TelexFREE Scam? End Of A Ponzi.
My subscribers have been asking for me to do a review of TelexFREE. It looks like the end is very near for this scheme that I believe is a scam. I hope people seeking business opportunities will have their eyes opened to the financial dangers of these types of schemes.
Here are the latest updates on the TelexFREE scam.
TelexFree Founders Indicted On Fraud Charges – Source Ponzitracker.com July 23,2014
TelexFREE is suspending all operations. – Source Milforddailynews.com
The FBI and the U.S. Department of Homeland Security have established a website for individuals who believe they were defrauded by TelexFree, an alleged pyramid- and Ponzi scheme the Massachusetts Securities Division says gathered more than $1.2 billion. Here is a link to a statement by the FBI and DHS. The page includes a link to a questionnaire. – Source Patrickpretty.com
Katia Wanzeler wife of accused billion-dollar Ponzi schemer Carlos Wanzeler, busted while trying to fly to Brazil with a one-way ticket and 70 pounds of luggage. – Source NYdailynews.com May 15,2014
A man asserted to be a promoter of at least three fraud schemes, including TelexFree, has been hauled in front of TV cameras in Uganda. The embarrassing appearance of the suspect may raise the stakes for promoters of online fraud schemes and create even more disastrous PR for cross-border MLM schemes. – Source Patrickpretty.com May 13,2014
James Merrill, co-owner of TelexFree Inc., the Marlborough company accused of bilking investors in an elaborate pyramid scheme, has been arrested, US Attorney Carmen Ortiz’s office confirmed today.
Authorities also have issued a warrant for the arrest of co-owner Carlos Wanzeler, who is now a fugitive, thought to have fled to Brazil amid a criminal grand jury investigation of the company. – Source Bostonglobe.com May 9, 2014
U.S. Bankruptcy Judge August B. Landis yesterday needed a full hour to read his oral opinion into the record, moving the TelexFree case out of his Las Vegas courtroom, where it was filed on April 13.
Landis said that most relevant factors weigh in favor of sending the case to Massachusetts. Among them, the company is based in Marlboro, Massachusetts, Landis said. The only connection with Nevada is incorporation of one of the TelexFree companies in that state. There are no offices or workers in Nevada.
The case will be heard in U.S Bankruptcy Court in Worcester. – Source Telegram.com May 7,2014
The Dominican Maria Cordones, who attracted investors for the ponzi scheme TelexFREE, on Thursday said that at least six of her countrymen have already taken their own lives in the east region near her hometown El Seibo. – Source Dominicantoday.com April 26, 2014
TelexFREE delivered a parting shot to many of its investors — sending out tax forms claiming to have paid them money they say they never received.
Secretary of State William F. Galvin, whose office filed civil fraud charges against TelexFREE on April 15, said participants should dispute the tax forms if they are inaccurate.
“If they never got the money, the statement is wrong,’’ Galvin said. “This is the principals’ effort to figure a way out of this, or to cover up their activities.’’ – Source bostonglobe.com April 26, 2014
The Department of Justice has filed a request in bankruptcy court seeking to take over embattled telecommunications company TelexFREE in the firm’s bankruptcy proceedings, according to court records. – Source
In the filing, U.S. Trustee Tracy Hope Davis says TelexFREE, which has been accused by both the Securities and Exchange Commission and the Massachusetts Secretary of State of running an international pyramid scheme, is continuing to try to bring in new investors, even though “it is clear that the pyramid has collapsed.” – Source Metrowestdailynews.com April 24, 2014
Dominican agencies probe the whereabouts of tens of millions of pesos allegedly scammed from Dominicans by the TelexFree ponzi scheme as well as the identity of its owners.
Justice Ministry anti-money laundering unit director Germán Miranda said the Office Prosecutor and the financial authorities will meet Wednesday morning to coordinate the investigation and possible confiscation of properties.
He said the National District Prosecutor and the Securities Superintendence will seek to identify TelexFREE’s intermediaries and promoters, noting that the whereabouts of the millions swindled from investors is their main target. – Source Dominicantoday.com April 22, 2014
TelexFREE has released a press release to explain why their former CFO had millions in checks.
TelexFREE is concerned about recent inaccurate press reports and speculation regarding the Company and would like to set the record straight.
Joe Craft, TelexFREE’s former consulting CFO, has been wrongfully accused of attempting to unlawfully remove funds or property from a TelexFREE location. The reports that Mr. Craft attempted to abscond with a laptop and cashier’s checks are false.
The cashier’s checks were in Mr. Craft’s possession because the Company’s bank accounts had been closed, which necessitated the Company obtaining the funds in the form of cashier’s checks. Upon the filing of the Chapter 11 cases, the Company determined to marshal all of the Company’s funds for the benefit of the Chapter 11 bankruptcy estate. Mr. Craft had taken possession of the cashier’s checks at the request of the Company’s counsel and advisors in order to assure that the estate funds were protected. Mr. Craft was holding the checks until they could be deposited in either a newly-established Company safe deposit box or an escrow account that the Company was in the process of establishing. – Source cnbc.com
I personally do not believe their explanation. Here is an excerpt from a declaration from Scott Stanley, an attorney with the SEC. He details a discussion with John Soares, a special agent with the Department of Homeland Security.
During the exercise of the search warrant, a Bristol County Deputy Sheriff encountered Joseph H. Craft, the Chief Financial Officer of TelexFree, entering an office and attempting to grab a laptop and bag.
Craft stated that he was a “consultant” helping TelexFree prepare for bankruptcy and that the laptop and bag were personal items. The Deputy Sheriff told Craft he could not take the laptop and bag and that these items were subject to search.
HSI agents searched the bag and identified ten Wells Fargo bank, N.A. cashier’s checks totaling $37,948,296. – Source SEC
Federal agents from the FBI and Homeland Security have raided the Marlborough headquarters of TelexFREE Inc. in the intensifying investigation of an alleged billion-dollar scheme that has the potential to rank among the largest international financial frauds. – Source bostonglobe.com
As federal agents searched the Marlborough headquarters of TelexFree Inc. this week, the company’s chief financial officer tried to flee with a laptop and a bag holding cashier’s checks worth nearly $38 million, according to court records made public Thursday.
The Securities and Exchange Commission said it has frozen the assets of TelexFree and eight principals and associates, alleging the company has been running an “illegal pyramid scheme’’ that recruited victims from around the world. – Source bostonglobe.com
Secretary of State William F. Galvin on Tuesday accused the Marlborough marketer of Internet telephone service of luring Massachusetts residents to invest $90 million in the scheme, targeting primarily Brazilian immigrants in a fraud. – Source bostonglobe.com
TelexFREE’s payment processor, iPayout, pulled the company’s ewallet services offline. – Source behindmlm.com
According to the Enforcement Section, TelexFREE was a veiled pyramid and Ponzi scheme whose revenues were significant dwarfed by the rapidly-growing obligations to investors. For example, in 2012 and 2013, TelexFREE identified approximately 4.4 million VoIP Program transactions totaling over $238 million. Resulting net revenue was significantly less due to commission payments. However, over the same period, nearly 800,000 investments were made that totaled nearly $900 million. Even assuming that each investor participated in the $289 program and satisfied the minimal requirements, this meant that TelexFREE would owe those participants a total of nearly $800 million. Additionally, as the percentage of investments skewed towards participation in the $1,375 investment, this further increased investor obligations – to nearly $4 billion if all investors participated in the more expensive plan. Indeed, according to TelexFREE, nearly 90% of Massachusetts-based investors opted for the $1,375 investment. Regardless of the breakdown, these figures were significantly higher than the corresponding revenues derived during the period. – Source forbes.com
How The TelexFREE Scam Works
TelexFREE charged $50 for an investor to become a “member” or “partner”. By itself, a membership was meaningless. The only way for an investor to make money was to become a “promoter” who placed internet ads, recruited new members, and/or sold the VoiP service.
The “AdCentral” program cost $339 ($50 membership fee plus $289 contract fee) for a 52-week contract. Promoters in the AdCentral program received ten one month packages of “99TelexFree” VoiP service and were required to place one internet ad per day. For each week that AdCentral promoters placed the required number of ads, they received one additional VoiP package. AdCentral promoters who posted the necessary ads were promised a weekly $20 payment, or $1,040 for the year. An AdCentral promoter who completed one 52-week contract was thus supposed to receive $1,040 – an annual return of 207% on an investment of $339.
The “AdCentral Family” program cost $1,425 ($50 membership fee plus $1,375 contract fee) for a 52-week contract. Promoters in the AdCentral Family program received fifty one-month packages of VoiP service and were required to place five internet ads per day. For each week that AdCentral Family promoters placed the required number of ads, they received five additional VoiP packages. AdCentral Family promoters who posted the necessary ads were promised a weekly $100 payment, or $5, 200 for the year. An AdCentral Family promoter who completed one 52-week contract was thus supposed to receive $5,200 – an annual return of 265% on an investment of $1,425.
TelexFREE’s VoiP service revenue has been only a small fraction of the money it promised to pay to AdCentral promoters. Credit card transactions from August 2012 to March 2014 indicate that TelexFREE received slightly more than $1.3 million from the sale of approximately 26,300 VoiP contracts. During the same period, TelexFREE received more than $302 million from approximately 48,000 AdCentral promoters and 202,000 AdCentral Family promoters. Through the sale of those one-year contracts, TelexFREE promised to pay more than $1.1 billion to the promoters who placed the required internet ads – a task which was extremely easy to accomplish. In other words, the receipts from selling VoiP packages covered barely 1% of TelexFREE’s obligations to pay promoters who placed ads. The disparity between TelexFREE’s VoiP revenues and its AdCentral obligations was actually worse than that, because the $1.1 billion of estimated obligations does not include the commissions and incentives that TelexFREE promised to pay to promoters under additional incentive programs.
TelexFREE was operating a classic pyramid. Because revenues from VoiP sales were so small, TelexFREE was forced to use money from newer investors to make its payments to older investors. – Source SEC
Background of TelexFREE
In the late 1990s, Wanzeler and Merrill became sales agents for WorldxChange, one of many companies then offering inexpensive long-distance phone service through “10-10” access numbers. (To make a call, customers dialed the company’s seven-digit access number and then dialed the phone number they wanted to reach.) WorldxChange was a multi-level marketing company using sales agents to recruit other sales agents as well as customers. Wanzeler and Merrill recruited Labriola as one of their marketers. In 2002, the three of them incorporated Common Cents as a vehicle for their sales efforts on behalf of WorldxChange. Wanzeler did most of the company’s recruiting through his contacts in Brazil and the Brazilian community in Massachusetts. In 2003, however, the three stopped working with WorldxChange after it was acquired by another company and ceased its multi-level marketing.
In 2005, Wanzeler began selling analog telephone adapters-devices that link a traditional telephone line with a digital network or VoiP service. Most of his customers were in Brazil, and Wanzeler used the name “Brazilian Help” in the United States and “Disk A Vontade Telefonia” (Portuguese for “Call Unlimited”) in Brazil. The business relied primarily on television and radio advertisements in Brazil to attract customers, because an attempt to employ WorldxChange’s multi-level marketing model was not successful. The monthly charge was $49.90. In 2007, Wanzeler incorporated Brazilian Help in Massachusetts. Merrill assisted Wanzeler but never held a title or an ownership interest in Brazilian Help.
In early 2012, Carlos Costa, who had been Wanzeler’s top sales agent in Brazil, suggested that they start recruiting customers through advertisements on the internet. Taking that suggestion, Wanzeler and Merrill changed the name of Common Cents to TelexFree, Inc. They adopted the name “99TelexFree” for their VoiP service, which they continued to price at $49.90 per month. Wanzeler, Costa, and associates in Brazil created a website called ”telexfree.com”. The site content was written in Portuguese and translated into English. In July 2012, Wanzeler, Merrill and Costa formed TelexFree, LLC, ostensibly to handle transactions outside Massachusetts.
In November 2012, TelexFREE began operations in the United States. – Source SEC
In my opinion you should avoid the TelexFREE scam.