TelexFree, accused of Ponzi scheme, has numerous creditors

WORCESTER — TelexFree’s bankruptcy lawyer told a U.S. Bankruptcy Court judge Tuesday that there may be over 700,000 TelexFree creditors out there — people who handed over thousands of dollars to TelexFree for what turned out to be, according to federal authorities, a $1 billion Ponzi scheme.

The Marlboro-based company’s assets are frozen as part of the U.S. Securities and Exchange Commission’s civil and criminal cases against TelexFree and its principal owners, James M. Merrill of Ashland and Carlos Wanzeler of Northboro. Mr. Merrill is being held on federal wire fraud charges; Mr. Wanzeler allegedly fled to Brazil, and a warrant has been issued for his arrest.

Some of the victims showed up in bankruptcy court Tuesday, hopeful for some shred of information about the fate of their money. U.S. Bankruptcy Judge Melvin S. Hoffman told them to file a claim as a creditor through the bankruptcy court.

“There is still no clear sense you will be able to recover anything at the end of the day,” he said. “You are going to have to file a claim and wait.”

Joseph P. Davis III, a lawyer representing TelexFree, said that the SEC has seized about $120,000 in cash from the company, as well as all of its computers, which contain its lists of clients. Judge Hoffman said he would like a list of those clients — now victims — as soon as it can be made available.

One woman in court claimed she has lost $65,000 to TelexFree. She said she was told by a company employee that she could earn $300 a week posting online advertisements for the company. Like others in the courtroom, she was told to file a claim.

Mr. Davis told the court that TelexFree has agreed to turn over the responsibility of acting as Chapter 11 bankruptcy trustee, for TelexFree’s money and assets, to the government. That would allow the office of the U.S. trustee, the U.S. attorney’s office or the SEC to collect all the claims against TelexFree, and to pursue all of the assets of the company to pay those claims.

Judge Hoffman said he would like to assign a trustee for the bankruptcy case within days.

Another lawyer, Robert J. Bonsignore of Medford, offered another wrinkle it what will likely be a very complicated bankruptcy case: Some of the clients of TelexFree, at least those who got into the scheme early, may have enjoyed healthy financial returns from the scheme. Mr. Bonsignore has filed two class action lawsuits with the bankruptcy court on behalf of people who paid into the TelexFree scheme.

“There could be people who own property that could be seized, people who were at the top of this Ponzi scheme,” he said. “Not all the parties who we are seeking funds from are part of this bankruptcy.”

The SEC has alleged that TelexFree, which sold Voice over Internet Protocol technology that allowed people to make unlimited international phone calls, only earned about 1 percent of its revenue from the sale of that product. The vast majority of the company’s revenue came from people who bought memberships and packages in TelexFree, told that they could earn as much as $300 a week if they simply placed online ads for TelexFree and recruited new people to buy memberships.

Aaron Nicodemus Kärin Radock

— Aaron Nicodemus, Kärin Radock


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