Archives for TelexFree

TelexFree – Final Judgment against Randy Crosby

Posted by ASDUpdates on May 5, 2018No Comments

SEC Obtains Final Judgment Against Promoter of Pyramid Scheme Targeting Latino Community

Litigation Release No. 24124 / April 30, 2018

Securities and Exchange Commission v. TelexFree, Inc. et al., No. 14-cv-11858 (D. Mass. filed Apr. 17, 2014)

The Securities and Exchange Commission announced that it has obtained a final judgment in a fraud case against a promoter of a pyramid scheme targeting Latino communities.

The final judgment, entered on April 27, 2018 by a federal district court in Boston, Massachusetts, permanently enjoins Randy Crosby from violating Section 5 of the Securities Act of 1933 and imposes a conduct-based injunction. The judgment orders Crosby to pay $294,014 in disgorgement, but that is deemed satisfied by an order requiring Crosby to transfer certain assets to settle an adversary action against Crosby filed by Stephen Darr, the Chapter 11 Trustee of TelexFree LLC, TelexFree, Inc., and TelexFree Financial, Inc. in the bankruptcy case and through a payment plan. In settling the SEC’s charges, Crosby admitted that he was a promoter of TelexFree, appearing in promotional videos that were posted on YouTube and making daily marketing presentations.

The SEC has previously obtained final judgments by consent against TelexFree’s co-owner and president and its CFO, its international sales director and another promoter of TelexFree, who also was ordered to jail for civil contempt arising from his repeated violations of court orders.

The SEC’s litigation continues against TelexFree, its other co-owner, and the remaining promoters of the alleged TelexFree pyramid scheme.

TelexFree: SEC Final Judgments Against Merrill and Craft

Posted by ASDUpdates on September 13, 2017No Comments

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23933 / September 12, 2017

Securities and Exchange Commission v. TelexFree, Inc. et al., No. 14-cv-11858 (D. Mass. filed Apr. 17, 2014)

SEC Obtains Final Judgments Against Officers of Pyramid Scheme Targeting Latino Community

The Securities and Exchange Commission announced that it has obtained final judgments in a fraud case against the co-owner and president and the CFO of a pyramid scheme targeting Latino communities.

The final judgments, entered on September 12, 2017 by consent by a federal district court in Boston, Massachusetts, permanently enjoin both James M. Merrill, of Ashland, Massachusetts, and Joseph H. Craft, of Kevil, Kentucky, from violating Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, impose conduct-based injunctions on both men, a permanent officer-and-director bar on Merrill, and a five-year officer-and-director bar on Craft. Merrill’s final judgment deems his liability of approximately $3.6 million in disgorgement and prejudgment interest satisfied by the order of restitution in the related criminal case. Craft’s final judgment to pay $298,708 in disgorgement and prejudgment interest and a $50,000 penalty is deemed satisfied by the order requiring Craft to transfer certain assets to settle an adversary action against Craft and his business filed by Stephen Darr, the Chapter 11 Trustee of TelexFree LLC, TelexFree, Inc., and TelexFree Financial, Inc. in the bankruptcy case.

In settling the SEC’s charges, Craft admitted to preparing financial statements provided to telecommunications regulators, as well as a financial regulator, materially overstating the pyramid scheme’s income.

Merrill and Carlos N. Wanzeler, the other co-owner and treasurer of TelexFree – were previously charged criminally. Merrill pled guilty to the criminal charges and was sentenced to six years’ imprisonment. Wanzeler is a fugitive from justice. The SEC has previously obtained final judgments by consent against the international sales director and a promoter of TelexFree, who also was ordered to jail for civil contempt arising from his repeated violations of court orders.

The SEC’s litigation continues against TelexFree, Wanzeler, and the remaining promoters of the alleged TelexFree pyramid scheme.

 

https://www.sec.gov/litigation/litreleases/2017/lr23933.htm

TelexFree: Merrill Sentenced to 6 Years

Posted by ASDUpdates on March 22, 2017No Comments
Department of Justice
U.S. Attorney’s Office
District of Massachusetts

FOR IMMEDIATE RELEASE
Wednesday, March 22, 2017

Former President of Telexfree Sentenced for Billion Dollar Pyramid Scheme

BOSTON – The former President of Telexfree, Inc., a global pyramid scheme disguised as an internet telecom company, was sentenced today in U.S. District Court in Worcester.

James Merrill, 55, of Ashland, was sentenced by U.S. District Court Judge Timothy S. Hillman to six years in prison and three years of supervised release. In October 2016, Merrill pleaded guilty to one count of wire fraud conspiracy and eight counts of wire fraud. He also agreed to forfeit approximately $140 million and other assets.

“Despite knowing that Telexfree was a pyramid scheme, Mr. Merrill profited for years at the expense of the hard-working individuals who invested in the fraudulent company,” said Acting U.S. Attorney William D. Weinreb. “For the hundreds of thousands of investors, here and around the world, who were taken in by the lies promoted by Mr. Merrill and Telexfree, today’s sentence provides a measure of justice. Mr. Merrill’s greed damaged the livelihoods of thousands of people who were simply struggling to make ends meet.”

“While the harm and damage James Merrill caused by stealing more than $3 billion from innocent investors can never be repaired, his victims in more than 240 countries around the world can take some small measure of satisfaction that he is now looking at six years in federal prison and a substantial forfeiture as repayment for his crimes.” said Matthew Etre, Special Agent in Charge of Homeland Security Investigations in Boston. “HSI special agents will continue to aggressively investigate those who seek to profit by taking advantage of others.”

Between February 2012 and April 2014, Merrill was the President of TelexFree, Inc., which sold a “voice-over-internet-protocol” (VOIP) telephone service, similar to Skype, for which customers could sign up on a website maintained by TelexFree. TelexFree, however, was a pyramid scheme; all of the money TelexFree paid out came, not from sales of its product, but from new participants paying TelexFree to sign up as “promoters” for the company.

TelexFree’s website prominently featured Merrill as the leader of the company and as an experienced businessman in the telecom field. As the website advertised at various times, participants paid $1,425 or $339 to sign up with TelexFree, after which they would be paid $100 per week or $20 per week to post classified ads every day on the internet. The company couched those payments in terms of “buying back” unused VOIP packages the participants were unable to sell, but the reality was that participants were guaranteed an annual return of over 200% on their money without having to sell anything. Among other things, emails showed Merrill’s awareness that the ad-posting was intended only to ensure that people visited TelexFree’s web site as opposed to generating actual retail sale of the VOIP product. Participants spent minutes a day cutting and pasting ads into various classified ad sites provided by TelexFree, which were already saturated with thousands of ads posted by earlier participants.

Participants were also given substantial financial incentives to recruit others to join the scheme. To receive bonuses for recruiting others, in theory each participant needed to have one VOIP customer. But in reality, participants met this requirement simply by buying the product themselves and, in 97% of instances, never using it. In this way, TelexFree created the illusion that it had hundreds of thousands of legitimate VOIP customers. On paper the company sold about 12.4 million VOIP plans, but in reality it had a tiny number of legitimate customers, an even smaller number of which had actually paid money to TelexFree for the service. Overall, the nearly 2 million who participated in TelexFree made 96% of their compensation, not from selling the company’s VOIP service, but from ad-posting and recruiting others to join.

TelexFree derived only a fraction of its total revenue in a two-year period from sales of VOIP service – approximately 2%. The remaining 98% came from new people buying into the scheme. TelexFree could only pay the returns it had promised to its existing promoters by bringing in money from newly-recruited promoters.

Beginning in late 2012, involvement in TelexFree spread rapidly, and by April 2014, well over a million people worldwide had signed up with the company. This included over 20,000 people in Worcester, Mass. alone, and thousands more in Boston, Framingham, Chelsea and other communities statewide. Meanwhile, beginning in 2013, Merrill received increasingly frequent warnings that the company was a pyramid scheme. Beginning in August 2013, Merrill began to take steps to change how the company did business, but Merrill never alerted the public, even though over a million people signed up for TelexFree between that month and TelexFree’s collapse.

In December 2013, Merrill wired himself and two co-conspirators a total of $10 million from TelexFree accounts. On April 14, 2014, Telexfree filed for bankruptcy, at which point it owed approximately $6 billion to its participants, while having only about $120 million on hand (about 2% of what it owed). At that point, approximately 1,855,000 participants worldwide lost money in the scheme, with total losses of about $3,045,000,000. Overall, these victims came primarily from the United States (all 50 states), Brazil, China, Portugal, Peru, other Central and South American nations, Italy, and Russia, with smaller victim populations in dozens of other countries.

Acting U.S. Attorney Weinreb and HSI SAC Etre made the announcement today. The U.S. Attorney’s Office also received valuable assistance from the Federal Bureau of Investigation, the Brazilian Federal Police based in Vitoria, Brazil, the Securities & Exchange Commission, and the Massachusetts Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts. Assistant U.S. Attorneys Andrew E. Lelling and Neil J. Gallagher, Jr., of Weinreb’s Economic Crimes Unit are prosecuting the case.

Topic:
Financial Fraud
Updated March 22, 2017

TelexFree: Feds Release Photo of $20 Million in Box Spring

Posted by ASDUpdates on January 24, 2017No Comments

Photo of $20M seized in box spring following arrest of Brazilian national in scheme to launder proceeds of TelexFree

The owner of this mattress, Cleber Rocha, a Brazilian national,  is being detained due to being a flight risk.

TelexFree – Brazilian National Hid $20 Million in Box Spring

Posted by ASDUpdates on January 6, 2017No Comments

Department of Justice
U.S. Attorney’s Office
District of Massachusetts

FOR IMMEDIATE RELEASE
Thursday, January 5, 2017

Agents Seize Approximately $20 Million and Arrest Brazilian National in Scheme to Launder TelexFree Funds

BOSTON –Approximately $20 million in cash hidden inside a box spring in a Westborough, Mass. apartment, was seized late yesterday, and a Brazilian man was arrested in connection with conspiring to launder proceeds of the massive TelexFree pyramid scheme.

Cleber Rene Rizerio Rocha, 28, was charged in a criminal complaint with one count of conspiring to commit money laundering. Rocha was detained following an appearance today before U.S. District Court Magistrate Judge Judith G. Dein.

According to the complaint, in April 2014, federal agents searched the headquarters of TelexFree, Inc., in Marlborough, Mass. Later that day, Carlos Wanzeler, one of the founders of the company, allegedly fled to Brazil, his native country, where he has remained. Wanzeler and TelexFree co-founder James Merrill were indicted in July 2014 on charges that they operated TelexFree as a massive pyramid scheme. Merrill pleaded guilty to those charges in October 2016 and is awaiting sentencing.

The complaint alleges that an intermediary working on Wanzeler’s behalf contacted an associate for help transferring millions of dollars of TelexFree money – still hidden in the greater Boston area – from the United States to Brazil. The associate, who subsequently became a cooperating witness for the government, allegedly arranged with Wanzeler’s nephew in Brazil to launder the cash through Hong Kong, convert it to Brazilian reals, and transfer it to Brazilian accounts.

According to court documents, Rocha, acting as a courier for Wanzeler’s nephew, flew from Brazil to JFK Airport in New York City a few days ago. Yesterday, Rocha met the cooperating witness at a restaurant in Hudson, Mass., and allegedly gave him $2.2 million in a suitcase. After the meeting, agents followed Rocha to an apartment complex in Westborough, Mass., and later arrested him. That night, federal agents searched an apartment at the Westborough complex and seized a massive stockpile of cash hidden in a box spring. The cash appears to total approximately $20 million.

The charging statute provides for a sentence of no greater than 20 years in prison, three years of supervised release and a fine of $250,000 or twice the gross gain or loss, whichever is greater. Actual sentences for federal crimes are typically less than the maximum penalties. Sentences are imposed by a federal district court judge based on the U.S. Sentencing Guidelines and other statutory factors.

United States Attorney Carmen M. Ortiz and Matthew Etre, Special Agent in Charge of Homeland Security Investigations in Boston, made the announcement today. Assistant U.S. Attorneys Andrew E. Lelling and Neil J. Gallagher, Jr., of Ortiz’s Economic Crimes Unit are prosecuting the case.

The details in the complaint are allegations. The defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

TelexFree: SEC Status Report on Civil Case 14-cv-11858

Posted by ASDUpdates on October 31, 20162 Comments

telexfree-logoPerhaps I am confused or maybe it is a misprint, but this is the Status Report in the TelexFree civil case brought by the SEC:

 

Status Report

 
Plaintiff Securities and Exchange Commission hereby informs the Court that, yesterday, October 24, 2016, in United States District Court for the District of Massachusetts, defendant James Merrill entered a guilty plea in the criminal case USA v. Wanzeler, et al. (D. Mass. 4:14-cr- 40028) pending before Judge Hillman. The Court did not accept Merrill’s guilty plea at that time and has scheduled sentencing for February 2, 2017. The other criminal defendant, Carlos Wanzeler, fled to Brazil upon learning of the federal charges filed against him where he remains. There is currently still a federal warrant for his arrest.

 
Respectfully submitted,
/s/ Deena R. Bernstein
Deena R. Bernstein (Mass. Bar No. 558721)
Attorney for Plaintiff
SECURITIES AND EXCHANGE COMMISSION

Yep, it says that the court did not accept Merrill’s guilty plea at that time.  OK, then why did they schedule sentencing?

TelexFree: SEC Press Release on Merrill Pleading Guilty

Posted by ASDUpdates on October 25, 2016No Comments

sec-logo

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23678 / October 25, 2016

Securities and Exchange Commission v. TelexFree, Inc. et al., No. 1:14-cv-11858-DJC (D. Mass. filed Apr. 15, 2014)

United States v. Carlos Nataniel Wanzeler and James Matthew Merrill, Criminal Action No. 14-cr-40028-TSH (D. Mass. filed May 9, 2014)

Telexfree President Pleads Guilty to Operating Pyramid Scheme in Related Criminal Action

On October 24, 2016, James M. Merrill, of Ashland, Massachusetts, the former president of TelexFree, Inc. and TelexFree, LLC, pled guilty to criminal charges related to his operating a pyramid scheme through TelexFree. On May 9, 2014, Merrill and another defendant, Carlos N. Wanzeler, who is a fugitive located in Brazil, were charged in a federal criminal complaint, charging them with conspiracy to commit wire fraud. The criminal charges against Merrill arose out of the same fraudulent conduct alleged by the SEC in a civil securities fraud action filed in April 2014.

The SEC’s complaint alleged that TelexFree, Merrill, Wanzeler, and other defendants claimed to run a multilevel marketing company that sold telephone service based on “voice over Internet” (VoIP) technology but actually were operating an elaborate pyramid scheme. In addition to charging Merrill and the company, the SEC charged several other TelexFree officers and promoters, and named several entities related to TelexFree as relief defendants based on their receipt of ill-gotten investor funds.

The SEC’s action, which remains pending against all parties, seeks injunctions against each of the defendants from further violations of the charged provisions of the federal securities laws, disgorgement of ill-gotten gains, and civil monetary penalties, among other things.

For further information, see Litigation Release Nos. 22974 (Apr. 17, 2014) (SEC Halts Pyramid Scheme Targeting Dominican and Brazilian Immigrants); 22992 (May 13, 2014) (Criminal Charges Filed Against Two Principals of Massachusetts-Based Telexfree); 23450 (Jan. 20, 2016) (Florida Resident Ordered to Jail Based On Violating Court Orders Obtained by the SEC).

 

http://www.sec.gov/litigation/litreleases/2016/lr23678.htm


Modified: 10/25/2016

TelexFree: DOJ Press Release on Merrill

Posted by ASDUpdates on October 24, 2016No Comments
Department of Justice
U.S. Attorney’s Office
District of Massachusetts

FOR IMMEDIATE RELEASE
Monday, October 24, 2016

President of Telexfree Pleads Guilty to Billion Dollar Pyramid Scheme

Approximately $140 million forfeited, along with property, luxury vehicles and boats

BOSTON – The President of Telexfree, Inc., a pyramid scheme that was disguised as an internet telecom company, pleaded guilty in U.S. District Court in Worcester today.

Merrill, 55, of Ashland, pleaded guilty to one count of wire fraud conspiracy and eight counts of wire fraud.  U.S. District Court Judge Timothy S. Hillman scheduled sentencing for Feb. 2, 2017.  Merrill’s trial was scheduled to begin today.

“The pyramid scheme Mr. Merrill operated defrauded thousands of victims throughout Massachusetts, and in fact, around the world,” said United States Attorney Carmen M. Ortiz.  “Mr. Merrill lined his pockets on the backs of hard working individuals who, in some cases, invested their entire savings.  We hope today’s guilty plea brings some degree of justice to the many victims in this case.”

“The significance of a guilty plea in a case of this magnitude cannot be overstated,” said Special Agent in Charge Matthew Etre of Homeland Security Investigations Boston. “James Merrill is finally facing justice for his role in bilking more than $3 billion from innocent investors, in more than 240 countries around the world, for what amounted to little more than greed.  HSI special agents will continue to aggressively investigate those who seek to profit by taking advantage of others.”

Between February 2012 and April 2014, Merrill was the President of TelexFree, Inc., which sold a “voice-over-internet-protocol” (VOIP) telephone service, similar to Skype, for which customers could sign up on a website maintained by TelexFree.  TelexFree, however, was a pyramid scheme whereby all of the money TelexFree paid out came, not from sales of its product, but from new participants continuously paying TelexFree to sign up as “promoters” for the company.

TelexFree’s website prominently featured Merrill as the leader of the company and as an experienced businessman in the telecom field.  As the website advertised at various times, participants paid $1,425 or $339 to sign up with TelexFree, after which they would be paid $100 per week or $20 per week to post classified ads every day on the internet.  The company couched those payments in terms of “buying back” unused VOIP packages the participants were unable to sell, but the practical reality was that participants were guaranteed an annual return of over 200% on their money without having to sell anything.  Among other things, emails showed Merrill’s awareness that the ad-posting was intended only to ensure that people visited TelexFree’s web site as opposed to generating actual retail sale of the VOIP product.  Participants spent minutes a day cutting and pasting ads into various classified ad sites provided by TelexFree, which were already saturated with thousands of ads posted by earlier participants.

Participants were also given substantial financial incentives to recruit others to join the scheme.  To receive bonuses for recruiting others, in theory each participant needed to have one VOIP customer.  But in reality, participants met this requirement simply by buying the product themselves and, in 97% of instances, never using it.  In this way, TelexFree created the illusion that it had hundreds of thousands of legitimate VOIP customers.  On paper the company sold about 12.4 million VOIP plans, but in reality it had a minute number of legitimate customers, an even smaller number of which had actually paid money to TelexFree for the service.  Overall, the nearly 2 million who participated in TelexFree made 96% of their compensation, not from selling the company’s VOIP service, but from ad-posting and recruiting others to join.

TelexFree derived only a fraction of its total revenue in a two-year period from sales of VOIP service – approximately 2%.  The remaining 98% came from new people buying into the scheme. TelexFree could only pay the returns it had promised to its existing promoters by bringing in money from newly-recruited promoters.

Beginning in late 2012, involvement in TelexFree spread rapidly, and by April 2014, well over a million people worldwide had signed up with the company.  This included over 20,000 people in Worcester, Mass. alone, and thousands more in Boston, Framingham, Chelsea and other communities statewide.  Meanwhile, beginning in 2013, Merrill received increasingly frequent warnings that the company was a pyramid scheme.  Beginning in August 2013, Merrill began to take steps to change how the company did business, but Merrill never alerted the public, even though over a million people signed up for TelexFree between that month and TelexFree’s collapse.

In December 2013, Merrill wired himself and two co-conspirators a total of $10 million from TelexFree accounts.  On April 14, 2014, Telexfree filed for bankruptcy, at which point it owed approximately $5 billion to its participants, while having only about $120 million on hand (about 2% of what it owed).  At that point, approximately 965,225 participants lost money in the scheme, with total losses of about $1,755,927,755.  Overall, these victims came primarily from the United States (all 50 states), Brazil, China, Portugal, Peru, other Central and South American nations, Italy, and Russia, with smaller victim populations in dozens of other countries.

According to the terms of the plea agreement, Merrill will be sentenced to no more than 10 years in prison.  Merrill also agreed to forfeit approximately $140 million, numerous real estate properties, luxury vehicles and boats.  Actual sentences for federal crimes are typically less than the maximum penalties.  Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and other statutory factors.

U.S. Attorney Ortiz and HSI SAC Etre made the announcement today.  The U.S. Attorney’s Office also received valuable assistance from the Federal Bureau of Investigation, the Brazilian Federal Police based in Vitoria, Brazil, the Securities & Exchange Commission, and the Massachusetts Securities Division of the Office of the Secretary of the Commonwealth of Massachusetts. Assistant U.S. Attorneys Andrew E. Lelling and Neil J. Gallagher, Jr., of Ortiz’s Economic Crimes Unit are prosecuting the case.

If you believe that you are a victim of the alleged TelexFree, Inc. scheme, please enter a claim for reimbursement on the following site:  www.telexfreeclaims.com [external link].

Topic:
Financial Fraud
Updated October 24, 2016

BREAKING NEWS -TelexFree: Merrill to Plead GUILTY on Monday….

Posted by ASDUpdates on October 21, 20162 Comments

from the Boston Globe 2 hours ago:


Former TelexFree CEO to plead guilty in $3b pyramid scheme

 

17fraud - ***warning: image lo res, do not use for more than 1.25 columns *** James Merrill (telex media)
James Merrill.

James Merrill, the former chief executive of TelexFree Inc., an alleged $3 billion global pyramid scheme, is pleading guilty to fraud and other charges in a case that has ensnared more victims than any other in history, the US Attorney in Boston said Friday.

TelexFree started in Brazil and was run from Marlborough from 2013 until April 2014, when federal agents raided the offices and the company filed for federal bankrutpcy protection.

Beth Healy can be reached at beth.healy@globe.com. Follow her on Twitter @HealyBeth.


There is no word yet on which or how many of the 17 counts he will plead to; this comes from the Docket itself:
10/21/2016 313 ELECTRONIC NOTICE OF HEARING as to James Matthew Merrill. Rule 11 Hearing set for 10/24/2016 at 2:30PM in Courtroom 2 – Worcester before District Judge Timothy S Hillman.Counsel is to contact U.S. Probation and Pretrial Services as soon as possible http://www.map.uscourts.gov/psi-interview-schedule to determine scheduling of the presentence interview. (Castles, Martin) (Entered: 10/21/2016)
 For more info on what a Rule 11 Hearing is, follow this link: https://www.law.cornell.edu/rules/frcrmp/rule_11
 Our thanks to PatrickPretty.com for the information!