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Ponzi scheme may hit $90M [Boston Herald :: ]
[April 16, 2014]

Ponzi scheme may hit $90M [Boston Herald :: ]


(Boston Herald (MA) Via Acquire Media NewsEdge) April 16--A Marlboro company charged with running a billion-dollar international pyramid and Ponzi scheme may have bilked as much as $90 million from thousands of Massachusetts victims, particularly Brazilian immigrants and other minorities, Secretary of State William F. Galvin said.



TelexFREE orchestrated an "elaborate scheme to mask the fact that they were taking money from older investors to pay newer ones," Galvin said yesterday.

"This potentially is one of the largest Ponzi schemes in recent memory," he said. "Like the classic Ponzi scheme, when the flow of new investment stops, the whole thing collapses." TelexFREE Inc. and TelexFREE LLC, "held themselves out as multi-level marketing companies selling telecommunications services to consumers," according to an administrative complaint filed by Galvin's office.


Their alleged scam was built around selling 99TelexFREE software, which allows people to make phone calls over the Internet. Investors were asked for either $289 or $1,375, in exchange for activation of the programs and the company's advertisement kit, the complaint says.

The investors posted pre-written ads on certain websites and received guaranteed yearly returns as high as 250 percent; they also were offered commissions and bonuses to recruit new investors, the complaint says.

"Without the multi-level marketing scheme, however, TelexFREE sales of the 99TelexFREE program alone would be impossible to satisfy guaranteed weekly commission and bonus payments to promoters," the complaint said.

A lawyer representing the company did not return a phone call yesterday seeking comment.

The company will be given a period to respond to the complaint before it goes to a hearings officer in the Securities Division of the Secretary of State's Office. Possible penalties include an order to pay restitution, prohibition from doing business in Massachusetts and/or an administrative fine.

Last summer, Brazilian authorities froze TelexFREE operations and funds for allegedly conducting a pyramid and Ponzi scheme in Brazil. Last month, TelexFREE, because of financial troubles, "made several changes to its once wildly popular passive income scheme," barring participants from withdrawing money before they make a specified number of retail sales and recruit a quota of investors.

The company filed for Chapter 11 bankruptcy protection Monday in Nevada.

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