Thread: TelexFree is scam or not ?

The SEC have filed an amended, more detailed complaint downloadable in .PDF format from ASD Updates

The amended complaint is similar to the initial complaint, but contains some interesting additional information showing some of the inner workings of Telexfree: (highlighting and bolding added )

"From April 2012 to April 2014, TelexFree and its two owners Merrill and Wanzeler, assisted by company insiders Labiriola and Craft and promoters such as Rodrigues, De La Rosa, Crosby and Sloan, raised more than $340 million from hundreds of thousands of investors worldwide, including many members of the Brazilian and Dominican immigrant communities in Massachusetts, through a fraudulent and. unregistered offering of securities."

" The membership tees from investors constituted 99% of the monies taken in by TelexFree"

" Based on the information available to date, TelexFree's revenues from retail VoIP sales —about $1.3 million in two years —were barely 0.1% of the amount needed to honor its promises to investors who placed internet ads — nearly 51.1 billion. As a result, in classic fashion, TelexFree paid its earlier investors, not with revenues from selling the VoIP service, but with money received from later investors."

" The company's financial records indicate that, from mid-November 2013 through mid-April 2014, TelexFree transferred approximately $33 million to the individual defendants, their Family members, and companies they controlled (including the relief defendants)"

"Before the compensation plan was changed on March 9, 201.4, there was no requirement that AdCentral investors actually sell the VoIP service in order to receive the promised weekly payments. The only requirement for receiving the payments was to post
Internet ads (one per day for each AdCentral contract and five per day for each. AdCentral family contact)"

" investors were promised unusually high returns —over 200% per year —for doing virtually nothing (except posting meaningless Internet ads); (2) investors were promised bonuses if they recruited new investors, who would do virtually nothing except post ads and recruit new investors (arid so on and so on); and (3) there was an actual VoIP service, but investors did not have to sell the service in order to get paid. Because investors were strongly encouraged to recruit new investors and were not required to sell the VoIP service, the almost inescapable inference is that TelexFree was using funds from later investors to pay earlier investors"

"Credit card and banking transactions indicate that, from August 2012 to March 2014, Telexfree received slightly more than $1.3 million from the retail sale of approximately 26.300 monthly VoIP contracts. During the same period, TelexFree received more than $340 million from hundreds of thousands of investors who purchased AdCentral or AdCentral Family contracts"

" In other words, the revenues from retail VoIP sales covered barely 0.1 % of TelexFree's obligations to pay AdCentral investors who placed ads"

" One bank after another —Bank of America, TD Bank, Citizens Bank, Fidelity Co-Op Bank, Wells Fargo, and Middlesex Savings Bank — ultimately terminated their banking relationships with TelexFree. Several payment processors — PayPal, ProPay, Global Payroll
Gateway, i-Payout, and Allied Wallet — likewise terminated their relationships with TelexFree"

"As a result," Sloan knew, was reckless in not knowing, or was negligent about the fact that her public statements promoting TelexFree, including those quoted in the previous paragraphs, were materially false and misleading and, more generally, that her promotional activities on behalf of TelexFree were fraudulent and deceptive, because TelexFree was a Ponzi and pyramid scheme that was destined to collapse, thereby preventing it from making the payments promised to investors"

"The information available to date indicates that Merrill and Wanzeler, who had sole authority to transfer TelexFree corporate friends until the bankruptcy filing, caused more than $33 million to be transferred from TelexFree accounts to themselves, to family members, to the other individual defendants, or to companies under their control (including the relief defendants)"

"James Merrill
The information available to date indicates that, between September 2012 and December 2013, Merrill received more than $3.2 million from TelexFree.
a. On December 27, 2013, TelexFree paid $3 million to an account jointly held by Merrill and his wife.
b. On December 26, 2013, TelexFree paid $136,200 to Merrill.
c. Between September 2012 and February 2013, TelexFree paid a total of $85,000 to Merrill, primarily in monthly payments of $7,500"

"Carlos Wanzeler
Tne information available to date indicates that, between November 2012 and February 2014, Wanzeler and members of his family received almost $13.7 million from TelexFree.

a. On Apri13, 2014, Wanzeler obtained a cashier's check for nearly $3.8 million
b. On FebrLiary 28, 2014, Katia Wanzeler, the defendant's wife, received $2.5 million
c. On December 26 and 27, 201.3, Wanzeler received. a total of $7,317,800.
d. Between November 2012 and April 2013, Fabio Wenlzeler, the defendant's brother, received more than $53,000.
e. In addition, on April 1 1, 2014 —two days before the bankruptcy filings — Katia Wanzeler and Merrill visited a bank where TelexFree, LLC had an account and obtained cashier's checks for more than $25 million. One check in the amount of $2,000,634, was payable to Katia Wanzeler. That cashier's check is one of the items seized by federal agents at TelexFree's office on April 15, 2014.
Wanzeler transferred a significant portion of the money he received from TelexFree to at least one bank outside the United States.
a. On November 25, 2013, he sent $50,000 to an account at the Oversea-Chinese Banking Corporation in Singapore.
b. On January 2, 2014, he sent an additional $3.5 million to an account at the same bank
Wanzeler used investor funds to build a small real estate empire"

"Steven Labriola
113. The information available to date indicates that Labriola received approximately $8500from TelexFree in 2013 and approximately $46,600 from Wanzeler's company Above & Beyond"

"Joseph Craft
1.14. The information available to date indicates that, between September 2013 and March 2014, companies under Craft's control (including Craft Financial Solutions, Inc. and Craft Trust Services, LLC) received more than $2 million from Telexfree"

Sanderley Rodrigues
115. Tlie information available to date indicates that, between. September 2012 and March 2013, Rodrigues and companies under leis control received $317,220 from TelexFree.
(As noted above, Rodrigues claims to lave received more than $3 million by promoting TelexFree.)

a. On February 28 and March 15, 2013, TelexFree paid a total of $231,367 to W WW Global Business Inc., a corporation that Rodrigues owns.
b. In September and October 2012, TelexFree paid a total of $82,254 to Rodrigues
c. On October 9, ?012, TelexFree paid $3,600 to VICSS, Inc., a corporation Rodrigues controls"

"Santiago De La Rosa
117. The information available to date indicates that, between Api-i12013 and April 2014, Magica Medica Corp. ( "Magica Medica "), a Massachusetts corporation that De La Rosa formed in March 2013, received a total of more than more than $2.2 million, of which up to $2.1 million is believed to have come from investors, most of whom paid $1,425 each for AdCentral Family memberships. (For reasons that are currently unknown, Magica Medica also received $17,400 from Crosby.)
11$. De La Rosa used investor fiends to support his- lifestyle.
a. He paid $501,000 in cash for a house in Lynn, Massachusetts.
b. He made payments to a BMW dealership and a Mercedes Benz dealership"

"Randy Crosby
119. The information available to date does clot identify the amount that Crosby received from TelexFree. It is apparent, however, that Crosby received a substantial amount from TelexFree. As noted above, he publicly claims to have been broke when he began
promoting TelexFree in December 2012. Nevertheless, he paid $70,000 in cash for a Porsche in September 2013 and $99,000 in cash for another Porsche in December 2013."

"Faith Sloan
120. The information available to date indicates that, between March 2013 and April 2014, Sloan. received snore than. $160,400 from TelexFree investors and $51,000 from TelexFree itself"

"Relief Defendants
121. Tne information available to date indicates that the relief defendants received more than $6.6 million from TelexFree in 2013:

a. On December 30 and 31, 2013, TelexFree paid a total of $6,005,000 to
TelexFree Financial.
b. According to the financial. statements for 2013 prepared by Craft, TelexFree, LLC made a $2,022,329 "loan" to TelexElectric.
c. According to the financial statements for 2013 prepared by Craft,
TelexFree, LLC made a $500,870 "loan" to Telex Mobile"

"Missing Investor Funds
122. The whereabouts and/or disposition of much of the more than $340 million. of investor funds raised by TelexFree is presently unkown"