TelexFREE denies Ponzi scheme allegations
TelexFREE of Marlborough has denied allegations made by the Massachusetts Secretary of State’s office that the telecommunications company is operating a $1.1 billion Ponzi scheme.
“The precipitous and unnecessary actions taken by the state and federal agencies have temporarily suspended the VoIP (voice over internet protocol) services TelexFREE customers rely on,” the company said in a statement Friday. “The company disputes the material allegations made by these agencies and regrets that their actions impede our ability to continue to serve our customers.”
The Secretary of State and the U.S. Securities and Exchange Commission (SEC) are accusing TelexFREE of running a pyramid scheme in which Brazilian and Dominican immigrants were promised a 200-percent return on investments of $289 or $1,375 by recruiting new members and placing advertisements on free Internet ad sites.
But the company has just $1.3 million of revenue to cover the $1.1 billion in payments it promised to some 700,000 company associates, the SEC said, and has only been able to pay earlier investors by allocating the proceeds received from newer investors.
TelexFREE said it’s confident that misunderstandings about its business model will be resolved during the court process, and the “outstanding entrepreneurial opportunities” provided to sales associates and promoters will ultimately be recognized.
The company also denied allegations that Joe Craft, its interim chief financial officer, attempted to flee with a laptop and $38 million of cashiers checks in a bag. TelexFREE said the laptop was Craft’s personal property, and that Craft was holding the checks until they could be deposited in either a newly-established safe deposit box or escrow account.
TelexFREE filed for Chapter 11 bankruptcy protection April 14, one day before federal agents raided their offices at 225 Cedar Hill St.
(Image credit: freedigitalphotos.net)
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