A hearing will be held in Boston next Tuesday to determine whether an Ashland man accused of running an international pyramid scheme can access $4 million of his money to help fund his defense.
TelexFREE co-owner James Merrill initially asked the U.S. District Court two weeks ago to release the funds, which he said are necessary to cover the exorbitant cost of defending himself against a charge of conspiracy to commit wire fraud.
But government prosecutors have resisted, telling the court Merrill has not shown the money didn’t come from TelexFREE, which several state and federal agencies have charged with being a pyramid scheme.
The hearing will be held before Magistrate Judge David H. Hennessy at 9:30 a.m., according to court records.
TelexFREE was ordered to shut down last summer in Brazil, after a judge ruled it a “financial pyramid” scheme, according to news reports.
Galvin’s complaint says the company has raised over $1 billion worldwide, “often from honest earnings and savings accounts of Brazilian-Americans and other minorities.’’
The scheme works by constantly bringing in new money, the state alleged. For instance, participants are recruited to invest either $289 or $1,375, and receive a number of advertising kits in return. By posting ads on web sites to promote the product, the participants are promised returns of 200 percent to 250 percent.
To drum up interest, TelexFREE would hold “extravanganzas” with large crowds and presentations promising cash and luxury items. In one such presentation, the state alleged, TelexFREE touted its “Passive Income Scheme” as the opportunity of a lifetime.
Galvin’s office is looking to require TelexFREE to cease and desist from its sales activities, and to provide an accounting of all the money it received as a result of its alleged wrongdoing. The regulators, in the state’s Securities Division, also are seeking to force the company to compensate investors for their losses, to disgorge any profits improperly earned, and to pay a fine.