The Securities and Exchange Commission froze TelexFree's assets and management within hours of accusing the company of running a pyramid scheme. This action followed investigators' discovery that executive Joseph Craft had attempted to siphon $37.9 million by misrepresenting his role.

The SEC filed its complaint on April 15. The Massachusetts Securities Division also filed a Ponzi scheme case against TelexFree that same day. However, the federal filing remained sealed until April 18.

This deliberate secrecy prevented defendants from getting advance notice of the temporary restraining order. Past cases taught the SEC that open filings allowed targets to move assets or flee before orders could be served. Federal prosecutors secured the restraining order first, then served TelexFree, stopping any asset transfers.

Judge Denise Casper approved the freeze. She found the SEC presented a strong case that TelexFree and eight individuals, including Merrill, Wanzeler, Labriola, Craft, Rodrigues de Vasconcelos, De La Rosa, Crosby, and Sloan, had violated securities laws. The judge also agreed violations would likely continue without intervention.

A genuine risk existed that defendants would hide or transfer assets. Corporate defendants had already moved over $23 million to Merrill and Wanzeler. This movement suggested a flight risk. Freezing assets served the public interest.

The temporary restraining order now prohibits TelexFree, its management, and key investors from further fraud. They cannot obtain money or property through false statements. They also cannot move funds or operate the scheme in any form.

The company was locked down by April 18, just three days after the initial complaint, effectively cutting off escape routes for the alleged perpetrators.