WORCESTER — A federal judge in Worcester has reinstated several of the nation’s largest financial institutions as defendants in the sprawling class-action litigation over the Marlborough-based TelexFree Ponzi scheme.
In a 35-page decision issued Monday, U.S. District Court Judge Timothy S. Hillman reinstated Wells Fargo Bank, Bank of America, PricewaterhouseCoopers and TD Bank as defendants in the national lawsuit, citing “substantial new” allegations of wrongdoing.
While Hillman had dismissed all four institutions from the case in 2019, new information plaintiffs’ lawyers recently uncovered — much of it from TelexFree’s former chief financial officer — supported reinstatement, Hillman ruled.
Specifically, Hillman said, the plaintiffs’ now allege that Bank of America, Wells Fargo and TD Bank “continued to service certain TelexFree accounts after each bank had suspended or shut down other TelexFree accounts, and after each bank learned of TelexFree’s legal issues in Brazil.”
TelexFree, operator of a worldwide, multi-billion-dollar Ponzi scheme authorities have said impacted more victims than any other in history, was initially shut down in Brazil in June 2013.
Banks much more involved than previously understood
In its proposed amended lawsuit, Hillman wrote, plaintiffs for the class allege that Bank of America, Wells Fargo and TD Bank were much more involved in helping TelexFree conduct business in the U.S. after the Brazil shutdown than was previously understood.
The plaintiffs, led by Medford-based lawyer Robert Bonsignore, said they learned much of the new information from former TelexFree CFO Joseph Craft.
Craft — who was caught trying to leave the company’s Marlborough office with $38 million in cashier’s checks as it was being raided in 2014 — agreed to provide the plaintiffs with information as part of a settlement finalized in 2020.
Plaintiffs at the time characterized his settlement, and two others, as “ice breakers” they believed would yield additional information.
That appears to have happened, as Craft, according to Hillman’s decision, provided the lawyers with information that, along with new bankruptcy data, underpins many of their new claims.
New allegations raised against Bank of America
Among the new allegations raised are that a senior vice president at Bank of America assisted TelexFree in opening an account “after discussing with TelexFree’s CFO that TelexFree had been shuttered in Brazil for being a pyramid scheme, expressing concerns that TelexFree’s operations were not legal, and indicating awareness that Bank of America had previously closed TelexFree accounts.”
The bank, plaintiffs allege, also facilitated transfers of tens of millions of dollars between accounts from January to May 2013.
New allegations against Wells Fargo Bank increased substantially
The allegations lodged against Wells Fargo Bank increased substantially, the ruling shows, with the plaintiffs now claiming that, after the Brazil shutdown, employees helped TelexFree open offshore accounts, facilitated the transfer of tens of millions of dollars overseas and continued to service some accounts.
New allegations against PricewaterhouseCoopers
The plaintiffs also now allege that PricewaterhouseCoopers, a large financial advising firm, helped TelexFree relocate operations and money beyond the reach of United States regulators, Hillman wrote.
The company, plaintiffs allege, was aware that TelexFree’s operations were illegal, yet still recommended it open accounts in countries with lax tax regulations and other favorable laws, Hillman wrote.
New allegations against TD Bank
TD Bank is accused in the new complaint of letting TelexFree, despite knowledge of the 2013 Brazil shutdown, open new accounts, and of helping it make “large fund transfers between accounts to assist (in) obscuring the source and movement of its funds.
Once you know that you’re servicing a criminal enterprise, you should stop and freeze their money. If you know your neighbor has a meth lab, you don’t help them unload the truck.
“In one instance, TD Bank facilitated the transfer of three million dollars between three accounts within the span of seven minutes,” plaintiffs allege.
Emails sent Tuesday afternoon offering comment on the new allegations to lead lawyers for the financial institutions were not immediately returned.
‘Hard-fought victory’
In a news release Tuesday, Bonsignore called the ruling a “hard-fought victory,” and praised the judge.
“Judge Timothy Hillman was required to go through massive amounts of briefing and evidence to dissect this highly complex, international financial fraud,” Bonsignore wrote.
The lawyer, one of dozens involved in the case, told the Telegram & Gazette in a telephone interview Tuesday that the case exposes the “underbelly” of pyramid schemes.
“Once you know that you’re servicing a criminal enterprise, you should stop and freeze their money,” he said. “If you know your neighbor has a meth lab, you don’t help them unload the truck.”
Bonsignore asserted that his complaint has factual evidence to back up its claims. He said he hoped the elite law firms representing the deep-pocketed banks would not engage in stall tactics.
The legal case has been pending since 2014, having been paused for years during separate criminal investigations opened by federal authorities.
A legal hold on discovery in the case wasn’t lifted until 2019, and depositions have yet to take place, court records show.
Lawyers have previously stated there could be upwards of 700,000 plaintiffs in the case. A website advising potential class members of their rights has been set up at https://telexfreesettlement.com.
Monday’s ruling is the most significant news in the case since Leominster-based Fidelity Bank and its former president agreed to a $22.5 million settlement in February.
Bonsignore at that time said Fidelity was far less involved with TelexFree than other defendants, having provided services for a much shorter period of time.
The ongoing lawsuit, which has been consolidated in Worcester from federal courts nationwide, is not the only avenue through which people duped may receive money.
Authorities in summer 2020 announced that $150 million in payments would be distributed to more than 100,000 victims from a separate action in U.S. Bankruptcy Court.