State subpoenas second firm in pyramid scheme probe
Secretary of State William F. Galvin’s office has issued subpoenas to another multilevel marketing firm doing business in Massachusetts, following his office’s recent lawsuit charging TelexFree Inc. with running a pyramid scheme.
The second company, Wings Network , appears to be based in Portugal and says it sells cloud-based Internet storage plans, according to its website and Facebook pages. Wings Network came to the attention of Galvin’s Securities Division because its sales strategy appears to be similar to TelexFree’s.
In Facebook posts, both companies tout the chance to earn riches by recruiting others to join. And they hold large sales conferences — which are more like rallies — to encourage participants.
“We attended one of their events,’’ Galvin said. “We had heard from some investors who, in light of TelexFree, had become concerned — and we’re concerned.’’ No charges have been brought against Wings Network.
D.J. Poyfair, an attorney for Wings Network in Denver, confirmed the company had received subpoenas from Galvin and that lawyers for the company met last week with the Securities Division. The regulators want to meet with company executives next week.
“Wings Network is committed to operating legally and ethically in all the countries in which it does business, including the United States,’’ Poyfair said. He said Wings is cooperating with the state’s investigation and is “conducting its own internal investigation and it intends to address quickly any problems that it discovers.’’
Poyfair said the company is looking into whether the local sales meetings were authorized by executives. If not, they may have been set up by opportunistic promoters as TelexFree appeared to be falling on hard times in March. The company filed for bankruptcy protection last month.
“If Wings Network discovers that significant issues exist, it would even be willing to suspend operations until the problems are properly addressed,’’ Poyfair said.
TelexFree and eight of its principals and promoters have been charged by the federal Securities and Exchange Commission with running an illegal pyramid scheme. The company allegedly recruited thousands of people to buy its Internet long-distance phone service and to open accounts that would pay them returns for helping post online ads for TelexFree. The apparent scheme may have cost Massachusetts investors $90 million.
The SEC froze the assets of TelexFree and the eight individuals last month, days after the bankruptcy filing. Through press releases and in court, the company has denied wrongdoing.
A TelexFree promoter’s office in downtown Framingham was dark on two recent weekday visits.
On the same block, a Wings Network office also was empty on those visits, and no one responded to the phone number posted in large print on the windows.
The Wings Network’s website lists Carlos Barbosa as chief executive.
In a statement there, Barbosa says, “Information technology applicable to mobile solutions is today a fast growing market. A reality that moves millions of dollars daily with downloads of every sorts of apps.”
Dozens of people have e-mailed The Boston Globe, saying some people who participated in TelexFree are now shifting to Wings Network. Like TelexFree, it appears to be popular with Portuguese-speaking Brazilian immigrants.
Other companies involved in multilevel marketing — which entails recruiting large numbers of people to pitch products or services — have come under scrutiny recently.
The SEC in March froze the assets of World Capital Market Inc., or WCM777 Inc., in California, charging the group with raising $65 million from investors in a Ponzi scheme.
The group targeted Asian-Americans and Hispanic-Americans, according to the complaint, which was filed in federal court in Los Angeles.
Galvin signed a consent order with WCM777 back in November 2013, requiring the company to reimburse Massachusetts residents.
In the order, Galvin’s office said that 160 Massachusetts investors, primarily residents of the Brazilian community, had paid more than $300,000 for WCM777 packages.
The company agreed to the order but neither admitted nor denied the allegations.
The company could not be reached for comment.