telexfree-logoJust over a week ago we saw the TelexFree Trustee issue subpoena requests on some of the bigger names linked to the TelexFree Ponzi scheme.

Eight requests were made in total, with the standout names to me being Gerry Nehra (and his lawfirm) and i-Payout.

i-Payout were running around telling everyone TelexFree wasn’t a Ponzi scheme, as this was a threat to the millions of dollars they were making in processor fees.

Nehra was the legal face of TelexFree (up until the company experienced actual regulatory problems), and was responsible for sending out cease and desist emails to anyone who bothered to look over TelexFree’s business model.

Initial objections were filed by Opt3 Solutions (IT service provider) and ProPay Inc. (payment processor).

Opt3 Solutions’ objection is limited to concerns about confidentiality and information being circulated by the Trustee among the general public. ProPay also raise these concerns, but also requests they be given 20 days to respond to any requests by the Trustee.

In his original motion, the Trustee had requested a 10 day response time for any subpoena requests and 5 days response time for any requested depositions.

Propay also objected to the Receiver request that he be granted authorization

to compel the Payment Processors to produce for inspection and copying any additional documents he deems necessary to complete his administration of the cases by delivering them to the undersigned upon (10) days notice.

ProPay argue that

this request strays outside Rule 2004’s boundaries. Rule 2004 examinations are broad but do have limits; courts have consistently held that Rule 2004 cannot
be used for “purposes of abuse or harassment” and “cannot stray into matters which are not relevant to the basic inquiry.”

Reading between the lines, ProPay (who naturally don’t want to give up any of the processor fees they made facilitating the TelexFree Ponzi scheme), are accusing the Trustee of requesting information “not relevant to the basic inquiry” (TelexFree).

Seems a bit premature to me. Logic would dictate waiting for the Trustee to issue a subpoena request that is “not relevant to the basic inquiry” before filing an objection.

One would assume the Trustee is aware of the scope of Rule 2004, and as such accusing him of breaching it before he’s even had a chance to issue any requests seems silly.

Perhaps ProPay’s lawyers watched Minority Report the night before they drafted the objection.

In any event, Judge Hoffman has signed off on endorsed orders granting subpoena requests on Babener and Associates (lawyers), Garvey Schubert Barer (lawyers), Lane Powell Prof. Corp (legal advice), The Sheffield Group (MLM consultants), Gerald Nehra and Nehra & Waak (lawyers) and Joele Frank, Wilkinson, Brimmer, Katcher (PR firm) and the payment processors (Global Payroll Gateway (GPG), International Payout Systems (i-Payout), ProPay, Argus Payments & Allied Wallet).

i-Payout’s lawyers had reached an agreement that the original subpoena request be granted, on condition that any documents produced are held confidential. This was written up in a stipulated order which was granted by the Judge.

ProPay’s objection as it stands hasn’t been taken into consideration (or has been rejected?). It was filed on the 10th, the same day the Judge entered in an endorsed order granting the Trustee permission to issue subpoenas.

I’m not sure whether or not ProPay’s objection will be considered at a later date.

Opt3’s objection was filed on the same day, with a hearing set to flesh out the objection on July 17th. Unless there’s been a delay with the filing of pending documents, this suggests Propay’s objections were overruled.

Looking forward, as we saw recently with Kevin Grimes and Howard Kaplan in the Zeek Rewards Receivership case, I would be at all surprised to see the TelexFree Trustee turn around and sue some of the parties he’s requesting information from.

i-Payout and Gerry Nehra in particular are likely sitting on a goldmine of self-incriminating evidence. Evidence they are now compelled to provide the Trustee (who, let’s not forget, is acting on behalf of the DoJ).

Stay tuned…


Footnote: The recent round of endorsed orders and objections can be viewed over at the KCC website (docs #330 to #342)