“TelexFree is already creating MILLIONAIRES and now is YOUR turn.”  So read the now defunct website of TelexFree Inc., which U.S. officials ordered to be taken down earlier this month.  Massachusetts company TelexFree Inc. held itself out as a low-cost internet telephone company.  In reality, its founders were allegedly running a billion dollar global Ponzi scheme, luring in tens of thousands of investors with promises of annual returns of up to 250%.     

TelexFree’s promoters allegedly preyed on low and middle income immigrant communities.  These investors may not have had the resources to hire an expert to conduct exhaustive due diligence prior to investing.  But we often see wealthy investors who choose not to ask too many questions before sinking their money into a risky venture, and instead rely on the advice of a friend or financial advisor who may or may not have done their own due diligence.    

In the case of TelexFree, had investors done some digging, they would have likely found enough questionable information about the company and its founders to persuade them to take their cash elsewhere.  A simple internet search would have revealed that TelexFree was shut down in Brazil nearly a year ago after a judge ruled that the company was a fraud.  Also, authorities in Guernsey posted warnings about TelexFree on their Facebook page months ago.

A more thorough investigation would have shown that TelexFree promoter Sann Rodrigues, whose real name is Sanderley Rodrigues de Vasconcelos, had already been in trouble for a similar, if much smaller, scheme.  In 2006, the SEC won a fraud case against Rodrigues and his former company, Universo FoneClub.  The company was ordered to pay $1.6 million in restitution.      

The moral of the story is: do your homework.  Before you invest in a company or hedge fund, get an objective opinion about whether they really are what they say they are.  Don’t rely on the people who want your money to give you a complete warts-and-all picture of their company.  Hiring people like us to conduct a thorough investigation may seem expensive at first blush, but it could end up saving you the value of your investment.  Just ask the people who wrote checks to TelexFree.