Investigators suspect TelexFREE is a pyramid scheme
HELENA, Mont. – Montana Securities Commissioner Monica J. Lindeen filed a temporary cease and desist order on Wednesday against TelexFREE, a Voice over Internet Protocol (VoIP) sales program that Lindeen’s office suspects may be a pyramid scheme that has already cost Montanans $70,000.
The order prevents TelexFREE, which filed for bankruptcy protection in Nevada on April 14, from conducting further business or accessing investors’ money.
“Our investigation into TelexFREE continues, but we didn’t want any more Montanans to be potentially victimized by this company,” Lindeen said. “We took the step of preventing TelexFREE from operating in Montana to stop any potential new damage in our state as we continue our investigation.”
TelexFREE, a multi-level marketing company, sold phone service calling software for a personal computer or smartphone. The software could be used for unlimited calls to landlines and mobile phones to about 70 countries for a fixed monthly price of $49.90. A VOiP competitor, Vonage, sells a similar product for $12.99 a month.
While it was possible to simply buy the VOiP software, TelexFREE heavily marketed a related program that the company advertised as a way of earning money for TelexFREE “members.” In that program, individuals had to pay $289 a year for an AdCentral membership. This membership required users to sell one TelexFREE calling software a month for a full year. On the sale of the software, the member would keep 90% of the commission. TelexFREE would also pay members $20 a week for posting template advertisements on approved websites daily.
Lindeen’s office has identified 34 Montanans who had participated in TelexFREE and collectively paid more than $70,000 into the program.
On April 15, the U.S. Securities and Exchange Commission filed civil fraud charges against TelexFREE, Inc., which stands accused of operating a $1 billion pyramid scheme. TelexFREE, Inc. is a Massachusetts corporation that has raised more than $90 million in the state alone. The state of Massachusetts has also filed a cease and desist order against the company.
Lindeen filed the temporary cease and desist order to stop TelexFREE from doing business in Montana as a multi-level distribution company because it failed to register as such in the state and it appears to have engaged in practices that violate the Securities Act of Montana. TelexFREE has 15 days from when they receive the order to respond for a request for hearing.
For more information call the Commissioner’s consumer hotline at 800-332-6148.