TelexFree Owner Arrested
The US Securities and Exchange Commission and Massachusetts Secretary of State are investigating TelexFree. The company's assets have been frozen by the SEC, which filed a civil suit against it in April, accusing it of operating a pyramid scheme. Authorities say that TelexFree recruited "promoters" to buy into the company for about $300 to $1,400, then post ads for its Voice Over IP product online. Promoters were compensated not with money generated by the ads, but from the buy-ins of those subsequently recruited.
An undercover Homeland Security investigator who was recruited by TelexFree in October was told that by a company representative that it wasn't necessary to sell products to earn money and that with a $1425 investment the agent could earn $100 a week without selling any product, by posting ads online and recruiting others.
In court records, authorities said that a review of TelexFree's bank accounts revealed that out of thousands of deposits, only 19 were related to sales of the company's VOIP service.
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