Joseph Isaacs and his company ISG Telecom assisted TelexFree with telecommunications regulations.

In early 2014, TelexFree retained ISG to register the VOIP phone service and mobile telephone service with various public utility agencies and to perform related services.

For this service, Isaacs was paid hundreds of thousand of dollars in stolen Ponzi funds.

In April, 2016 the TelexFree Trustee filed clawback litigation against Isaacs and ISG, demanding the return of $747,973  in “fraudulent transfers”.

Following discovery, this amount was revised to $575,000.

After ongoing settlement negotiations between Isaacs, ISG and the Trustee, the parties have now agreed to a $50,000 settlement.

The low amount to be paid back is based on current financial information provided by Isaacs and ISG to the Trustee.

The Trustee has evaluated the transaction history with ISG for potential recovery as preferential or fraudulent transfers.

Based upon the discovery provided by ISG, the Trustee has concluded that the payments are likely subject to meritorious new value and ordinary course defenses that would mitigate any claims of preferential transfer.

Telexfree did pay ISG in the range of $125,000 to $150,000 for services relating to registration of Telex Mobile.

Because TelexFree had no ownership interest in Telex Mobile, a claim may exist for recovery of such amounts as fraudulent transfers, as TelexFree may not have received reasonably equivalent value for the payments.

The Trustee has also raised issues respecting the reasonableness of the charges imposed by ISG. ISG has contested these allegations.

In addition to the costs and delays that would be associated with litigating this action, the Trustee also has concerns as to collectability.

The Trustee has been provided tax return data for ISG, which demonstrates modest income and few assets, and personal financial information for Isaacs as well as an affidavit of financial condition signed by Isaacs individually and as president of ISG.

The financial documentation provided by ISG and Isaacs demonstrates that the Trustee would have difficulty collecting amounts in excess of he Settlement Amount and, in fact, it has been represented that the source of the settlement was borrowed funds.

What Isaacs and ISG did with the $575,000 they received from TelexFree is unclear.

The proposed January 27th settlement is currently awaiting approval by the court.


Update 23rd February 2017 – On February 22nd Judge Hoffman approved the Isaacs and ISG settlement.