An alleged pyramid scheme that may have defrauded Brazilians and Americans out of more than a billion dollars has surfaced in B.C.
The discovery comes after U.S. regulators shut down the U.S. headquarters of the company behind the alleged scam, which purported to sell voice over internet (VoIP) phone services.
TelexFREE Inc. first took off in Brazil but was shut down after the firm was accused of bilking one million investors out of $1-billion US in just over a year. Many of the investors lost their life savings in the alleged scam.
The company then set up in Massachusetts until U.S. regulators froze millions of dollars of its assets last week and charged the company operators with running a Ponzi scheme. The company denies any wrongdoing and the charges in the U.S. and Brazil have yet to be proven in court.
- Scroll down to the bottom of this story to read court documents relating to the U.S. charges
Now, CBC has discovered that TelexFREE has set up in Richmond, B.C., as a registered business, with its company address listed as the offices of a lawyer who incorporates new businesses. Two of the individuals listed as the company's directors in Canada, James Merrill and Carlos Wanzeler, are two of the people charged in the U.S.
According to the U.S. Securities and Exchange Commission, in the U.S., TelexFREE's "pyramid scheme" was to sell so-called "memberships that promised annual returns of 200 per cent or more for those who promoted TelexFREE by recruiting new members and placing TelexFREE advertisements on free internet ad sites."
Memberships cost between $300 US and $1,400 US, and investors — called "promoters" — who placed the ads for TelexFREE's voice over internet service were promised returns in the form of monthly payments.
But in fact, most investors never got their money back.
"In classic pyramid scheme fashion, TelexFREE is paying earlier investors, not with revenue from selling its VoIP product but with money received from newer investors," the SEC said in an April 17 news release announcing the U.S. charges.
The regulator said TelexFREE's VoIP sales revenues of approximately $1.3 million US from August 2012 through March 2014 were "barely one per cent of the more than $1.1 billion US needed to cover its promised payments to its promoters."
Move into Canada 'bold,' says one observer
One man who almost got lured by the alleged scam and witnessed the collapse of TelexFREE in Brazil is now raising the alarm about the company's presence in Canada.
"Boris" — not his real name — believes TelexFREE's move into B.C. is a clear attempt to make inroads in Canada and target local investors.
"I think it's a bold manoeuvre by TelexFREE, and it's kind of embarrassing for Canada to let that happen," he told the CBC.
CBC agreed to protect the identity of Boris, who says he fears retaliation from those made rich off TelexFREE.
Boris says he almost invested but decided not to in the end and now wants to warn Canadians.
"Luckily, I was out of it, but some people, they just trust," he said.
Boris said many investors get told about the investment opportunity by friends or family members and are not as lucky as he was in spotting the potential pitfalls.
"I've seen people who lost their houses, their cars, all their money in it," he said.
'You have to take action'
On the firm's Canadian Facebook page, investors appear to be lining up, with more than 7,000 "Likes," as of Friday afternoon. While the company's website in the U.S. has been pulled down, the Canadian version remains up.
Boris wants Canadian regulators to step in.
"I would say you do have to take action. Having an office open in Canada opens doors to a lot of people around the globe to keep investing money in this," he said.
The B.C. Securities Commission, tasked with protecting the investing public, won't reveal if it's investigating TelexFREE.
But director of enforcement Teresa Mitchell-Banks says it is monitoring the situation carefully.
"We would ask people if you are concerned about this company or any other, to please contact us," she said.
None of the allegations have been proven in court.