telexfree-logoThere has been a whole bunch of stuff filed in the last 48 hours and, rather than write separate updates for each motion and ruling, I figured it’d be of more use to provide a summary of TelexFree’s current legal status.

Last we checked in the SEC had filed a motion requesting TelexFree’s bankruptcy application be moved to Massachusetts, and the Department of Justice had petitioned for the appointment of a Chapter 11 trustee. If granted, that would put the DoJ in charge of TelexFree’s application and the company itself.

TelexFree also managed to delay the scheduled April 24th preliminary injunction hearing. A new hearing to decide whether a preliminary injunction should be enetered against defendants Joe Craft, Carlos Wanzeler and Jim Merrill has been scheduled for May 7th.

A hearing to decide whether a preliminary injunction should be granted against the remaining defendants (Faith Sloan, Randy Crosby, Santiago De La Rosa, Sann Rodrigues and Steve Labriola), has been scheduled for April 25th.

In the meantime, the temporary restraining order remains in place (currently till the April 25th hearing).

As of the closing of April 24th, here’s where we’re currently at.

Motions Filed

1. Certain Portions of the TRO violate the automatic stay that comes with a Chapter 11 filing (TelexFree, April 23rd)

TelexFree are arguing that they should be able to ‘operate their business in the ordinary course‘. They’ve as such asked the court to grant them relief from sections of the TRO that prohibit them from conducting “ordinary business”.

Specifically, TelexFree are asking the court to prohibit the SEC from ‘enforc(ing) a judgment against the Debtors or seeking to recover assets from the other defendants or third parties as a result of an alleged Ponzi Scheme‘.

They are also asking that the court rule the following points in the TRO invalid:

  • IV – Prohibits TelexFree and management from ‘withdrawing, selling, paying, transferring, dissipating, assigning, pledging, alienating, encumbering,
    disposing of, or diminishing the value of any assets and funds in their possession or under their control (also freezes bank accounts)
  • V – Freezes TelexFree and management’s funds and assets (similar to IV)
  • VI – Orders TelexFree and management to provide the SEC with details of any and all their financial activities between January 1st 2012 to the present
  • VII – Orders TelexFree and management to deposit all funds fraudulently obtained from affiliate investors into a bank account overseen by the court
  • VIII – Prohibits TelexFree and management from accepting any new investments from affiliates
  • IX – Prohibits TelexFree and management ‘from destroying, mutilating, concealing, altering, disposing, or transferring custody of any items’ that relates to the operation of TelexFree
  • X – Grants the SEC approval to conduct discovery and depositions on TelexFree management and top investors (used for information gathering)

2. Request to exceed page limit in TRO objection (TelexFree, April 23rd)

This a brief motion, with TelexFree asking the court to grant them permission to exceed the 20 page standard limit in their previously filed TRO objection motion (motion #1 in this list).

3. Objection to SEC’s request to expedite decision on moving the bankruptcy application to Massachusetts (TelexFree, April 24th)

TelexFree are objecting to the SEC’s request that they be granted an expedited hearing (April 30th) for their motion to move the bankruptcy application to Massachusetts. TelexFree are asking that the hearing be held on May 2nd, along with the First Day Order final hearing currently scheduled.

4. Request to expedite hearing on TRO violation motion (TelexFree, April 24th)

TelexFree have filed a motion asking the court to grant them an expedited hearing for the TRO objection (motion #1 on this list).

TelexFree are claiming ‘irreparable harm will result to the Debtors’ business operations and ability to reorganize’ if the motion is not heard quickly, and have asked it be included in the motions to be heard on May 2nd.

5. Opposition to TRO against TelexFree, management and top-promoters (Randy Crosby and Santiago De La Rosa, April 24th)

Opposition to the TRO currently in place affecting defendants in the SEC complaint, Randy Crosby and Santiago De La Rosa.

6. Motion for preliminary injunction against Randy Crosby and Santiago De La Rosa (SEC, April 24th)

With a hearing date set for April 25th, this is a motion filed by the SEC for a preliminary injunction to be granted against TelexFree top affiliates, Randy Crosby and Santiago De La Rosa.


1. Hearing for the moving of bankruptcy application to Massachusetts (April 24th)

The Judge has granted the SEC’s motion to expedite the hearing on their application to move the bankruptcy case out of Nevada, but did not grant the 30th of April date requested. Instead, the SEC’s motion will be heard on May the 2nd.

2. Approval of the employment of Kurtzman Carson Consultants LLC (April 24th)

Order approving TelexFree’s application to employ Kurtzman Carson Consultants LLC (KCC) as their claims and noticing agent.

Note that this order prohibits KCC from opening any bank accounts for TelexFree and collecting any of the $350,000 retainer paid to them (without prior approval from the court).

3. Authorization of “Joint Administration of Chapter 11 cases” (April 24th)

Consolidates the bankruptcy applications filed for TelexFree LLC, TelexFree Inc. and TelexFree Financial under one joint administration. Prior to this order the three bankruptcy applications had three separate case numbers.

4. Granting of Motion to exceed page limit in TRO objection (April 24th)

Order approving the TRO objection filed by TelexFree (#1 on the “Motions Filed” list of this update), to exceed the standard 20 pages.

5. Meeting of Creditors (April 24th)

A meeting of TelexFree’s creditors (parties they owe money to) has been set for May 22nd. Creditors are advised they have 90 days to file a proof of claim after the May 22nd meeting.

TelexFree victims are hereby prohibited from

contacting (TelexFree) by telephone, mail, or otherwise to demand repayment, taking actions to collect money or obtain property from the debtor, repossessing the debtor’s property and starting or continuing lawsuits or foreclosures.


Confirmation of chapter 11 plan may result in discharge of debts, which may include all or part of your debt.

A discharge means that you may never try to collect the debt from the debtor (TelexFree).

Important Upcoming Dates

  • April 25th (Massachusetts) – Hearing to decide whether a preliminary injunction should be granted against defendants Steven Labriola, Randy Crosby, Faith Sloan, Sann Rodrigues and Santiago De La Rosa
  • May 2nd (Nevada) – Multiple motions will be heard at this hearing, including the final First Day Orders in the bankruptcy application, the SEC’s request to move the bankruptcy proceedings to Massachusetts
  • May 7th (Massachusetts) – Hearing in the SEC case to decide on whether a preliminary injunction will be granted against TelexFree, Carlos Wanzeler, Jim Merrill and Joe Craft.
  • May 22nd (Nevada) – First meeting of TelexFree creditors

Final Thoughts

Having read what’s been filed recently, the attempts by TelexFree to use the bankruptcy court to absolve them of legal responsibilities for the running of a 1 billion dollar Ponzi scheme are painfully obvious.

In addition to rushing to “beat” the regulatory complaints against them, the thrust of their arguments now revolve around the bankruptcy claims taking precedent over any regulatory action against them. Sounds ridiculous but that’s the angle they’re adopting.

How that’s going to translate in court when the dust settles remains to be seen, but given the unlikelihood the judiciary develop amnesia and wipe them a clean slate, we’ll just have to see how this plays out for now.

Going forward, if a whole bunch of filings are again made I’ll do another update – otherwise we’ll stick to the standard article format. Any feedback on this style of update (whether it’s helpful or not, any improvements etc.) would be appreciated.