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Trustee Continues to File Clawback Actions in Telexfree LLC Bankruptcy

April 1, 2016, Massachusetts – On April 13, 2014, Debtors Telexfree, LLC and its affiliates filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code with the U.S. Bankruptcy Court for the District of Nevada. Subsequently, the cases were transferred to the District of Massachusetts. Subsequently, on June 6, 2014, Stephen B. Darr was appointed as a Chapter 7 Trustee.

As per the Order entered by the Court, the Debtors operated a massive Ponzi and pyramid scheme, which involved as many as 1,900,000 participants from multiple countries under the guise of a “multi-level marketing” company with its headquarters in Marlborough, Massachusetts. Although, the Debtors represented themselves as being in the business of selling telephone service plans that use voice over Internet (VoIP) technology, the sale of VoIP constituted only a minor portion of their business; the Debtors’ actual business was the recruitment of participants to carry out the sale of plans.

Last month, the Trustee initiated about 45 actions in the District of Massachusetts claiming that the defendants received more than they paid into Marlborough-based Telexfree between 2012 and 2014. The largest claim in the group is filed for recovery of claim amounts worth $747,973.55 and $106,416.35 against ISG Telecomm Consultants, LLC and Advent Communications Corporation respectively.

The Debtors bankruptcy cases are jointly administered under Case No. 14-40987. The cases are pending before the Honorable Judge Melvin S. Hoffman in the U.S. Bankruptcy Court for the District of Massachusetts. The law firm of Murphy & King Professional Corporation is acting as lead bankruptcy counsel to Telexfree, LLC (D. Mass.) in the bankruptcy cases.