In the midst of a huge scandal and upcoming legal battles, VoIP systems company TelexFREE has announced through an update on its website that it will be suspending all operations.
The following message was posted on the company's homepage:
“TelexFREE has suspended all business activity while we address certain issues in the Bankruptcy Court and address pending proceedings by the SEC (News - Alert) and other government agencies. Since we are not currently in a position to support our network, it is likely Customers will experience either interruption or discontinuation of service. Independent Associates and Promoters should not be representing TelexFree on a going forward basis absent approval of a new compensation plan by the Bankruptcy Court.
We continue to believe strongly in the TelexFREE VoIP product and the direct selling model. At this point, however, 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. We continue to be hopeful that we will obtain approval from the Bankruptcy Court to restart day-to-day operations and restructure TelexFree’s VoIP business.
To our Customers and our Independent Associates, we thank you for your loyalty. While the issues we are facing are unfortunate, we remain dedicated to continuing the TelexFree VoIP and related telecommunications services.”
TelexFREE is a telecommunication company that has grown through multi-level marketing, using independent contractors to sell its services while bringing in millions through investors known as promoters. While based in Massachusetts, the company's main market was in Brazil.
In April 2014, the company filed for bankruptcy in the state of Nevada. Quickly following in the foots of their bankruptcy claim, allegations came out that the company was running a Ponzi scheme, making most of its profits off new investors rather than their VoIP services in Brazil. In May, both the Security Exchanges Commission and the Massachusetts Secretary of State charged the company for running a pyramid scheme. Class action lawsuits have also been filed against the company by investors in Massachusetts. Amidst all this, at the end of May a bankruptcy judge, using Chapter 11, gave permission to the federal government to take control of the company.
Allegations state that the company raised $300 million over the last two years through its Ponzi scheme, with co-owner Carlos Wanzler bringing in $13.7 million himself while living a lavish lifestyle. Many of the top executives have been difficult to locate, with the company being handled by newer rotating employees. One of the co-owners, James Merril, was located and has been arrested for fraud.
While TelexFREE's American activities had already been suspended early on, TelexFREE was still operating within Brazil. The announcement that TelexFREE will be suspending all activities means that anyone using TelexFREE's VoiP services will likely find themselves without phone access.
Edited by Alisen Downey