SEC Obtains Final Judgment Against Two Massachusetts Companies for Their Role in a Pyramid Scheme
Litigation Release No. 24301 / September 28, 2018
Securities and Exchange Commission v. TelexFree, Inc. et al., No. 14-cv-11858 (D. Mass. filed Apr. 17, 2014)
Two Massachusetts companies used to perpetrate a pyramid scheme targeting Latino communities have agreed to admit their role in the scheme and settle charges brought by the Securities and Exchange Commission against them and eight other defendants.
The final judgment, entered on September 28, 2018 by a federal district court in Boston, permanently prohibits TelexFree, Inc. and TelexFree, LLC from violating the registration provisions of Section 5 of the Securities Act of 1933 and the antifraud provisions of Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In agreeing to settle the SEC's charges, the entities both admitted that the court in the related bankruptcy proceeding found they were engaged in a Ponzi and pyramid scheme. The Commission also voluntarily dismissed its claims for unjust enrichment against a relief defendant, TelexFree Financial, Inc.
The SEC has previously obtained final judgments by consent against TelexFree's co-owner and president and its CFO, its international sales director, a promoter of the pyramid scheme, another promoter of the pyramid scheme, and a third promoter, who also was ordered to serve prison time for civil contempt arising from his repeated violations of court orders.
The SEC's litigation continues against TelexFree's other co-owner, and the remaining promoter of the alleged TelexFree pyramid scheme.
The SEC has issued an investor alert warning investors about the dangers of potential investment scams involving pyramid schemes posing as multi-level marketing programs.