Archives on April, 2014

TelexFree: Fourth Declaration of Scott Stanley, Esq.

Posted by ASDUpdates on April 30, 2014No Comments

Scott Stanley, Esq. is a Staff Attorney at the Boston office of the SEC and has done some exemplary work in this case.  His 4th Declaration states the following:

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TelexFree: Declaration of Frank C. Huntington, Esq.

Posted by ASDUpdates on April 30, 2014No Comments

Mr. Huntington is a Senior Trial Counsel in the Boston regional Office of the SEC and mentions in his declaration a YouTube video posted by Defendant Faith Sloan, wherein she made the following statement:

“You post your ads. Take you a minute and a half. Three minutes. Five minutes max.”

“Place your ads, and you go about your day. You do that for seven days a week, you get paid every single week… You don’t have to build. You don’t have to sell.”

As most of you know, for some odd reason, all of the videos made or posted by Faith Sloan touting the wonders of TelexFree have been removed.  But, I wonder if she knows that there are always copies cached somewhere, or the Feds already made their own copies. Nothing really every goes away once it is posted on the interwebs.

In addition to this video, Mr. Huntington also located three (3) TelexFree related websites associated to Faith Sloan.  These domains were named:

  1. telexfreepower.com
  2. telexfreeprogram.com and
  3. telexfree.faithsloan.com

Excerpts from these websites are included in the Exhibits filed with the document.  Here’s a link to it:  Doc 60-3

 

 

Preliminary Injunction Issued, Assets Frozen, in SEC v TelexFree case

Posted by ASDUpdates on April 30, 2014One Comment

Here is a tidbit from the docket, I have uploaded these documents onto the Files website for your perusal.

 


United States District Court
District of Massachusetts (Boston)
CIVIL DOCKET FOR CASE #: 1:14-cv-11858-NMG

Securities and Exchange Commission v. Telexfree, Inc. et al
Assigned to: Judge Nathaniel M. Gorton
Cause: 15:78m(a) Securities Exchange Act
Date Filed: 04/15/2014
Jury Demand: Plaintiff
Nature of Suit: 850 Securities/Commodities
Jurisdiction: U.S. Government Plaintiff
04/30/2014 60 MOTION for Preliminary Injunction , Order Freezing Assets and Order for Other Relief as to Defendants Telexfree Inc,Telexfree, LLC, Merrill, Wanzeler, Labriola, Craft, Rodriques and Sloan and the Relief Defendants by Securities and Exchange Commission. (Attachments: # 1 Text of Proposed Order, # 2 Declaration of Janet Conforti In Support, # 3 Second Declaration of Frank Huntington In Support, # 4 Fourth Declaration of Scott Stanley in Support)(Huntington, Franklin) (Entered: 04/30/2014)
04/30/2014 61 MEMORANDUM in Support re 60 MOTION for Preliminary Injunction , Order Freezing Assets and Order for Other Relief as to Defendants Telexfree Inc,Telexfree, LLC, Merrill, Wanzeler, Labriola, Craft, Rodriques and Sloan and the Relief Defendants filed by Securities and Exchange Commission. (Huntington, Franklin) (Entered: 04/30/2014)
04/30/2014 62 Judge Nathaniel M. Gorton: ENDORSED ORDER entered granting 58 Motion for Preliminary Injunction as to Defendants De La Rosa and Crosby (Patch, Christine) (Entered: 04/30/2014)
04/30/2014 63 Judge Nathaniel M. Gorton: ORDER entered. PRELIMINARY INJUNCTION Order, Order Freezing Assets and Order as to other Equitable Relief as to Defendant Santiago De La Rosa.(Patch, Christine) (Entered: 04/30/2014)
04/30/2014 64 Judge Nathaniel M. Gorton: ORDER entered. PRELIMINARY INJUNCTION Order, Order Freezing Assets and Order as to Other Equitable Relief as to Defendant Randy Crosby.(Patch, Christine) (Entered: 04/30/2014)

BehindMLM: WCM777 offshoot, “Global Unity”

Posted by ASDUpdates on April 30, 2014No Comments

Unity Club: Global Unity Ponzi scheme refuses to die

unity-club-logoGlobal Unity is probably the most direct successor of the WCM777 Ponzi scheme. When the regulatory heat got too much for founder Phil Ming Xu, he put out a message saying he’d sold the business to some new owners, and that he hoped they could turn it legit.

Global Unity was far from legit though, with the owners instead opting to try to reload WCM777′s business model. Global Unity affiliates even professed the company to be safe from the SEC, largely due to the fact that it was based offshore in Hong Kong:

The team now manages the company from Hong Kong is doing so with much more professionalism than the previous team.

Total trust in the new policy according to which there has been. -Global Unity will not close, will continue its activity and will continue to pay according to the payment Plan.

SEC is only for USA. As already known the company not operating currently in USA. The rest of the world continues its activity.

That late March and after the announcement things went quiet. A week or so into April and Global Unity’s website went down, showing an “under construction” message.

Now, it seems the owners are trying to flog the same business under yet another name. [Continue reading…]

Judge Approves $1.2 Million Settlement with Four Oaks Bank and Trust

Posted by ASDUpdates on April 29, 2014No Comments

Zeek Rewards related – Four Oaks was an ACH Processor for Rex Ventures

From NewsObserver.com, Business section

Judge approves Four Oaks Bank’s $1.2 million settlement

Posted by David Ranii on April 28, 2014

A federal judge in Raleigh has approved a settlement that calls for the corporate parent of Four Oaks Bank & Trust in Johnston County to pay a $1.2 million civil penalty.

The settlement between Four Oaks Fincorp and the U.S. Justice Department was approved Friday by Judge Terrence Boyle.

Four Oaks agreed to the settlement in January a day after federal prosecutors filed a civil lawsuit accusing it of facilitating fraud by routing more than $2.4 billion in transactions for “fraudulent Internet payday lenders” through the national money transfer system. Four Oaks received more than $850,000 in fees for this service.

The bank, which has more than a dozen branches, didn’t admit to any wrongdoing. However, the bank’s board of directors “felt that this settlement was in the bank’s best interest in order to avoid a lengthy and protracted legal fight and so that the bank could continue to focus on its primary business, which is serving its local communities.”

The lawsuit accused Four Oaks of deliberately ignoring warning signs that the fraudulent payday lenders were “deceiving consumers about the terms of payday loans, making loans that are unlawful and unenforceable under state and federal laws.”

Reinvestment Partners, a Durham consumer advocacy group, praised the civil penalty when it was announced in January.

“Four Oaks has put its profits ahead of the interest of consumers,” Adam Rust, research director with Reinvestment Partners, said in a prepared statement. “Hopefully this will make all banks think twice about being passive accomplices to illegal lending.”

 

The Court’s Judgement:  Judgement – Doc 23

Ponzitracker: Suicides Linked to TelexFree

Posted by ASDUpdates on April 26, 2014No Comments
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Report: Six Suicides Linked To TelexFree Collapse

Last week, both state and federal regulators alleged that TelexFree, Inc. and related entities were a massive Ponzi and pyramid scheme that may have raised hundreds of millions of dollars from victims worldwide.  In addition to the financial carnage inflicted on these victims, many of whom invested significant sums, one recent report claims that at least six people have committed suicide in the wake of the scheme’s collapse.  According to Dominican Today, one well-known TelexFree promoter has claimed that at least six recent suicides in the town of El Seibo, Dominican Republic, are attributable to TelexFree.

Maria Cordones, originally from the Dominican Republic but currently residing in New York, indicated that she had recruited at least 40 people to invest in TelexFree, which promised exorbitant returns in exchange for several minutes of work daily that purportedly entailed approving computer advertisements.  For example, an investment of $1,375 resulted in a weekly payout of $100 – an annual return of over 200%.  Authorities have estimated that TelexFree raised at least $300 million from United States investors alone.

One reason for TelexFree’s popularity was its practice of incentivizing investors to recruit new investors to the scheme.  This incentive-based system rapidly expanded the scheme’s reach, and the promised returns were especially well-received in poorer countries such as the Dominican Republic and Brazil.  According to Cordones, the 40 people she recruited in the Dominican Republic – where the average annual wages pales in comparison to larger countries – collectively lost thousands of dollars.

A morbid topic that is not often discussed, suicides attributable to Ponzi schemes do occur.  In one particularly grim example, at least ten suicides were linked to the collapse of of a massive Indian Ponzi scheme last year.  Given that the suicides linked to TelexFree are isolated to one town in Dominican Republic, the possibility certainly exists that this number could increase.

Faith Sloan to SEC: “Why are you picking on me??”

Posted by ASDUpdates on April 25, 20142 Comments

OK, I give up.. Now Faith Sloan is using the olde psycho-babble “But that guy is a bigger crook than I am” defense. And yet, you still admitted to an SEC attorney as being part and parcel of this Ponzi/Pyramid fraud, Ms. Sloan.  And, this is definitely not her first “rodeo” when it comes to scams. Faith Sloan is the consummate “Serial Promoter”, in fact, I think she probably gives lessons.

Ms. Sloan has a long and storied history and has steadily entered into, and recruited for, many other HYIP “opportunities”, most of which have either collapsed or were shut down by the Feds.

Perhaps this time she will get exactly what she deserves, some time in prison.

Below is part of the filing from yesterday. I have placed them all onto the Files website.

 


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BehindMLM: TelexFree Owners Hiding Assets???

Posted by ASDUpdates on April 24, 2014No Comments

TelexFree owners withdrew $25M just before bankruptcy

Reymundo Torres: once the company comes back everybody is going to receive their money.

-snippet of a TelexFree social media discussion, published 6 hours ago

telexfree-logoAlthough it’s sort of died down, one of the more persistent assertions TelexFree affiliates are making is that the company is flush with cash. The picture painted is that TelexFree would easily be able to pay out the $1 billion it accumulated in ROI liabilities.

Contrasting with this rosy vision however, is the reality that continues to be conveniently ignored by many of TelexFree’s affiliate investors. Having filed for bankruptcy just days before, we’ve already covered how TelexFree CFO attempted to flee with $37.9 million in checks as an FBI led raid was executed.

Now, as part of an exhibit of the SEC’s request for a jurisdictional change in the bankruptcy proceedings, comes even more sordid details of management’s last minute cash-grab before the Titanic-like TelexFree ship went under.

[Continue reading…]

Ponzitracker: SEC Seeks to move TelexFree Bankruptcy to Massachusetts

Posted by ASDUpdates on April 23, 2014No Comments

 

SEC Seeks To Move TelexFree Bankruptcy To Massachusetts

Citing a “coordinated effort to avoid the Massachusetts courts,” the Securities and Exchange Commission filed a motion in a Nevada bankruptcy court seeking to transfer venue of the TelexFree bankruptcy to a Massachusetts bankruptcy court.  In its Motion for Change of Venue (the “Motion”), the Commission alleged that the overwhelming facts and circumstances warranted the transfer of the pending bankruptcy filed by three TelexFree entities from Nevada to Massachusetts.

According to the Commission, TelexFree, Inc., TelexFree, LLC, and TelexFree Financial, Inc. (collectively, “TelexFree”) “hastily filed their Chapter 11 petitions the evening of Sunday, April 13, 2014.”  Despite the fact that only TelexFree, LLC was a Nevada limited liability company and maintained a “rent-a-space office” in Las Vegas, the bankruptcy petitions claimed that venue was proper in Nevada.  The bankruptcies appeared extremely coordinated, with a flurry of motions accompanying the petitions – including a motion for court approval to “reject” hundreds of millions of dollars in obligations to “promoters” under old and current compensation plans.  Approximately 36 hours after the filing of the bankruptcy petitions, both the Massachusetts Securities Division (“MSD”) and the Commission filed civil complaints against TelexFree in Massachusetts.

In its Motion, the Commission stressed the overwhelming evidence it alleged supported a finding of venue for the bankruptcies in Massachusetts rather than Nevada.  This included the fact that:

  • All of Debtors’ physical assets are located in Massachusetts (or in Florida);
  • Most of TelexFree’s bank accounts are located in Massachusettts;
  • The 50% owners and only directors of TelexFree reside in Massachusetts;
  • One-third of the 30 largest creditors listed by TelexFree reside in Massachusetts, while none reside in Nevada; and
  • Both the MSD’s administrative complaint and the Commission’s emergency enforcement action are pending in Massachusetts courts.

The federal statute governing venue in a bankruptcy case specifies that venue is proper in the district in which “the domicile, residence, principal place of business in the United States, or principal assets in the United States, of the person or entity that is the subject of such case have been located for the 180 one hundred and eighty days…” prior to commencement of the bankruptcy proceeding.  28 U.S.C. 1408.  Further, Nevada caselaw provides a six-factor test to determine whether a case should be transferred for the convenience of the parties:

  • proximity of creditors of every kind to the court;
  • proximity of the debtor;
  • proximity of witnesses necessary to the administration of the estate;
  • location of the assets;
  • economic administration of the estate; and
  • necessity for ancillary administration if liquidation should result.

In re B.L. of Miami, Inc., 294 B.R. 325, 329 (Bankr. D. Nev. 2003).   Reviewing these factors, the Motion indicated that, while preliminary data shows that only 205 victims may be located in Nevada, more than 2,500 victims were located in Massachusetts.  Additionally, both TelexFree’s principal place of business and its owners are located in Massachusetts.  These owners are also primary witnesses in the case.  Interestingly, the Commission also alludes to the possibility under current law that entry of any orders in fraudulent transfer actions against any of the individual defendants or other non-claimants will have to be coordinated with the Nevada district court – whereas the Commission’s civil enforcement action is currently pending in the District of Massachusetts and thus the Court there will already be familiar with the facts and circumstances of the case.  Finally, the Commission also indicates that the current Chapter 11 status of the case is in doubt, hinting that “liquidation of the estate may become necessary”.  In that event, the Commission argues that liquidation in Massachusetts would complement the establishment of a distribution fund that would likely be under the auspices of the Massachusetts District Court.  As the Commission argued, the factors heavily weighed towards a transfer of venue to Massachusetts bankruptcy court.

Previous Ponzitracker coverage of TelexFree is here.

A copy of the Motion is below:

Transfer Motion

BehindMLM: DOJ on TelexFree

Posted by ASDUpdates on April 23, 2014No Comments

DoJ on TelexFree: Fraud, dishonesty & gross mismanagement

telexfree-logoThe Unites States Trustee program is

a component of the Department of Justice responsible for overseeing the administration of bankruptcy cases and private trustees.

Under the party name “US Trustee”, the DoJ has now filed what is the first major opposition to TelexFree’s bankruptcy proceeding. The DoJ’s motion to appoint a “Chapter 11 trustee” addresses the elephant in the room that is as of yet untackled in TelexFree bankrupty proceeding: That being of course the serious allegations laid out against the company by the SEC and Massachusetts Securities Division.

Both agencies have filed complaints against TelexFree, alleging it to be a pyramid and Ponzi scheme respectively.

Supported by damning evidence against the company, here’s a breakdown of the DoJ’s latest filing.

[Continue reading…]