TelexFree Ponzi Victims Seek To Revive Bank Claims

Victims of the $3 billion TelexFree Ponzi scheme claim that new evidence supports their allegations against five financial service providers previously cut from their 2014 suit over the scam and are asking a Massachusetts federal judge to accept their fifth amended complaint.

The victims asked U.S. District Judge Timothy S. Hillman on Nov. 29 to reconsider his early 2019 decisions to dismiss financial service providers including Bank of AmericaTD BankWells Fargo BankPricewaterhouseCoopers and payment processor Global Payroll Gateway Inc. from the multidistrict litigation.

Judge Hillman ruled at the time that the evidence didn’t suggest that those financial services providers had participated in or willfully ignored the global fraud, saying that “the mere provision of banking services … cannot actively or substantially assist a fraud” in an order dismissing all counts against the banks.

The defrauded investors now claim that newly discovered evidence from a copious trove of documents they received as part of a settlement with one of the defendants shows the financial service defendants shouldn’t be able to escape the allegations.

The investors also filed a 418-page complaint revising their allegations against a range of defendants alongside the motion for reconsideration of the dismissal order.

“The newly discovered facts both eliminate any doubt as to the adequacy of plaintiffs’ claims against other previously named defendants and more than sufficiently state claims against additional defendants,” the six putative class representatives said in their motion for reconsideration.

In particular, the plaintiffs want to amend claims of aiding and abetting and conspiracy against Bank of America, TD Bank, Wells Fargo and PwC and their personal jurisdiction claims against payment processing service company Global Payroll Gateway.

The new evidence also “establishes claims against several additional wrongdoers who also knowingly played essential roles in the TelexFree scheme,” the defrauded plaintiffs told Judge Hillman.

The amended complaint comes on the heels of three settlementswith the company’s former chief financial officer, one of its payment processors and Synovus Bank. If approved, the settlements would provide $2.1 million in recovery.

The putative class action dates back to 2014, the same year TelexFree LLC declared bankruptcy and drew scrutiny from the U.S. Department of Justice and the U.S. Securities and Exchange Commission for allegedly running a billion-dollar Ponzi scheme.

The scam left about 1.9 million people in nearly every country in the world more than $3 billion in the red, including almost 170,000 Americans, a quarter of whom were from Massachusetts and lost an average of $2,940 each.

The company filed for bankruptcy in April 2014, when it owed $6 billion to participants but had only $120 million on hand, according to prosecutors.

Attorneys for the victims and attorneys for Bank of America, TD Bank, Wells Fargo and PwC did not immediately respond to requests for comment Monday.

Spokespersons for Bank of America and TD Bank declined to comment on Monday.

A spokesman for PricewaterhouseCoopers told Law360 by email Monday that “the plaintiffs’ motion to add PwC back as a defendant in the lawsuit is simply an effort to retread claims that the court has already rejected.”

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 and 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.

Bank of America was represented as recently as 2017 by Kenneth I. Schacter and S. Elaine McChesney of Morgan Lewis & Bockius LLP.

TD Bank was represented as recently as 2017 by Jarrod D. Shaw and Mary J. Hackett of McGuireWoods LLP.

Wells Fargo is represented by Robert W. Fuller and Adam Doerr of Robinson, Bradshaw & Hinson PA and Paul Samson of Riemer & Braunstein LLP.

PricewaterhouseCoopers was represented as recently as 2017 by Paul P. O’Connor of Milton Laurence & Dixon LLP and Gabor Balassa of Kirkland & Ellis LLP.

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 Dean Seal and Reenat Sinay. Editing by Jay Jackson Jr.
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