As business VoIP gets ever more popular, one provider, TelexFree, has shuttered its operations and declare Chapter 11 bankruptcy amid allegations that the company was running a pyramid scheme. The firm has been accused of targeting Brazilian citizens as well as immigrants. TelexFree announced the shutdown with a post on its homepage, saying it has ended all of its business operations while it goes through the process of getting bankruptcy approval.
The company isn’t merely seeing the repercussions of some less than positive business practices on its bottom line. TelexFree also has to deal with action taken against it by the SEC (News - Alert) and the state of Massachusetts. While TelexFree still argues that it believes strongly in its VoIP product and direct selling model, the company seems unsure when it will be able to get its business up and running again.
"At this point…we do not know when or if we will be able to persuade the Bankruptcy Court and other legal bodies of the value of our VoIP service and the potential new TelexFree products, and the viability of the TelexFree business," the statement read.
The SEC accused TelexFree of running a pyramid scheme aimed at Brazilian and Dominican immigrants that promised them a 200 percent return on investments of $289-$1,375 by recruiting new members and placing ads on free Internet ad sites.
In response to these charges, the business VoIP company filed for Chapter 11 protection just one day before federal agents raided the Massachusetts-based headquarters. Now it will be up to TelexFree to figure out whether or not they can actively fight the charges, or simply fold up shop. The bankruptcy will certainly protect them against creditors if a judge allows it, but won’t shield company executives against possible criminal charges should they be filed.
Edited by Alisen Downey