TelexFREE Scam: Santiago De La Rosa Will Pay $1,092,013
After Santiago De La Rosa was unable to get the case against him dismissed by the court, he has settled with the SEC for his part in the TelexFREE Scam.
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
In April 2014, the SEC charged Massachusetts-based TelexFree, Inc. and TelexFree, LLC (collectively, “TelexFree”), plus four company officers and four promoters of TelexFree, including Santiago De La Rosa, with perpetrating an international pyramid scheme targeting Latino communities in the U.S.
Here are the key details from the settlement between Santiago De La Rosa and the SEC:
Santiago De La Rosa is permanently restrained and enjoined from violating Section 5 of the Securities Act by, directly or indirectly, in the absence of any applicable exemption:
(a) Unless a registration statement is in effect as to a security, making use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell such security through the use or medium of any prospectus or otherwise;
(b) Unless a registration statement is in effect as to a security, carrying or causing to be carried through the mails or in interstate commerce, by any means or instruments of transportation, any such security for the purpose of sale or for delivery after sale; or
(c) Making use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy through the use or medium of any prospectus or otherwise any security, unless a registration statement has been filed with the Commission as to such security, or while the registration statement is the subject of a refusal order or stop order or (prior to the effective date of the registration statement) any public proceeding or examination under Section 8 of the Securities Act.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Santiago De La Rosa is enjoined from offering, operating, or participating in any marketing or sales program in which a participant is compensated or promised compensation solely or primarily (1) for inducing another person to become a participant in the program, or (2) if such induced person induces another to become a participant in the program.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Santiago De La Rosa is liable for disgorgement of $1,527,770, representing profits gained as a result of the conduct alleged in the Complaint, together with prejudgment interest thereon in the amount of $218,264.91, for a total of $1,746,034.91. Based on the sworn representations in Defendant’s Statement of Financial Condition dated October 11, 2017 and other documents and information submitted to the Commission, however, the Court is not ordering him to pay a civil penalty, and payment of all but $1,092,013.00 of the disgorgement and prejudgment interest thereon is waived. The determination not to impose a civil penalty and to waive payment of all but $1,092,013.00 of the disgorgement and pre-judgment interest is contingent upon the accuracy and completeness of Defendant’s Statement of Financial Condition. If at any time following the entry of this Final Judgment the Commission obtains information indicating that Defendant’s representations to the Commission concerning his assets, income, liabilities, or net worth were fraudulent, misleading, inaccurate, or incomplete in any material respect as of the time such representations were made, the Commission may, at its sole discretion and without prior notice to Defendant, petition the Court for an order requiring Defendant to pay the unpaid portion of the disgorgement, pre-judgment and post-judgment interest thereon, and the maximum civil penalty allowable under the law. In connection with any such petition, the only issue shall be whether the financial information provided by Defendant was fraudulent, misleading, inaccurate, or incomplete in any material respect as of the time such representations were made. In its petition, the Commission may move this Court to consider all available remedies, including, but not limited to, ordering Defendant to pay funds or assets, directing the forfeiture of any assets, or sanctions for contempt of this Final Judgment. The Commission may also request additional discovery. Defendant may not, by way of defense to such petition: (1) challenge the validity of the Consent or this Final Judgment; (2) contest the allegations in the Complaint filed by the Commission; (3) assert that payment of disgorgement, pre-judgment and post-judgment interest or a civil penalty should not be ordered; (4) contest the amount of disgorgement and pre judgment and post-judgment interest; (5) contest the imposition of the maximum civil penalty allowable under the law; or (6) assert any defense to liability or remedy, including, but not limited to, any statute of limitations defense. Defendant shall also pay post-judgment interest on any delinquent amounts pursuant to 28 U.S.C. § 1961.
It is good to see Santiago De La Rosa pay a price for scamming millions from people with a pyramid scheme.