TelexFree LLC’s bankruptcy advisers will forgo more than $1 million in fees they charged during the short time they worked for the company, which has since been accused of operating a massive pyramid scheme.
To head off objections from the U.S. Securities and Exchange Commission, one of the many that have sued over the alleged fraud, attorneys at Greenberg Traurig and turnaround advisers at Alvarez & Marsal will dramatically slash the amount they charged TelexFree in the early days of its Chapter 11 case.
Court papers show that Greenberg will cut its request for $969,000 in fees to just $320,000, while its requested expenses of about $76,000 will remain the same. A&M’s roughly $876,000 in fees and expenses, meanwhile, will be cut to $435,000.
In return for these agreed-to reductions—which together total $1.09 million—TelexFree’s court-appointed trustee and the SEC won’t object as the firms seek bankruptcy-court approval for the fees (all debtor advisers in Chapter 11 must submit their fees for court approval). The SEC will also ask a district judge to lift the order freezing TelexFree’s assets so the firms can collect their fees.
Massachusetts-based TelexFree sought Chapter 11 protection in April with Greenberg as its counsel and A&M as its financial adviser. Two days later, the SEC filed a civil lawsuit accusing the company, which sold international calling plans, of operating a massive pyramid scheme. (The company and its co-owners were later hit with criminal charges related to the alleged fraud, which they’ve denied.)
Less than two months after the bankruptcy filing, a bankruptcy judge turned over control of the company, which is no longer operating, to a court-appointed Chapter 11 trustee. As trustee, Stephen P. Darr now is tasked with winding down the company and recovering assets to pay creditors. He has his own team of advisers, so Greenberg and A&M are no longer needed to assist the company.
A Massachusetts bankruptcy judge is expected to take up the reduced fee requests at a hearing next week.
Write to Jacqueline Palank at jacqueline.palank@wsj.com. Follow her on Twitter at @PalankJ.
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