A federal court in Massachusetts recently denied dismissal motions from six defendants in the TelexFree class-action lawsuit, including Bank of America and Wells Fargo. The ruling allows claims against these entities to advance, keeping a significant portion of the litigation active over the alleged multi-billion dollar Ponzi scheme. Five other defendants, however, secured full dismissal from the case.

The Sheffield Group, PNC Bank N.A., International Payout Systems, Garvey Schubert Barer P.C., and PricewaterhouseCoopers LLP were among those successfully removed from the suit. These five entities convinced the court that the Fifth Amended Complaint lacked sufficient grounds to proceed with claims against them.

The Estate of Jeffrey A. Babener received a partial dismissal. The court granted the Babener Estate relief from tortious aiding and abetting and civil conspiracy claims. Other allegations against the estate in the Fifth Amended Complaint, however, were upheld.

Mauricio Cardenas, Bank of America N.A., Dustin Sparman and Vantage Payments LLC, TD Bank N.A., Wells Fargo Advisors LLC and Wells Fargo Bank N.A., and ProPay Inc. remain as defendants. Their motions to dismiss the Fifth Amended Complaint were denied.

The court found the Fifth Amended Complaint adequately pleaded an underlying fraud against Wells Fargo and Mauricio Cardenas. This means the plaintiffs provided enough initial evidence to support their claims that these parties were involved in or facilitated the TelexFree scheme.

Bank of America argued it lacked actual knowledge of TelexFree's fraudulent operations before June 2013. The court agreed with this point regarding the early period. But the Fifth Amended Complaint does support an inference that Bank of America had actual knowledge of TelexFree's fraudulent scheme by late 2013. The court deemed it plausible that Bank of America's facilitation of a $30 million transfer from IPS to TelexFree on March 17, 2014, substantially aided TelexFree in absconding with victim funds.

This transfer happened shortly before TelexFree filed for bankruptcy. Law enforcement intercepted Joseph Craft leaving TelexFree headquarters with $38 million in cashier's checks issued by Wells Fargo Bank the day after the bankruptcy filing. Later, authorities uncovered $20 million in cash in an apartment linked to TelexFree co-founder Carlos Wanzeler. On March 17, 2014, it is plausible Bank of America knew TelexFree was a pyramid scheme, that IPS processed payments for it, and that the $30 million transfer would further the scheme. The plaintiffs' financial losses plausibly resulted directly and foreseeably from Bank of America's facilitation of that transfer.

TD Bank's alleged reactions to various red flags constitute circumstantial evidence that the bank "actually knew" TelexFree was a fraud. The Fifth Amended Complaint alleges TD Bank transferred TelexFree funds between accounts to help conceal the source of its money. Given the inference of actual knowledge, these allegations are sufficient at the pleading stage to establish substantial assistance. The same facts supporting an inference of TD Bank's knowledge and continued assistance also support an inference that TD Bank shared TelexFree's intent to defraud.

When Vantage Payments began working with TelexFree, it was reportedly aware that TelexFree operated a multilevel marketing scheme guaranteeing returns for passive investments. Vantage also knew TelexFree's business model could not sustain the promised returns. Nevertheless, Vantage solicited payment processors for TelexFree and registered TelexFree, LTD in the United Kingdom to manage the scheme's EU operations. The court previously found plaintiffs had a reasonable likelihood of success on their tortious aiding and abetting claim against Vantage and Sparman. The Fifth Amended Complaint states a claim against Sparman for both tortious aiding and abetting and "substantial assistance" conspiracy.

ProPay Inc. provided payment processing services to TelexFree from October 2012 to at least January 2014, handling more than $110 million in payments. ProPay was reportedly aware of TelexFree's business model and its legal issues in Brazil during this period. By alleging ProPay furthered the unlawful scheme, whether before or after their investments, the plaintiffs have sufficiently established their losses are "fairly traceable" to ProPay at the pleading stage.

In related proceedings, the class-action's Fifth Amended Complaint also survived several Motions to Strike, a Motion to Remand, and a Motion to Stay. These additional rulings further solidify the lawsuit's progress.

The TelexFree scheme, which promised returns on Voice over IP (VoIP) packages, collapsed in 2014, affecting hundreds of thousands of participants globally.