The Securities and Exchange Commission has announced the freezing of assets of TelexFree Inc., as federal agents continued to search the company's premises. The headquarters of the Internet telephone services company were raided by federal agents, even as the chief financial officer of the company tried to flee, taking along with him checks worth more than $38 million.
The company's assets, as well as assets of more than eight principals and associates have been frozen. The Securities and Exchange Commission believes that the company ran an illegal pyramid scheme that targeted victims globally. According to the Securities and Exchange Commission, the company managed to raise close to $300 million, mainly by targeting immigrant communities in Massachusetts and at least 20 other states. Globally, the company might have made illegal profits of more than $1 billion.
During investigations, the Securities and Exchange Commission found that TelexFree actually managed to generate only $1.3 million in revenue for Internet phone services. It had promised investors more than $1 billion in profits. The company lured investors by telling them that they would be able to participate in the returns, if they simply placed online ads advertising the service. Many customers also signed on, attracted by the success stories reported by other members of the scheme before them. A pyramid scheme, like the one that TelexFree is believed to have conducted, only works when it attracts more and more numbers of investors.
The Securities and Exchange Commission also found that executives at the company spent the last several weeks transferring millions of dollars out of the company to their accounts or accounts belonging to other entities. In fact, one of the top executives at the company was found trying to flee the company's headquarters with checks amounting to more than $30 million in value in his possession.