That the filing of bankruptcy proceedings to escape criminal liability for the running of a billion dollar Ponzi scheme was absurd, is and always will be a given.

Absurder still are the fee claims submitted by firms hired by TelexFree to orchestrate the bankruptcy circus.

Despite being approached and hired only after TelexFree learned a regulatory shutdown was imminent, these firms are now collectively demanding they be paid millions of dollars in fees for their services.

One such firm is Gordon Silver, who the SEC claim do not deserve any of the $230,000 in fees they believe they are owed.

At the core of the SEC’s objection is that the services provided to Gordon Silver were ‘
were not necessary to the administration of the estate (TelexFree)
‘, which ‘
is required for a court to approve an application under Bankruptcy Code Section 330(a)
‘.

I don’t know what Silver’s response to this charge might be, but it’s a hard case to make that your bankruptcy filing was in any way required as part of the administration of TelexFree, a billion dollar Ponzi scheme.

Gordon Silver was hired on April 13 and filed TelexFree’s Chapter 11 petition late that evening.1

On April 15 – less than 48 hours later – the FBI seized all of TelexFree’s computers and books and records as well as $38 million in cashier’s checks, and the Commission filed an enforcement action in the District of Massachusetts charging that TelexFree was an enormous pyramid scheme.

The next day, the court in the Commission’s case entered a preliminary order freezing all of TelexFree’s assets and prohibiting it from raising more money from actual or prospective investors.

At that point, TelexFree was effectively out of business, and it was obvious that no reorganization was feasible.

Stephen Darr, the Chapter 11 Trustee put in charge of TelexFree, recently confirmed as much. Putting an end to the ongoing speculation by TelexFree affiliates that the Ponzi scheme might come back, Darr stated in July that he had ‘
no intention of reorganizing or reactivating
‘ TelexFree.

One would think that trying to push ahead with bankruptcy proceedings to subvert joint action from the SEC, Massachusetts Securities Division and Department of Justice was wholly futile, but Gordon Silver instead chose to milk the situation for all it was worth:

Nevertheless, Gordon Silver continued to churn the case – racking up nearly $192,000 in fees after April 15.

The firm now wants TelexFree’s unsecured creditors – virtually all of whom are
innocent victims
of the pyramid scheme –
to foot the bill for its extravagance.

Just how outrageous was Gordon Silver’s extravagance?

First, the firm filed and argued a frivolous motion charging that the asset freeze entered in the Commission’s enforcement case violated the automatic stay in Bankruptcy Code Section 362(a).

Second,
the firm should never have been hired at all
. It collaborated in the unjustified decision to file for bankruptcy in Las Vegas, even though th

🤖 Quick Answer

What was the SEC's main objection to Gordon Silver's bankruptcy fee claim in the TelexFree case?

The SEC objected to Gordon Silver's $230,000 fee claim, arguing that the services provided were not necessary for administering the TelexFree estate. According to bankruptcy law requirements, only services essential to estate administration qualify for court approval and compensation.

Why did TelexFree hire firms like Gordon Silver during bankruptcy proceedings?

TelexFree engaged these firms after learning that regulatory shutdown was imminent. The companies were contracted to manage the bankruptcy process, though their engagement occurred only after the company faced certain regulatory action.

What was the underlying criminal case against TelexFree?

TelexFree was accused of operating a billion-dollar Ponzi scheme. The company filed for bankruptcy protection, which the SEC characterized as an attempt to escape criminal liability for fraudulent operations.

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