Back in April the TelexFree Trustee filed a
host of clawback adversary proceedings
against TelexFree insiders.

The Trustee was required to commence the Adversary Proceeding before the

Criminal Action could be resolved because the expiration of the Statute of Limitation relevant to these actions was approaching and was clearly going to expire before the Criminal Action was resolved.

However, in commencing these actions, the Trustee does not intend to interfere with the proper administration of the Criminal Actions nor prejudice the Government’s prosecution of those actions.

Now, in an attempt to rectify possible interference, the Trustee has filed for a stay on the clawback proceedings.

Of concern is that the Trustee’s clawback proceedings would potentially

permit the targets of the Criminal Action to use the Adversary Proceeding to conduct discovery, which could result in the premature and broad disclosure of the essentials of the Government’s case in chief, allowing the defense to tailor its presentation to meet that anticipated proof.

Additionally, the use of discovery in the Adversary Proceeding could be used to harass or intimidate potential witnesses for the Government, some of whom are also named as Defendants in the Adversary Proceeding.

Whether any of the TelexFree insiders the Trustee has sued are indeed witnesses for the DOJ is not disclosed.

If the court grants the Trustee’s request for a stay, all of the clawback adversary proceedings will be put on hold till Merrill’s criminal trial in October.

This is in line with the
SEC’s civil case against TelexFree
, which has
already been stayed
.

Stay tuned…

🤖 Quick Answer

What actions did the TelexFree Trustee take regarding clawback proceedings in April?
The TelexFree Trustee filed multiple clawback adversary proceedings against TelexFree insiders to recover assets before the statute of limitations expired, which was expected to occur prior to the resolution of ongoing criminal actions against the defendants.

Why did the Trustee file for a stay on the clawback proceedings?
The Trustee filed for a stay to prevent potential interference with the criminal prosecution and to avoid prejudicing the Government's criminal actions, recognizing that the clawback proceedings could compromise the proper administration of the parallel criminal cases.

🔗 Related Articles

- Faith Sloan quibbles over securities fraud, owes lawyer $50,000+
- TelexFree delay preliminary injunction hearing
- TelexFree insiders try to cut prelim injunction deals
- Did Jim Merrill’s Ponzi empire ruin his brother’s career?
- Carlos Wanzeler “will definitely stay in Brazil”