In a joint memorandum, Fidelity Co-Operative Bank and a class led by plaintiff Igor Shikhman asked U.S. District Judge Timothy S. Hillman to approve the settlement to end Fidelity’s role in a years-long multidistrict suit, which was consolidated in Massachusetts in 2014.
In addition to the eight-figure payout, the deal “also requires the Fidelity Bank defendants to cooperate in connection with plaintiffs’ prosecution of this case against the remaining defendants,” the memorandum states.
Fidelity will have to “provide plaintiffs with documents in their possession and make witnesses identified by plaintiffs available for informal interviews and depositions. Additionally, if necessary, they must also provide one or more witnesses to appear at trial.”
The motion notes the complexity of the case, which began in 2014 when suits piled up after TelexFree filed for bankruptcy, and the U.S. Department of Justice and U.S. Securities and Exchange Commission accused the company of running an elaborate Ponzi scheme.
The suit is not “a run-of-the-mill litigation,” the document states.
“This case involves a massive and complex fraud perpetrated against almost a million victims,” the memorandum says. “The fraud was massive, and many individuals and institutions participated in it. The participants, co-conspirators and aiders and abettors also — at every step — took pains to conceal and obscure their fraud.”
Counsel for the plaintiffs and a Fidelity representative did not immediately respond to comment requests Monday.
Judge Hillman also handled the criminal side of the Telexfree case and sentenced the company’s former CEO to six years in prison back in 2017 after he pled guilty to wire fraud.
TelexFree offered voice-over-internet telephone service, but federal prosecutors said the company’s money ultimately came not from the service it offered but from a massive pyramid scheme that brought in cash by having those who already signed up convince others to pay for the privilege of being a “promoter” of the brand.
The scam left about 1.9 million people in nearly every country in the world more than $3 billion combined in the red, prosecutors said, including almost 170,000 Americans, a quarter of whom were from Massachusetts and lost an average of $2,940 each.
Earlier this month, Synovus Bank and two other companies agreed to shell out $2.1 million to settle claims over their alleged roles in the scheme. Judge Hillman heard oral arguments for final approval of that settlement motion last week and took the matter under advisement.
Early 2019 rulings by Judge Hillman appeared to end claims against some of the major financial institutions ensnared in the litigation, including Fidelity, Bank of America NA, TD Bank NA, Wells Fargo Bank NA and PwC, also known as PricewaterhouseCoopers.
The judge found that the evidence did not suggest they participated in or willfully ignored the global fraud.
But in November, the victims claimed that newly discovered evidence from a trove of documents they received as part of a settlement with one of the defendants showed the financial services defendants shouldn’t be able to escape the allegations.
Plaintiffs Igor Shikhman, Rita Dos Santos, Edivaldo A. Reis, Anthony Cellucci, Jamilly Lake and Gerivaldo Pacheco are represented by interim lead counsel Robert J. Bonsignore and Lisa Sleboda of Bonsignore Trial Lawyers PLLC; interim executive committee members William Coulthard, Michael J. Gayan and Anna A. Karabachev of Kemp Jones & Coulthard LLP; Ronald A. Dardeno and Alexander D. Wall of the Law Offices of Frank N. Dardeno; R. Alexander Saveri and Sarah Van Culin of Saveri & Saveri Inc.; and D. Michael Noonan, Christine Craig, Nicholas Kline and William Shaheen of Shaheen & Gordon.
Fidelity is represented by Ian D. Roffman and Joseph T. Toomey of Nutter McClennen & Fish LLP and Pressly M. Millen of Womble Carlyle Sandridge & Rice PLLC.
The case is In Re: Telexfree Securities Litigation, case number 4:14-md-02566, in the U.S. District Court for the District of Massachusetts.
–Additional reporting by Nadia Dreid. Editing by Alyssa Miller.For a reprint of this article, please contact [email protected]