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TelexFree, LLC filed chapter 11 on April 13, 2014 from Las Vegas after its board authorized the case and designated Stuart MacMillan and Joseph Craft to execute the filing and retain Greenberg Traurig, Alvarez & Marsal, and other professionals source filing. The first-day declaration framed the business as a VoIP seller built around the "99TelexFree" product and distributed through a multilevel-marketing promoter network run by founders James Merrill and Carlos Wanzeler source filing.
The operating story already pointed to a collapse rather than a conventional reorganization. Management told the court revenue exceeded $1 billion in 2013, but promoter withdrawal demands under the compensation structure jumped from roughly $8 million to more than $86 million in the week before bankruptcy. The debtors had only 14 employees with weekly payroll of about $9,878, while Brazilian authorities had already shut down related entity Ympactus in July 2013 and the Massachusetts Securities Division had issued subpoenas in early 2014 source filing. The chapter 11 filing was presented as a way to safeguard cash, stop the prepetition comp plans, and sort legitimate participant claims from the massive promoter liability overhang source filing.
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