May 23, 2014
TelexFree Scam Targets Brazilians
Numerous residents of South Florida as well as Brazilian nationals are listed among thousands of creditors of TelexFree LLC, which was accused by the U.S. Securities and Exchange Commission of operating a Ponzi scheme centered around the sale of “voice over internet protocol” or VOIP telecommunication services. On May 6, a U.S. Bankruptcy Judge in Las Vegas, Nevada transferred the case to Worchester, Massachusetts as a more appropriate venue for the administration of the bankruptcy case as TelexFree’s primary place of business was located in Marlboro, Massachusetts.
The Bankruptcy Court did not, however, determine whether TelexFree was operating a Ponzi scheme as alleged in several civil suits initiated by the SEC and private plaintiffs, many of whom were promoters for TelexFree nor did the Judge rule on a motion filed by the U.S. Trustee seeking the appointment of a Chapter 11 trustee. Instead, the Nevada Court left that decision for the bankruptcy court in Massachusetts. Because there is an SEC civil action pending in Boston federal district court, the SEC shutdown all of TelexFree’s business operations when it seized all of the company’s computer servers two days after it filed for bankruptcy in Nevada. It appears unlikely that the SEC will allow the company to resume operations anytime soon.
TelexFree stated that it generated revenue of $1 billion in 2013 using 700,000 associates or promoters who sold unlimited international calling minutes for $49.90 a month. The Chapter 11 petition listed assets of less than $100 million and debt exceeding $100 million. Court records show several creditors located in South Florida with significant roles in the local Brazilian community. The Brazilian operations of TelexFree were terminated last year by Brazilian authorities.
Article By:The Bankruptcy Court did not, however, determine whether TelexFree was operating a Ponzi scheme as alleged in several civil suits initiated by the SEC and private plaintiffs, many of whom were promoters for TelexFree nor did the Judge rule on a motion filed by the U.S. Trustee seeking the appointment of a Chapter 11 trustee. Instead, the Nevada Court left that decision for the bankruptcy court in Massachusetts. Because there is an SEC civil action pending in Boston federal district court, the SEC shutdown all of TelexFree’s business operations when it seized all of the company’s computer servers two days after it filed for bankruptcy in Nevada. It appears unlikely that the SEC will allow the company to resume operations anytime soon.
TelexFree stated that it generated revenue of $1 billion in 2013 using 700,000 associates or promoters who sold unlimited international calling minutes for $49.90 a month. The Chapter 11 petition listed assets of less than $100 million and debt exceeding $100 million. Court records show several creditors located in South Florida with significant roles in the local Brazilian community. The Brazilian operations of TelexFree were terminated last year by Brazilian authorities.
Craig Rasile, Esq., Office Managing Partner
Michael Silva, Partner
DLA Piper LLP
200 S. Biscayne Blvd., Suite 2500
Miami, FL 33131
Contact:
Michael A. Silva & Ryan J. Coyle
michael.silva@dlapiper.com - ryan.coyle@dlapiper.com , 305-423-8530
