TelexFREE Pyramid Scheme Victims Receive $3.5M Fund

By on August 14, 2015

In April 2014, the Massachusetts Securities Division accused TelexFREE of operating a $1.1 billion Ponzi investment scheme which enticed individuals to invest in a business purportedly based on a Voice over Internet Protocol (VoIP) telephone service.

TelexFREE advertised two initial investment options: individuals who invested $289 were told minimum annual profit potential of $681 and individuals investing $1,375 could earn $3,675. The scheme reportedly targeted Brazilian and Dominican communities.

The Massachusetts Securities Division entered into a consent order with Fidelity Cooperative Bank of Fitchburg in September 2014, alleging that the bank failed to detect suspicious activity in the TelexFREE accounts within a reasonable time period.  The bank’s president, John Merrill, is the brother of James Merrill, a TelexFREE principal.

Pursuant to the consent order, the Fidelity Cooperative Bank of Fitchburg established a $3.5 million Massachusetts Victim Relief Fund and retained Grant Thornton LLP as independent claims administrator. Each investor will receive $205.52.

“While this money does not make the TelexFREE victims whole,” Galvin said in a statement, “the distribution does provide the first real monetary relief received by Massachusetts victims of this international pyramid scheme.  I am very pleased that my office was able to get some money back for these victims.”

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