Phone service distributor TelexFree LLC has come under siege in recent weeks by federal prosecutors and securities regulators, which have alleged that the company is behind a $1 billion-plus pyramid scheme. Now, the company faces the daunting challenge of notifying hundreds of thousands of investors worldwide about its pending bankruptcy, according to a Wall Street Journal blog yesterday. Based in Marlborough, Mass., TelexFree used multilevel marketing to assist in the distribution of voice over Internet protocol (known as VOIP) telephone service plans for unlimited international calling to approximately 70 countries. Investors were promised annual returns of 200 percent or more for recruiting new members and placing TelexFree advertisements on free ad sites. According to court papers, TelexFree had about 700,000 such investors around the world. Since the company filed for bankruptcy protection in April, the Securities and Exchange Commission has filed civil fraud charges against the company, its owners and several of its most senior promoters, which the company disputes. The bankruptcy judge overseeing TelexFree’s chapter 11 case in Worcester, Mass., is expected to turn over control of the company to a trustee.
