When I first heard about Telexfree and checked it out, I felt it was a ponzi scheme, now it’s been proven to be true.
This report will explain what it was, the amount of money it took and if you were or are someone who was looking to make money online through it, a better, an actual legit way you can do it…
Price: This varies from $30 to $1,375 (I’ll go through each one).
Final Rating: Scam (Red Flag & in my opinion a ponzi & pyramid scheme). And I wrote that before it officially went down.
Here is the main update ($1.8 billion dollar ponzi scheme):
Yes that is how much it is said to have taken from investors. Here are 2 sources you can read to see the official report:
First is Wikipedia, they have an article about Telexfree and everything you need to know.
Second, here is a Forbes article that explains the whole situation, the owner’s sentence for running this ponzi scheme and more.
Back to the original review I made (before Telexfree was unveiled):
Let me start of by saying that everything I write here is my opinion. I’ve carefully reviewed TelexFree and truly believe that it is a ponzi scheme. One of the main reasons for this is because I’ve reviewed other programs before who operated on similar types of sales pitches/business models that also turned out to be scams.
I will carefully explain everything you need to know about this company in simple terms as well as show you if there’s other alternatives you can pursue as well as how to avoid ever involving yourself with these types of places. Also if you are/were a TelexFree member and you have money owed to you, you will need to be patient as the current lawsuits get handled.
I predict that there will likely be a compensation website from which those who are owed money or require refunds will be able to file for it. I will keep you all posted on this as it develops.
What is TelexFree? Here’s the simple explanation:
It is/was a company which was founded in 2012. It’s HQ is in Marlborough, Massachusetts, US. While it’s HQ is in the U.S, it’s been most popular in Brazil where the company made most of it’s money.
Based on what one of the owners of the company said, it had over 1 million people promoting the company in Brazil alone.
We don’t really need to know the history. What we do need to know is WHAT it is, how it operates and why there is speculation and accusations of pyramid/ponzi schemes being used:
TelexFree is a company which delivers VOIP services. These are just services which allow you to use your internet to make phone calls anywhere. This service is cheaper and easier to use and thus has much appeal. The price for using these services was $49/month.
TelexFree also has (had) a compensation type plan where people could make money with this program. THIS is where things become suspicious and where the original claims of scams arose.
How people made money with TelexFree:
There are 2 ways: Posting online ads for the company and/or referring others into the program. Here is a breakdown:
You could earn $20 every week by posting 1 ad a day for this company. The way this is done is pretty simple:
You could sign up and join it’s “Adcentral” program where for a $30 fee and an “investment” of $299 (yearly), you could post 1 ad a day for the company. The supposed purpose of this was to help the company gain more exposure so by posting ads, more potential customers could flock to the company and to compensate the user for posting ads, you could earn $20 a week.
The ads people would post would be online and on websites provided by TelexFree. In addition, pre-written ads were also given so all people would have to do is simply copy the ads and put them on the sites provided by the company.
For this, the person/s who put up the ads would earn $20 a week, $80 a month, and $1,040 a year (counting weeks times 52). If you subtract the initial “investment” of $299, the profit would be $741 a year.
Obviously this amount if minuscule but for the supposed amount of work to place these ads daily (minutes), many people seized this “opportunity”.
Note: Before I go further, I want to point out that I am quoting a lot of words like investment and opportunity because with ponzi schemes, these terms don’t exist which is why when I use them in regards to TelexFree, it’s simply not appropriate.
Now for many people, a profit of $741 is nothing which is why there was a “Adcentral Family package” available in which you could earn 5 times as much. What would happen here is that you would be able to post 5 ads a day as opposed to just 1 and earn 5x each week/month/year.
When you run the numbers, it comes out to $100 a week, $400 a month and $5,200 a year. However the annual cost of signing up for the Adcentral Family package was $1,375 which means the profit would be $3,825.
Here is a breakdown:
You could also make money with this program by referring others into it. If they purchased one of the Adcentral packages, you would earn a certain amount. Here is a quick breakdown of the compensation plan:
- For every person you refer who then purchased a regular Adcentral package ($299/year), you earn $20.
- For every person you refer who purchased an Adcentral Family package ($1,375/year), you could earn $100.
Now one thing I am confused about is how it works if the people you refer, refer others into the program. Generally in MLM programs, there is a percentage that goes to you. I did see TelexFree use the word “spillover” which I assume might be it, but in terms of exact numbers, I can’t offer that at the moment.
One thing I do know is that if you were to participate as a “partner” with TelexFree and make money with them, you would have to purchase their VOIP services for the $49/month.
Now that we have the figures down, let’s example what we all came here to find out…
Is TelexFree a ponzi scheme?
I believe it is and my opinion/understanding of this subject is as follows:
The accusations of ponzi schemes began when the amount of money owed to people was not being paid out as promised. Supposedly the amount of VIOP contracts sold + the Adcentral contracts that those people were signing up for exceeded the amount of money that TelexFree could pay out.
Let’s use the following example to illustrate this:
If you take a regular Adcentral package, the total cost ($49/month, $30 registration fee, $299/year) would equal: $917 that TelexFree could make off each person a YEAR.
Now consider that each person through this contract can make $1,040 a year, it means the company would still owe that person an extra $123.
Multiply that 100’s, 1,000’s and likely even more people who were promoting the company, and you have yourself a big financial hole to fill up in terms of paying everyone.
Let’s use the Adcentral family package. TelexFree could make $4,425 a year off each person. Here is the breakdown:
$49/month (x5 people) + $30 registration fee (x5 people) $1,375/annual) = $4,425
Now consider that for the Adcentral Family package, users were supposedly promised to make $5,200 a year. This means that AGAIN TelexFree cannot pay each user fully because for each person there is a $775 deficit that is owed to the user.
Again, multiply that by the many who went for the Adcentral Family package and it’s another shovel that makes the hole even bigger.
Even if you apply the referral program into the picture, you still have to deal with the deficit of each new referral coming in, not to mention the money being owed to people who are referring others into the business. Another shovel for an ever growing hole.
Supposedly (I know I’m saying this word a lot), in order to pay everyone, TelexFree needed to have new people enter the program and use their investments to pay off older ones. This makes sense if you apply the math above and if it’s true, then TelexFree is indeed a ponzi scheme.
As for the pyramid scheme arguments, that can also be applied here because there isn’t much of a product that exists other than the VOIP. Most of the money coming into the company was through people trying to get others into it.
Final Rating: TelexFree
Red Flag (Scam)
0 out of 10 stars. I believe it to be a ponzi scheme and will never recommend it or any other program like it to anyone. If you want a real way to earn money from home, here is my #1 recommendation.
My final thoughts & more reasons TelexFree is a ponzi:
I refuse to believe that just posting ads online is good enough to make money. In my opinion it sounds like a front for something that doesn’t exist. I said earlier I reviewed other programs whose business models were similar to that of TelexFree.
To name a few: Zeek Rewards ($600 million dollar ponzi scheme) and Banners Broker (Ponzi scheme total pending). Zeek Rewards also had people place ads and earn points each time they could redeem for money. That turned out to be false.
Banner’s Broker promised massive traffic by having people advertise on their networks but that’s likely false too since those networks didn’t get squat for visitors.
In all of these examples, my main argument is that advertising on networks is pointless because the biggest ones are Google & Bing as well as their partners. To put up “daily ads” from my point of view being a marketer for many years is a waste of time and money. So even if it was real and TelexFree was actually paying people to do this, it’s a HUGE waste of money. They would be better off advertising on the big name networks.
Like I said before, I think the whole posting ads thing was a gimmick to cover up the real truth, but that’s my opinion and if you disagree with me, I’d love to hear your side.
Be careful of TelexFree copycats popping up:
I’ve seen this happen before with Zeek Rewards. When it went down, there were a lot of look alike programs sprouting, all claiming to be like Zeek Rewards but better. I advised against joining any of these programs. I expect the same will happen with TelexFree.
One thing I’ve learned is that in spite of a company getting a bad rep, there will always be those who still believe in it no matter what happens. With Zeek Rewards, there were MANY former member who in spite of the SEC’s claim that was a ponzi scheme still believed in the program. I am certain there are still a lot of people who also feel the same way about TelexFree.
Whatever the case is, whether you believe/don’t believe in the company, if you see any programs sprouting like it promising similar things as TelexFree did or stating they are the same, stay away from it.
Alternatives to TelexFree:
I personally do online business and what that means is that I have a website in which I promote certain products as an affiliate that people want. Once they come to my site and buy, I earn a commission. This isn’t an MLM, it’s simple affiliate work. It works for me and the ability to make an exta amount of money exists. There are even people who do this full time (including me) and make a handsome living.
Becoming successful in online business isn’t exactly difficult, but it does require proper guidance. As an alternative to TelexFree, I recommend you try online business. It’s NOT a get rich quick scheme, but it’s a hell of a better alternative than than any of these MLM’s and it’s completely legitimate.
Now I do realize that a large majority of people who joined TelexFree didn’t do it to start a business or get rich. They did it to make some extra money and aren’t interested in my preferred alternative.
That’s completely understandable, but I promise you that finding an extra way to make money from the internet is like a mine field and that means you need to be careful where you step, because scams are everywhere, whether it TelexFree, some shady MLM or even get rich quick programs.
They promise you easy money for little effort and that’s all it takes to give them your hard earned money. I am personally opposed to ANY MLM program, legitimate or not because many of them in my opinion are pyramid schemes. If you are looking to make extra money from home, there is a legitimate way to do it, but it does take work and proper guidance. However it yields great rewards in the long run and in my opinion is worth your time.
If you have a person story to share about TelexFree or would like to add anything, I would love to hear it!