and Exchange Commission (SEC) has filed charges against the alleged TelexFree pyramid scheme and a federal judge has granted an asset freeze.

    TelexFree was a sham to mask an investment scheme known as “AdCentral” in which affiliates were told they could earn money without selling anything as long as they placed “meaningless ads” for the the program’s VOIP product on the Internet “and recruit[ed] others to do the same,” the SEC charged.

    The TelexFree “program” was targeted mainly at “Dominican and Brazilian immigrants in the U.S.,” the SEC alleged.

    One of its key promoters, Sanderley Rodrigues de Vasconcelos, also known as Sann Rodrigues, has a history of both pyramid-scheming with telephone products and affinity fraud, the SEC said.

    On March 9, after TelexFree had received subpoenas on Jan.  22 and Feb. 5 from the Massachusetts Securities Division, according to assertions in TelexFree’s bankruptcy case filed earlier this week, TelexFree changed its compensation scheme. The Securities Division is the state-level regulator in Massachusetts and is overseen by Commonwealth Secretary William Galvin.

    Galvin filed a state-level civil action against TelexFree on Tuesday that alleged an epic Ponzi and pyramid scheme that had gathered more than $1.2 billion. Records now show the SEC was in court on the same day, filing a federal case under seal and seeking an asset freeze. A federal judge granted the freeze yesterday, and the seal was lifted today, the SEC said.

    “Prior to the rule change on March 9, 2014, there was no requirement that AdCentral promoters actually sell any VoiP packages in order to receive their weekly payments,” the SEC charged. “Indeed, TelexFree and its promoters repeatedly emphasized that AdCentral members did not have to sell anything — they simply had to post the internet ads. The slogan repeated over and over was “everybody gets paid weekly.”

    Named defendants in the SEC’s action are TelexFree Inc., TelexFree LLC, TelexFree co-owner James Merrill of Ashland, Mass., TelexFree co-owner and treasurer Carlos Wanzeler of Northborough, Mass., TelexFree CFO Joseph H. Craft of Boonville, Ind., and TelexFree’s international sales director, Steve Labriola of Northbridge, Mass.

    Also charged were four individual promoters:  Sanderley Rodrigues de Vasconcelos, formerly of Revere, Mass., now of Davenport, Fla., Santiago De La Rosa of Lynn, Mass., Randy N. Crosby of Alpharetta, Ga., and Faith R. Sloan of Chicago.

    How much they allegedly earned was not immediately clear.

    Sloan is a notorious pusher of HYIP fraud schemes, and de Vasconcelos, also known as Sann Rodrigues, is a former defendant in an SEC pyramid-scheme and affinity-fraud prosecution.

    The SEC is the top securities regulator in the United States.

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

    Named a relief defendant as the alleged recipient of fraud proceeds from TelexFree was TelexFree Financial Inc. of Coconut Creek, Fla.

    “It was incorporated by Craft on December 26, 2013,” the SEC alleged. “Its officers and directors are Wanzeler and Merrill, and Wanzeler is its registered agent. On December 30 and December 31, 2013, it received wire transfers totaling $4,105,000 from TelexFree, Inc. and TelexFree, LLC.”

    Also named a relief defendant was TelexElectric LLLP of Las Vegas. “It was formed on December 2, 2013,” the SEC charged. “Its general partners are Wanzeler and Merrill. Financial statements prepared by Craft indicate that TelexFree made a $2,022,329 ‘loan’ to TelexElectric.”

    In addition, Telex Mobile Holdings Inc. of Las Vegas was named a relief defendant.

    “It was incorporated on November 26, 2013,” the SEC alleged. “Its officers are Wanzeler and Merrill. Financial statements prepared by Craft indicate that TelexFree made a $500,870 ‘loan’ to Telex Mobile.”

    The PP Blog reported the existence of asserted TelexFree intracompany loans on March 9.

    Craft, the SEC said, “has been the chief financial officer of other multi-level marketing companies.”

    The Boston Globe is reporting this afternoon that during a raid of the TelexFree Massachusetts office Tuesday by the FBI and the Department of Homeland Security, Craft “tried to leave the scene with a laptop and cashier’s checks totaling nearly $38 million.”

    In its complaint, the SEC said that “on April 11 (just before TelexFree filed for bankruptcy), Merrill and the wife of Wanzeler obtained cashier’s checks in the total amount of $25,552,402. The checks are payable to TelexFree, LLC.”

    Citing information it had received from a bank, “TelexFree, LLC sent $10,389,000 to an entity known as TelexFree Dominicana, SRL,” the SEC alleged. Records suggest this transaction occurred on April 3, 2013.

    And federal “wire transfer records show that Wanzeler wired $3.5 million to the Oversea-Chinese Banking Corporation in Singapore on January 2, 2014, the SEC alleged.

    “The Commission has not yet been able to obtain a complete set of statements from the defendants’ banks, brokerage firms, and credit card payment processing services,” the SEC said in its complaint. “However, the information available to date, from bank records and other financial records as well as from statements made by various defendants, indicates that Merrill and Wanzeler, who had sole authority to transfer TelexFree corporate funds until the bankruptcy filing, have caused more than $30 million to be transferred from TelexFree operating accounts to themselves and to affiliated companies in the past few months.”

    Merrill received $3,136,200 on Dec. 26 and Dec. 27, 2013, the SEC alleged, citing bank statements. On the same dates, Wanzeler “received $4,317,800,” the SEC alleged.

    Again citing bank statements, the SEC alleged that approximately $14.3 million “was transferred to newly-created brokerage accounts in the name ofTelexFree, LLC” in December 2013. The complaint outlines other money routes prior to the bankruptcy filing, which seeks the “authority to reject all existing AdCentral contracts” with TelexFree promoters.

    The PP Blog reported on Monday that TelexFree was seeking to reject the contracts.

    SEC investigators, according to the fraud complaint, plucked a number of online videos featuring TelexFree’s top promoters.

    “When telling his success story in an internet video on March 13, 2013, Rodrigues stated, ‘Just place your ads every day and everyone gets paid weekly,’” the SEC charged. “He also asked and answered the following question: ‘What company in the country, in the world, you can make money . . .  you don’t need to sell anything? Now it exists. TelexFree.’”

    In April 2013, Crosby was quoted in a video as saying, “What if you were with a company that would pay you just to advertise the service? . . .  They’re paying us to advertise the service. It’s just that simple.”

    He added that members do not have to “worry about selling to the public,” the SEC charged.

    During the same month — April 2013 — the SEC brought fraud charges against a “program” known as Profitable Sunrise, calling it an international pyramid scheme. Sloan also was a Profitable Sunrise promoter, according to her website.

    Just two months after the Profitable Sunrise action, Sloan allegedly was flogging TelexFree.

    “Sloan stated in an internet video on June 12, 2013, ‘Place your ads, and you go about your day,’” the SEC charged.

    “You do that for seven days a week, you get paid every single week,” the SEC continued, quoting Sloan.

    She added, “You don’t have to build,” the SEC charged.  “You don’t have to sell.”

    Like similar schemes before it that had collected hundreds of millions of dollars — AdSurfDaily, Zeek Rewards, Imperia Invest IBC, Pathway To Prosperity and Profitable Sunrise — TelexFree had a presence on well-known Ponzi scheme forums such as TalkGold and MoneyMakerGroup.

    And what about the photos showing Merrill posing in front of a large building In Massachusetts? The SEC said they were part of the scheme to defraud.

    From the SEC’s complaint (italics added):

    The “Founder” section of the TelexFree website includes a photo of Merrill standing in front of a large three-story building, with the caption “Mr. Merrill in front of the headquarters of Telexfree in the USA.” At least two versions of the marketing presentation on the company website contained a photo of Merrill and a photo of the same building with the caption “The Company HS: United States.” The use of the building photo is misleading. TelexFree, Inc. does not own or occupy the entire building. In fact, it originally shared a single suite (consisting of a receptionist, conference rooms, and cubicles) with 28 other companies. Only in December 2013 did it move into its own suite, which occupies a portion of the first floor. TelexFree, LLC has no physical office at all, just a mailing address in Nevada.

    From the SEC’s statement on the TelexFree case (italics added):

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

    Read the SEC complaint.

  • URGENT >> BULLETIN >> MOVING: Massachusetts Securities Division Says TelexFree Is Billion-Dollar Ponzi And Pyramid Scheme That Targeted Brazilian Community

    breakingnews72URGENT >> BULLETIN >> MOVING: (11th update 3:03 p.m. EDT U.S.A.) The state of Massachusetts has alleged that TelexFree is a “massive” Ponzi- and pyramid scheme that gathered more than $1.2 billion and targeted the Brazilian community.

    In alleged dollar volume, TelexFree appears to be at approximately the same level of the epic Scott Rothstein Ponzi and racketeering scheme in Florida in 2009. Rothstein is serving a 50-year prison sentence.

    TelexFree, the office of Massachusetts Commonwealth Secretary William Galvin alleged in an action, raised $90 million in Massachusetts alone. The scheme, according to the filing, is “untenable without a continuous influx of new capital.”

    The 46-page complaint paints a picture of an incredibly elaborate domestic and international fraud scheme featuring interconnected companies and operated by individuals who told tales of incredible riches — at one time supplementing the story by plunking down more than $100,000 at a Mercedes-Benz dealership in Orlando, Fla., to acquire what effectively were stage props to lure the masses.

    A check uncovered by Massachusetts investigators, according to the complaint, had a memo line that read, “Cars for Extravaganza . . .”

    Despite stage props, “lavish meetings,” sea cruises and suggestions TelexFree somehow was affiliated with jewels of American business, TelexFree was racking up liabilities in the billions of dollars and encountering serious problems from its financial vendors, the complaint alleged.

    “The financial activities of TelexFREE have raised red flags in many United States[‘] financial institutions where it maintains accounts,” the complaint alleges.

    One of those vendors was a Massachusetts bank that booted TelexFree “after only 2 months,” the state alleged.

    Another vendor — a processor of credit cards — dumped TelexFree “after less than 6 months,” the state alleged.

    Meanwhile, the state alleged, TelexFree financial filings with the Washington State Utilities and Transportation Commission were at odds with information TelexFree had provided the investigators in Massachusetts.

    At the same time, Massachusetts alleged, TelexFree was turning a blind eye to an investigation in Brazil and effectively evading an asset freeze imposed there on an arm known as Ympactus.

    “TelexFREE fails to verify investor residency information — information manipulated to circumvent legal issues TelexFREE faces elsewhere,” the state alleged.

    In fact, the state further alleged, one witness testified that he’d recruited affiliates in Brazil after Ympactus’ assets were frozen and its recruitment activities were enjoined.

    Cash payments to Brazilian affiliates were made despite the action in Brazil, the state alleged, further alleging that affiliates in Brazil appear to have posed as residents of the United States or England.

    Moreover, the state alleged, TelexFree members had set up side businesses in which their recruits paid them directly, rather than paying TelexFree. (Editor’s note: This situation exists in many HYIP scams.)

    “These participants received uncontrolled cash deposits outside of the TelexFree system,” the state alleged.

    The state also expressed concerns about a black-market economy popping up around TelexFree.

    One Massachusetts entity asserted that it bought “TelexFree packages, and all sorts of real estate within the U.S.A. or foreign countries,” the state alleged, further alleging that the enterprise asserted it was backed by “Dubai investors.”

    On Feb. 14 — Valentine’s Day — an ad appeared “seeking to sell an automobile in the Commonwealth in return for [TelexFree] AdCentral Packages and AdCentral Family Packages,” the state alleged.

    TelexFree also featured Sann Rodrigues as its top pitchman, the state alleged.

    Rodrigues “had operated a similar multi-level marketing phone card fraud shuttered by the SEC in 2006,” the state alleged.

    Named respondents in the Massachusetts action were TelexFree Inc. of Massachusetts and TelexFree LLC of Nevada.

    “Related Parties” were identified as Carlos Nataniel Wanzeler of Northborough, Mass.; James Matthew Merrill of Ashland Mass.; Steven M. Labriole (also known as Steve Labriola) of Upton, Mass.; Carlos Roberto Costa of Brazil; Fabio N. Wanzeler of Coral Springs, Fla.; Ympactus Comercial LTDA-ME of Brazil; Lyvia Mara Campista Wanzeler (no residency listed); Disk A Vontade Telefonia Ltda (also known as Diskavontade and Disk) of Brazil and Massachusetts; Brazilian Help Inc. of Massachusetts;  Sanderley R. De Vasconcelos (also known as Sann Rogrigues) of Orlando, Fla.; and TelexFree Financial Inc. of Florida.

    TelexFree Inc., TelexFree LLC and TelexFree Financial Inc. all filed bankruptcy petitions in Nevada on April 13, a Sunday.

    Among the assertions by Galvin’s investigators is that TelexFree is a combined Ponzi- and pyramid scheme that engaged in the sale of fraudulent and unregistered securities and allowed and encouraged “participants to structure deposits in order to avoid heightened bank scrutiny.”

    Structuring transactions is a somewhat common element in Ponzi schemes.

    Read the Massachusetts complaint.

     

     

     

  • URGENT >> BULLETIN >> MOVING: TelexFree Says It Has Filed For Bankruptcy In United States; Uganda’s Central Bank Issues Fraud Warning

    newtelexfreelogoURGENT >> BULLETIN >> MOVING: (6th update 2:36 p.m. EDT U.S.A.) TelexFree LLC and “certain of its subsidiaries and affiliates” have filed for bankruptcy in Nevada, the firm said in a statement this morning.

    In its statement, the company did not directly identify the other TelexFree firms involved in the filing. A link in the statement, however, identifies the firms as TelexFree LLC, TelexFree Inc. and TelexFree Financial Inc.

    A schedule included in the bankruptcy filing suggests that TelexFree owes its 30 largest unsecured creditors nearly $14 million. As much as $36 million may be owed other unsecured creditors, the filing suggests.

    TelexFree is seeking to reject contracts that existed with affiliates both before and after the “program” changed its compensation plan on March 9, according to the bankruptcy filing.

    Stakeholders and affiliates are called “constituents” in the statement, which attributes a remark to Stuart MacMillan, “interim Chief Executive Officer of TelexFREE.”

    TelexFree is under investigation by the Massachusetts Securities Division. Prosecutors in Brazil have described TelexFree as a pyramid scheme.

    Separately, the central bank of Uganda has issued a fraud warning on TelexFree and other programs, according to a report in African media. The warning follows a move by the government of Rwanda last month that banned a TelexFree enterprise.

    TelexFree’s announcement of the bankruptcy filing occurred just days after the enterprise, citing unspecified “scheduling conflicts,” sought the postponement of a hearing in Alabama to consider its application for “Resale Interexchange Authority.”

    TelexFree says it is in the VOIP business and provides other telecommunications services. How the bankruptcy filing would affect various TelexFree phone-service applications in various states was not immediately clear. In regulatory filings, TelexFree LLC said it posted more than $691 million in “total income” last year.

    Affiliates of the TelexFree MLM “program” have been complaining about not getting paid.

    The filing also takes place against the backdrop of public appeals by TelexFree for affiliates to recruit more customers. A promo earlier this month included the logos of prominent media firms in the United States, planting the seed that the firm’s MLM “program” had the backing of the companies, many of which are affiliates of major television networks in the United States.

    A TelexFree arm in Brazil sought bankruptcy protection last year. Carlos Costa, a TelexFree executive in Brazil, curiously waved the flags of Portugal and Madeira while announcing the Brazil filing. Police in Europe later issued warnings that TelexFree was targeting the Madeiran community.

    Alvarez & Marsal North America, LLC is serving as restructuring advisor to the Company and Greenberg Traurig, LLP and Gordon Silver are serving as legal advisors to TelexFREE, according to the statement.

    Among other things, the bankruptcy filing says TelexFree has generated more than $1 billion in revenue since 2012. The revenue surge “put tremendous pressure on the Company’s financial, operational and management systems,” TelexFree contends.

    The filing seeks to reject contracts with TelexFree promoters under both an existing compensation plan implemented March 9 and an “original compensation plan” that existed prior to that date.

    “At the time of the roll-out of the Revised Comp Plan, the Company decided to honor certain discretionary payments to Promoters under the Original Comp Plan,” TelexFree said in bankruptcy filings. “These discretionary payments quickly became a substantial drain on the Company’s liquidity. The Company discontinued the Pre-Petition Comp Plans and ceased making discretionary payments under the Original Comp Plan prior to Petition Date.”

    TelexFree affiliates have claimed that $289 sent to the firm returned $1,040 in a year and that $1,375 returned $5,200. Some TelexFree groups solicited sums of $15,125, saying such a sum would return $57,200.

    From the TelexFree bankruptcy filing, which requests contracts with affiliates to be rejected (italics/bolding added):

    Under the Original Comp Plan, Promoters have and are continuing to assert substantial claims against the Debtors. While the Debtors believe that many of those claims are invalid, the Debtors continue to be burdened by the demands made under the Original Comp Plan. In addition, questions were raised as to whether the Original Comp Plan is compliant with law, which jeopardized the Debtors’ business. Although the financial demands are less under the Revised Comp Plan, the Revised Comp Plan does not generate sufficient revenues for the Debtors to continue operating their business.”

    Said MacMillan, in the TelexFree media statement:

    “We are taking this major step because we continue to believe in our business, our products and the enthusiasm of our world-class team.  We believe that this restructuring plan, which will include significant enhancements to our governance practices and internal controls, will help us to build a stronger and more sustainable financial and operational foundation for the future.”

  • In Face Of International Probes And Legal/PR Disaster In Africa, TelexFree Launches PR Campaign That Only Raises More Questions

    From Google News search results.
    From Google News search results.

    UPDATED 9:24 A.M. EDT (MARCH 22 U.S.A.) TelexFree, alleged to be a pyramid scheme using a VOIP product as a front to mask an investment program, has been under investigation in Brazil since at least June 2013. There’s also an ongoing securities probe in Massachusetts. The government of Rwanda, meanwhile, has announced it booted a TelexFree enterprise after a joint investigation with the African nation’s central bank sparked money-laundering concerns.

    Yes, Rwanda has banned TelexFree, something that might set a new standard of embarrassment for an American MLM company. Though the timing may be coincidental, Rwanda did this after a TelexFree pitchman suggested to troops in Boston on March 9 that TelexFree has so much free cash laying around that the two-year-old business can saddle up a “private jet” for trips to Hispaniola and Haiti, perhaps the poorest nation in the Western Hemisphere.

    Just a week earlier, promos for a TelexFree convention in Spain bragged that the firm was holding a “Gala Dinner” in Madrid and providing “direct Limo Service” to its recruiting stars. TelexFree also sponsors a professional soccer club in Brazil.

    One can hardly blame Rwanda if it is protecting its dignity while wondering what happened to the cash gathered from Rwandan affiliates. And because Uganda has signaled it may follow Rwanda’s lead, the imagery in African media of out-of-touch, greedy American MLMers may not be at its zenith. From a PR perspective, these things couldn’t be happening at a worse time for MLM. Herbalife, an industry stalwart, is under investigation by the U.S. Federal Trade Commission.

    There have been rumors for days that Massachusetts-based TelexFree was hiring a CEO. That appears not to have happened. Or, if it has happened, TelexFree hasn’t expressed it clearly in print.

    There is a new hand on board, according to a TelexFree news release issued this morning. But nowhere does the release describe the new hand — former MLM telecom executive Stuart A. MacMillan — as TelexFree’s CEO or even as a TelexFree executive. Instead, MacMillan is described in terms that suggest he’s freelance management talent “[s]peaking on behalf of TelexFREE.”

    MacMillan doesn’t even get a mention until the tail end of the sixth paragraph of this morning’s release. Instead, the company booted out of Rwanda and under investigation on at least three continents led with an underwhelming headline that highlighted MLM without calling it MLM. “TelexFREE Chooses Tradition of Direct Selling Phone Service.”

    So, TelexFree, which says it is a professional communications company, buried whatever news it had and hasn’t made it clear that MacMillan has a title, let alone real decision-making authority. And even if he does have authority, how much of it extends to the overall TelexFree operation is unclear.

    There’s a TelexFree LLC based in Nevada that has been denied registration as a telecommunications company in Washington state. Then there’s TelexFree Inc., which operates from Massachusetts. In Florida, there’s a TelexFree International Inc. that was registered on March 14. Also in Florida there’s a TelexFree Tax Service registered March 14, and a TelexFree Financial Inc. registered Dec. 26. Other companies in Florida also use the name TelexFree. So do at least three companies in California.

    In Nevada, at least two companies that appear to have ties to TelexFree have been registered since November. These include Telex Mobile Holdings Inc. and TelexElectric LLLP.

    Leading With ‘The Gipper’

    The opening line of the news release release fondly harkens back to the “mid-1980s” and the phone-sector deregulation that occurred during “the Reagan Administration.”

    It could be worse, we suppose. WCM777, an MLM firm kicked out of Massachusetts and California and under investigation on at least two continents for advertising preposterous returns, tried its hand at channeling both President Reagan (of California) and President Kennedy (of Massachusetts) with rhetorical references to a “City upon a Hill.”

    President Reagan finished his second and final term as President in January 1989, more than 25 years ago. He died in 2004. Even his political opponents wept.

    Now, TelexFree appears to be suggesting that the deregulation he favored during his years in the White House has put the firm on the success track and inspired it to sell Internet telephony to “Brazilian and Hispanic expatriate communities.”

    One of the things that happened during the Reagan administration — and this is not a knock on the President, whom we admired — was that doors opened for phone companies to compete on long-distance pricing. Over time, consumer-pleasing downward pressure on prices and lower margins put some firms at death’s door. One of those firms was Excel Communications, an MLM company that formerly employed MacMillan.

    A separate release issued today describes TelexFree as an enterprise that “booked 10,859,669 minutes of VOIP calls” last month. It’s a hollow claim, rather like a husband bragging to a wife on Saturday morning that he’d just trimmed 10.8 million blades of grass in the front yard — while conveniently forgetting to mention that a John Deere did all the heavy work.

    What TelexFree conveniently is forgetting is that the issue with it is whether the people who used those 10.8 million minutes it “booked” last month would purchase the VOIP service if it were not attached to an “opportunity” affiliates describe as something that could retire government, corporate and consumer debt if the regulators would just leave it alone.

    Moreover, the release does not mention that Sann Rodrigues, previously described as the firm’s top pitchman, was accused by the SEC before TelexFree even came into existence of being a pyramid-huckster who roped Brazilians into an affinity-fraud scheme involving a phone-related product.

    “You say you haven’t heard of TelexFREE?” the second release queries. “Then you probably aren’t one of the more than 1 million Portuguese-speaking residents of the Commonwealth of Massachusetts.”

    It goes on to say that “[b]efore TelexFREE, Portuguese speakers calling home to Brazil or Portugal were paying high international rates or suffering the frustration of trying to teach elderly parents how to use Skype…after they taught them how to get online.

    “In large part due to those frustrations and expenses, Brazilian and Hispanic expatriate communities are embracing the simplicity and economy of TelexFREE.”

    Most curious of all in the second release was a TelexFree claim that it  “wasn’t until about two years ago that we found a niche community that expressed such overwhelming need for our product.” That’s particularly strange, given that Rodrigues hails from Portuguese-speaking Brazil, as do Portuguese-speaking TelexFree executives Carlos Wanzeler and Carlos Costa.

    Rodrigues and Wanzeler, at least, have been pitching phone products to Portuguese-speakers for years. Rival Skype is available in multiple languages, including Portuguese.

    Like the first release, the second release doesn’t mention that promoters of TelexFree have claimed that $15,125 sent to the firm fetches back more than $57,000 in a year and that smaller sums of between $289 and $1,375 also virtually triple or quadruple in a year.

    The first release, however, at least hints that MacMillan recognizes some in-house problems at TelexFree.

    “I see my responsibility as establishing internal governance and an expansion of the products and services,” the release quotes him as saying. “Like so many entrepreneurial companies in the tech space, TelexFREE has been growing so fast, it hasn’t had much time for management. I’ve been brought in to spend that time and to provide that experience, including an end-to-end review of methodologies and controls.” (Emphasis in original.)

    Whether MacMillan has the authority to ground the “private jet” to which executives and top reps apparently have access when flying to the Dominican Republic and Haiti was not addressed in the news release. Nor did the release say whether MacMillan planned to eliminate the appearances of limousines in various TelexFree promos or do away with sea-cruise pitchfests.

    James Merrill remains TelexFree’s president, according to the second release.

    From the second release (italics added):

    When asked about the success of the company, President and co-founder Jim Merrill replies, “We have been in VOIP telecommunications for more than a decade; but it wasn’t until about two years ago that we found a niche community that expressed such overwhelming need for our product. Combined with a distribution method that takes our services to them economically, our growth has been exponential.”

    It’s as though promising to pay $1,040 on $289, $5,200 on $1,375 and $57,200 on $15,125 — in a year, no less — had nothing to do with it.

    Reagan would have thought it madness and advised House Speaker Tip O’Neill that someone was trying to soil that beautiful Massachusetts city upon the hill. And Kennedy would have called TelexFree’s business practices “a wholly unjustifiable and irresponsible defiance of the public interest.”

  • Washington State Rejects TelexFree Bid To Register As Telecommunications Firm

    TelexFreeLLCWashingtontelecommunications

    The Washington State Utilities and Transportation Commission has rejected a bid by TelexFree LLC to register as a telecommunications company.

    TelexFree LLC is not registered as a corporation in Washington state and therefore is ineligible to be registered as a telecommunications firm in the state, the commission said in a finding dated March 13.

    How the order will affect TelexFree reps in Washington state  was not immediately clear this evening. Also unclear is whether TelexFree LLC will encounter similar problems in other U.S. states. TelexFree LLC  is part of an enterprise that already is offering a VOIP product and says it is expanding into cell phones, apps, credit repair and financial advice.

    “THE COMMISSION REJECTS the application and petition of Telexfree, LLC, in its entirety,” the order reads in part.

    TelexFree LLC’s rejected filing was submitted Feb. 13 by Joseph Isaacs, a “consultant” from Palm Harbor, Fla., according to the state. A “Telexfree LLC Balance Sheet” is listed on the state’s website as part of the submission. The balance-sheet document “properties” lists “JoeCraft” as the author.

    As the PP Blog reported on March 9, the balance sheet claims TelexFree LLC has provided millions of dollars in loans to other TelexFree enterprises.

    One loan, according to the document, was for more than $3.8 million and went to an entity known as Telexfree Financial Inc. Another loan of more than $2.022 million went to an entity known as TelexElectric LLLP.

    In addition, the Washington state document lists a loan of more than $500,000 to an entity known as TelexMobile. Another loan of more than $291,800 went to an entity described as Ympactus. A TelexFree-related entity known as Ympactus Comercial Ltd. is based in Brazil.

    TelexFree executive Carlos Costa is associated with Ympactus. Costa said yesterday that TelexFree had been assessed a tax penalty in Brazil of about $30 million.

    The government of Rwanda has announced that a TelexFree enterprise has been banned in the African nation after a joint probe with Rwanda’s central bank. Rwanda said it was concerned that the enterprise posed a money-laundering risk. TelexFree, which operates in Massachusetts as TelexFree Inc., is under investigation in its home state. Brazilian prosecutors have called TelexFree a pyramid scheme.

    The order in Washington state leaves open the door for TelexFree LLC, which is based in Nevada, to reapply for telecommunications registration if it gets properly registered as a corporation in Washington.

    TelexFree LLC appears to have 14 days from March 14 to challenge the order. March 14 was the date the order was posted on the state’s website.

  • Did TelexFree Affiliates Fund Millions Of Dollars In Loans To Various TelexFree-Connected Enterprises?

    Part of the TelexFree LLC "Balance Sheet" was it appears on the website of the Washinton state XXX.
    Part of the TelexFree LLC “Balance Sheet” as it appears on the website of the Washington state Utilities and Transportation Commission.

    A document published on the website of the Washington State Utilities and Transportation Commission claims that TelexFree LLC has provided millions of dollars in loans to other TelexFree enterprises, including a Nevada entity known as TelexElectric LLLP.

    The loan sum was more than $2.022 million, according to the document. The business purpose of TelexElectric was not immediately clear. Also unclear is why the document was published on Washington state’s government website and whether members of the TelexFree MLM “program” knew they were funding intracompany loans.

    TelexElectric was formed in Nevada on Dec. 2, 2013, according to Nevada records. TelexFree LLC also is a Nevada business. Both firms list TelexFree Inc. executives James Merrill and Carlos Wanzeler as partners or managers. TelexFree Inc., headed by Merrill and Wanzeler, is based in Massachusetts. Brazilian TelexFree executive Carlos Costa, who is or was associated with TelexFree LLC, is listed in Nevada as a “historical” TelexElectric general partner.

    From Google search results.
    From Google search results.

    The Washington state document is dubbed “Telexfree LLC Balance Sheet As of December 31, 2013.” The document claims that, in addition to the $2 million-plus loan to TelexElectric, a loan of more than $3.8 million was provided to an entity known as Telexfree Financial Inc.

    Telexfree Financial appears to be a Florida entity under the control of Merrill and Wanzeler. The firm, which was formed on Dec. 26, 2013, lists an address in Coconut Creek, Broward County, according to Florida records.

    Meanwhile, the Washington state document lists a loan of more than $500,000 to an entity known as TelexMobile. Where TelexMobile is based could not immediately be determined.

    In addition to the loans to TelexElectric, Telexfree Financial Inc. and TelexMobile, there is a loan listed of more than $291,800 to an entity described as Ympactus. A TelexFree-related entity known as Ympactus Comercial Ltd. is based in Brazil.

    Listed as an additional asset by TelexFree LLC is a “Propay Reserve” account said to contain more than $4.4 million.

    According to the Washington state document, TelexFree LLC has or had accounts at ProPay, TD Bank (three accounts), Citizens Bank, Fidelity Bank, Fidelity Bank Sweep and Middlesex Savings. Most of the accounts were said to have modest balances, but the Middlesex Savings account was said to contain more than $5.4 million.

    An entity described as “e-Wallet” was said to have a much larger balance: more than $31.6 million.

    TelexFree LLC, according to the document, listed “other assets” totaling more than $27.4 million. These included more than $18 million at Fidelity Investment, nearly $7.3 million at Waddell and Reed, an asset-management firm, and $2 million in a savings account at Middlesex Savings.

    The document appears to be dated Feb. 20, 2014.

    TelexFree also is using the name “TelexFree International.” Where that entity is based is unclear.

    TelexFree is the subject of a securities investigation in Massachusetts. Investigators in Brazil have called TelexFree a pyramid scheme.

    Some promoters have claimed that the TelexFree “program” triples or quadruples money in a year. There also have been claims that TelexFree was building 500 hotels in Brazil in the run-up to this year’s World Cup and the 2016 Summer Olympics.

    The bottom lines of TelexFree Inc. and the other TelexFree-related entities are not addressed in the TelexFree LLC document. TelexFree LLC is said to have more than $76.1 million in “total liabilities and equity.”

     

  • SporTV Video Shows That TelexFree, An Alleged Pyramid Scheme, Is Using A Shared Office Facility In Massachusetts With At Least 25 Other Firms

    A SporTV reporter enters suite 200. Source: screen shot from SporTV video.
    A SporTV reporter enters suite 200. Source: screen shot from SporTV video.

    UPDATED 9:21 A.M. ET (FEB. 22, 2014 U.S.A.) As the PP Blog reported on July 4, 2013, TelexFree is using a shared office facility in Marlborough, Mass. Promoters of TelexFree, alleged in Brazil to be a massive pyramid scheme that may be using a VOIP product as a front, have shown photos of TelexFree President James Merrill posing outside the building. Some promoters appear to believe that the building somehow serves as proof that TelexFree is legitimate and has a large-scale, brick-and-mortar presence in the United States.

    It is somewhat common for MLM schemes to create the illusion of physical scale as a means of instilling confidence in promoters. Other than the facility and suite it shares with other firms, however, TelexFree appears to have no physical presence in the United States.

    Apparently flush with cash despite a freeze on funds in Brazil, TelexFree announced last week that it was sponsoring the Botafogo soccer club in Rio de Janeiro. This prompted Brazil’s SporTV to send a crew to Marlborough and to seek comment from Merrill.

    The video report that emerged [Feb. 22 edit: If you can’t see the video, look here] appears to show that TelexFree is a tenant with at least 25 other firms in a single suite: suite 200. An August 2011 report at Examiner.com about office options in Marlborough noted that suite 200 “is home to 103 different companies, 45 of which actually reside at the Regus center on the second floor.”

    As shown in the screen shot above from the SporTV video, the camera shows the reporter entering suite 200.

    After being greeted by a receptionist in the suite — and it’s unclear if the receptionist worked for TelexFree or the leasing company — the reporter sits down with Merrill.

    “I don’t want to get into the financial end of the [Botafogo] sponsorship,” Merrill told the reporter.

    Some Brazilians have expressed concerns that TelexFree’s sponsorship of Botafogo could hurt the image of Brazil and soccer in the country, which produced the internationally acclaimed Pelé, one of the most famous athletes in the world and soccer’s most enduring figure. (For many Americans of a certain age, Pelé, who briefly played for the New York Cosmos in the 1970s after playing for the Brazilian national team and the celebrated Santos club, represented their first contact with a sport that is hugely popular internationally but less so in the United States, where baseball, American football, basketball and hockey dominate the airwaves. Decades after his stint with the Cosmos, however, Pelé still is spoken about warmly in the United States.)

    TelexFree, which has “Inc.” (Massachusetts) and “LLC” (Nevada) versions of its name, appears also to be using the name TelexFree International, including at the Marlborough office facility.  Where the “International” version of TelexFree is officially based is unclear. A Nevada entity known as WorldTelexFree LLC is listed as in “default,” according to Nevada records.

    A Facebook site dubbed “TelexFree International” forms part of its URL with the slug of “getpaidweeklyguaranteed.”

    In other TelexFree news, a Facebook site styled “TelexFreeInUSA” appears not to have been updated since Jan. 10. The site, which is linked to TelexFree promoter and cash-gifting enthusiast Scott Miller, had been updated almost daily prior to the 10th.

    At the time of this PP Blog post, the last headline on the TelexFreeInUSA site read, “OVER THIRTY THOUSAND! Positions Under Me! 100% Of Them Being Paid Weekly! STOP Marketing Programs Where Only 1% Ever . . .”

    The site appears not to include an explanation for the sudden lack of postings.

    Some promos for TelexFree, including promos from Miller’s group, have claimed that $15,125 sent to the firm returns $57,200 ($42,075 plus the return of the full initial outlay) in a year and that lesser sums return lesser amounts. TelexFree promoters claim they get paid for posting ads online about the company.  In 2012, Zeek Rewards, a U.S. company with a similar ad-posting requirement, was accused by the SEC of operating a “classic” Ponzi scheme that gathered hundreds of millions of dollars and paid members with incoming funds from other members.

    Among other things, Zeek promoters appeared to believe that an office the company controlled in North Carolina somehow demonstrated that Zeek was not a scam. Not only was Zeek a scam, but it may be the largest Ponzi scheme in U.S. history based on the number of victims created, an estimated 800,000. The SEC accused Zeek of securities fraud and selling unregistered securities.

    Based on Google search results in July 2013, TelexFree promoters seemed to be confused about the physical presence of TelexFree and how old the company is. These phrases appeared in the July search results:

    • “TelexFree is real brick and mortar 9 year old business, a solid program where . . .”
    • “TelexFREE itself with its cutting edge products have been around for over 10 years . . .”
    •  “Telexfree is an 11 year old company . . .”
    • “This 13 year old Advertise & Technology company called TelexFREE, will pay you . . .”
    •  “Telex Free is a multi level marketing company that was established in Brazil in 2002 . . .”

    TelexFree appears to have been formed from the shell of an entity known as Common Cents Communications Inc. in February 2012.

     

  • REPORT: Brazilian Judge In TelexFree Case Again Threatened With Death

    telexfreeatseaThe judge presiding over elements of the TelexFree pyramid-scheme case in the Brazilian state of Acre again has been threatened with death and a police investigation is under way, according to Globo.com.

    Here is the Sept. 12 story in Portuguese. He is an English translation by Google Translate.

    It is the second time the judge reportedly has received death threats related to the TelexFree probe. Earlier threats were made in June. (The link in the preceding sentence is to the Google English translation. Here is the Portuguese original from June.)

    Despite the unsettling events in Brazil — indeed, a prosecutor also reportedly has been threatened with death — American MLMers continue to flog the purported TelexFree “opportunity.” Some promos claim a payment of $15,125 to TelexFree for the purchase of a “contract” fetches at least $42,075 in a year.

    Also see Aug. 4, 2013, PP Blog editorial about a July MLM rah-rah event for TelexFree in California that occurred against the backdrop of reported death threats in Brazil aimed at judicial officers and while multiple pyramid-scheme probes were under way in Brazil.

    Meanwhile, see July 8, 2013, PP Blog report that outlines some of the coaching about money flow TelexFree affiliates in the United States have received. (It is very reminiscent of the AdSurfDaily Ponzi scheme, which the U.S. Secret Service broke up in August 2008.)

    For more information on TelexFree, use the PP Blog’s search function in the upper-right corner. Type in “TelexFree.”

    TelexFree operates in the United States as TelexFree Inc. and TelexFree LLC. It recently claimed also to have a presence in the United Kingdom.

  • **[UNCONFIRMED]** Report In Brazil Says Prosecutors Have Asked U.S. Court To Block TelexFree Accounts, New Signups **[UNCONFIRMED]**

    telexfreelogo**[UNCONFIRMED]** A report in Brazilian media translated by Google Translate from Portuguese to English says that prosecutors in Brazil have asked a U.S. court to prevent new members from joining TelexFree and to block the accounts of TelexFree figures Carlos Wanzeler, James Merrill, Carlos Costa and Lyvia Wanzeler.

    The PP Blog could not immediately confirm the report. If it is true, it could mean that law-enforcement agencies in Brazil have contacted their U.S. counterparts and asked them to begin the process of investigating a potential seizure of TelexFree-related funds that may be in the United States and perhaps to disable or otherwise block the functionality of the TelexFree web domains. The United States has said on various occasions that it is interested in fostering partnerships with law-enforcement agencies across the globe to combat commercial fraud online.

    As of 1:03 p.m. EDT today in the United States, the TelexFree websites remained online and appeared still to be capable of enrolling recruits.

    TelexFree has said it has U.S. arms in the states of Massachusetts and Nevada. Some U.S. afffiliates of TelexFree also appear to have formed business entities in California and Florida. Some TelexFree affiliates have claimed the “opportunity” did business through Bank of America, TD Bank and ProPay. (See July 8, 2013, PP Blog report on some of the claims.)

    Despite allegations in Brazil that TelexFree was conducting a massive pyramid scheme and that a Brazilian judge and prosecutor had been threatened with death, TelexFree nevertheless held a rah-rah session in California late last month in which an MLM pitchman appears to have tried to sustain the scheme by telling a joke about “Carlos Danger,” an online identity purportedly used by U.S. Democratic politician Anthony Weiner. A companion TelexFree promo playing in the United States on YouTube claims that people who send $15,125 to TelexFree can expect to profit to the tune of more than $42,000 in a year.

    TelexFree has a presence on well-known Ponzi-scheme forums such as TalkGold, MoneyMakerGroup and DreamTeamMoney. The forums previously were used as staging grounds for the Legisi Ponzi scheme, the AdSurfDaily Ponzi scheme, the PathwayToProsperity scheme, the Zeek Rewards scheme and the Profitable Sunrise scheme, among others. The SEC has described Zeek as a $600 million Ponzi- and pyramid fraud. The agency has described Profitable Sunrise as a fraud that may have gathered tens of millions of dollars through a series of accounts. Federal prosecutors in Illinois have described PathwayToProsperity as a fraud that made its way into at least 120 countries.

    In May, the United States indicted the Liberty Reserve payment processor and forced it offline, amid allegations that Liberty Reserve and some of its operators had engaged in a $6 billion money-laundering conspiracy. In June 2011, U.S. Attorney General Eric Holder described the amount of money being stolen online as “staggering.”

    “In recent years, we’ve seen clear, and alarming, advances in the sophistication and commercialization of crimes involving electronic networks,” Holder said.  “And the staggering volume of money being stolen online today has the potential to threaten not only the security of our nation — but the integrity of our government, the stability of our economy, and the safety of our people.”

    Nearly a year later — in May 2012 — INTERPOL said that “[Eighty] per cent of crime committed online is now connected to organized gangs operating across borders.”

    In October 2012, Lisa Monaco, then-Assistant Attorney General for National Security, said that cyber intrusions may have resulted in “the greatest transfer of wealth in history.”

    Monaco is now President Obama’s chief counterterrorism adviser.

    Some TelexFree members have claimed that the purported “opportunity” has gathered in excess of $300 million. Among other things, TelexFree has purported to be in the hotel-development business in the run-up to the 2014 World Cup and the 2016 Summer Olympics in Brazil. TelexFree, an MLM business, also purports to be in the VOIP telephone business.

    Many HYIP “opportunities” that use an MLM sales model have members and promoters in common and promise absurd rates of return. The practice has led to questions about whether groups of MLMers — however loosely associated — may be engaging in willful blindness and causing banks and payment processors to become warehouses for fraud proceeds.

    The ASD, Zeek, Legisi, PathwayToProsperity and Profitable Sunrise HYIP schemes may have gathered on the order of $1 billion, court filings suggest. Alleged PathwayToProsperity operator Nicholas Smirnow is listed as wanted by INTERPOL. So is Robert Hodgins, who reportedly once provided payment services to ASD and is listed as an INTERPOL fugitive in a money-laundering case allegedly involving the offloading of narcotics profits in Colombia.

    See Aug. 12 TelexFree report on BehindMLM.com.

  • REPORTS: TelexFree Blocks Members’ Access To Back Offices, Claims Hacking Attempts

    UPDATED 6:23 P.M. EDT (U.S.A.) There are at least three reports in Brazilian media today that say TelexFree has blocked members’ access to their back offices.

    A company attorney said the blockages were necessary because hackers had attempted an intrusion, according to reports in Portuguese translated to English by Google Translate.

    Here is a link to one of the reports, with the corresponding Google translation. (Please note that Google translations often are imperfect, may appear stilted and may lack subtleties of language.)

    Narratives about hackings often accompany HYIP schemes. The AdSurfDaily Ponzi scheme in the United States once claimed it could not make payments because hackers had stolen $1 million. ASD President Andy Bowdoin never reported the alleged hacking bids to police, federal prosecutors said.

    In 2012, reports surfaced that the JSS Tripler/JustBeenPaid scheme that purported to pay 730 percent a year (precompounding) had been targeted by hackers. There also were reports in 2012 that accounts at Zeek Rewards (1.5 percent a day) had been hacked and that at least one individual had presented a bogus financial instrument to Zeek.

    TelexFree pitchwoman Faith Sloan reported this (see italicized paragraph below) in a Blog post titled “TelexFREE Update: July 15, 2013 with Steve Labriola” that was referenced July 16 in a reader comment at BehindMLM.com.

    “There were an increase in number of cashouts last Tuesday which caused the women in the office to get a huge increase in their workload. They will continue pushing out money to our bank accounts Today and Tomorrow. So be patient. He emphasized that this has absolutely nothing to do with Brazil.”

    Even as reports surfaced that a TelexFree had blocked members' access to their back offices as a safeguad against hackers, the "opportunity" says a California extravaganza is still set for July 26 and 27.
    Even as reports surfaced that TelexFree had blocked members’ access to their back offices as a safeguard against hackers, the “opportunity” says a California extravaganza is still set for July 26 and 27.

    TelexFree has been under investigation in Brazil for weeks and appears to have been blocked by a court order in the state of Acre from making payments to members in Brazil. Now, some affiliates appear to be questioning whether the denial of access to their back offices means that data is being destroyed or records about money owed to affiliates by TelexFree are being changed.

    The circumstance at least suggests that TelexFree continued to make payments to Americans and has been hit with a flood of cashout requests by U.S.-based affiliates concerned about the government actions in Brazil. Put another way, TelexFree could be facing an American run on its bank accounts.

    Some HYIP schemes have been known to block redemption requests to fend off a bank run, but the precise circumstance TelexFree is facing is unclear. Hackings can and do occur.

    Some TelexFree affiliates have claimed the “program” was using Bank of America and TD Bank in the United States to gather funds. That may have changed in April 2013 at least with respect to Bank of America, when TelexFree affiliate reports quoting Labriola surfaced that TelexFree was “pulling out of Bank of America.”

    No reason was given for TelexFree’s purported decision to leave Bank of America. In May 2012, the Zeek Rewards “program” reported mysteriously that it was ending its relationship with two banks. About three months later, the SEC accused Zeek of conducting a $600 million Ponzi and pyramid scheme from North Carolina.

    TelexFree lists the states of Nevada and Massachusetts as its bases of operation under the names TelexFree LLC and TelexFree Inc.

    Some individuals associated with TelexFree appear also to have set up companies that use the TelexFree name. Records in California show entities with names such as ALL-IN TELEXFREE 247 LLC, LIVING-THE-DREAM TELEXFREE 247 LLC and RAIN-MAKER TELEXFREE 247 LLC. Records in Florida, meanwhile, show an entity known as TELEXFREE MARKETING INC.

    Whether the United States has opened a probe into TelexFree’s activities is unknown.

    Some TelexFree affiliates have claimed that a payment of $15,125 to TelexFree for the purchase of a “contract” results in an income of at least $1,100 a week for a year. TelexFree is one of several “programs” that have been targeted at victims of Profitable Sunrise, which the SEC described in April 2013 as a pyramid scheme that may have collected tens of millions of dollars.