TelexFree

» see telexfree.com as it lived, on the wayback machine

~ the eulogy ~

TelexFree's peak years overlap with my early 2010s window, but the scheme worked in brazil, the united states, and the brazilian diaspora across portugal and the dominican republic. Turkey was not part of the recruitment graph. The first time i saw the name was reading sec filings, not in any way that would have reached me at the time.

On paper it was a voip company. You bought a calling-card package called AdCentral for around 1,425 dollars, posted some ads online, and the company sent you weekly checks. In practice almost no one bought the voip cards. The money came from new members buying AdCentral packages, which paid the older members. The numbers were not subtle. Federal prosecutors later established that voip card sales accounted for roughly two percent of revenue across the company's life.

It was founded on 2 february 2012 by Carlos Costa, Carlos Wanzeler, and the american partner James Merrill in massachusetts. The brazilian operating arm was called Ympactus Comercial. By mid 2013 the company was reporting over a million active promoters in brazil. Prosecutors later put the total worldwide victim count at around 1.8 million across all 50 us states, brazil, portugal, the dominican republic, china, peru, and parts of italy.

~ the dossier ~

~ how it worked ~

The structure was a classic recruitment pyramid wrapped in a calling-card story. To get the weekly payouts you had to buy a starter package. To keep getting the payouts you had to recruit more people who would buy starter packages. The voip product existed but was essentially decoration so the company could claim it was selling something.

This worked for a year and a half because the recruitment math worked. New brazilian and brazilian-american members joined fast enough to pay the older members on time. When new recruitment slowed, the math collapsed. At the bankruptcy filing the company owed its participants roughly 6 billion dollars and had 120 million dollars in cash, about two percent of what it owed.

~ the day it died ~

The brazilian end came first. On 13 june 2013 a brazilian state court in acre issued an injunction against Ympactus for running a pyramid scheme. The brazilian operation froze.

The us end took longer. On 13 april 2014 TelexFree LLC filed for chapter 11 bankruptcy in nevada. Three days later, on 16 april 2014, the sec announced the asset freeze and the criminal complaint. Federal agents raided the marlborough, massachusetts headquarters. Wanzeler fled to brazil. Merrill was arrested in the united states, eventually pled guilty, and was sentenced in march 2017 to six years in prison and 140 million dollars in forfeiture.

~ the long tail ~

The bankruptcy estate kept paying small recoveries to victims for years. In july 2020 a bankruptcy judge approved a 150 million dollar distribution to a subset of approved claimants. The brazilian civil suits and asset-recovery cases continued into the 2020s, with various recoveries from frozen accounts and seized property.

The cultural footprint was less about the company than about how many people it touched. Over a million brazilian and brazilian-american families lost real money. The whatsapp chains and church meetings and immigrant-community recruitment calls became one of the standard cautionary references for any pyramid scheme that came after.

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