Archives on September, 2016

BREAKING: Sann Rodrigues Makes Plea Deal in Visa Fraud Case

Posted by ASDUpdates on September 28, 2016One Comment

sann-rodrigues-top-telexfree-investorJust posted to the Docket files today in 15-cr-10227, USA v Rodrigues de Vasconcelos, the Defendant has agreed to plead Guilty to Count 1 (Visa Fraud).

Defendant expressly and unequivocally admits that he committed the crime charged in Count One of the Indictment, did so knowingly, and is in fact guilty of that offense.

Count One has a maximum penalty of 10 years incarceration; supervised release for 3 years; a fine of $250,000; and a mandatory special assessment of $100.

Pleading guilty may have consequences with respect to Rodrigues’ immigration status. Under federal law, there’s a wide range of crimes that are removable offenses, including the offense to which the defendant is pleading guilty.

I have posted the Agreement onto the Files website.

 

Zeek Rewards: Dawn and Daniel Olivares Sentenced

Posted by ASDUpdates on September 13, 2016No Comments
Department of Justice
U.S. Attorney’s Office
Western District of North Carolina

FOR IMMEDIATE RELEASE
Tuesday, September 13, 2016

ZeekRewards’ Former Chief Operating Officer And Former Senior Technology Officer Sentenced In Federal Court

CHARLOTTE, N.C. – U.S. District Judge Max Cogburn, Jr., sentenced Dawn Wright Olivares, 48, and Daniel C. Olivares, 34, both of Clarksville, Ark., to 90 and 24 months in prison, respectively, for their involvement in an $850 million Internet Ponzi scheme that promised victims a bogus return on investments, announced Jill Westmoreland Rose, U.S. Attorney for the Western District of North Carolina.

The two Arkansas residents were associated with the Lexington, N.C. based Rex Venture Group, LLC (RVG), which owned and operated Zeekler and ZeekRewards.  In addition to the prison term imposed, Judge Cogburn also ordered each defendant to serve three years under court supervision.  The restitution amount will be set at a later date.

Michael Rolin, Special Agent in Charge of the United States Secret Service, Charlotte Field Division and Thomas J. Holloman III, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation Division (IRS-CI) join U.S. Attorney Rose in making today’s announcement.

According to filed court documents and today’s sentencing hearings, from January 2010 through August 2012, Dawn Wright Olivares, her step-son, Daniel Olivares, and Paul Burks, the owner of RVG, conspired with each other and engaged in Ponzi scheme that raised more than $850 million through a sham internet-based penny auction company named “Zeekler” and its purported advertising division “ZeekRewards” (collectively “Zeek”).  According to court records, the conspirators induced more than 900,000 victims – including over 1,500 victims in the Charlotte area – to invest in their fraudulent scheme, by falsely representing that Zeekler was generating massive retail profits from its penny auctions, and that the public could share in such profits through investment in ZeekRewards.  Court documents indicate that, at one point, the conspirators claimed that investors would be guaranteed a 125% return on their investment.

Court records show that the co-conspirators represented that victim-investors in ZeekRewards could participate in the Retail Profit Pool (RPP), which supposedly allowed victims collectively to share 50% of Zeek’s daily net profits.  The co-conspirators did not keep books and records needed to calculate such daily figures.  Instead, Burks simply made up the daily “profit” numbers.  Contrary to the conspirators’ claims, the true revenue from the scheme did not come from the penny auction’s “massive profits.”  Instead, approximately 98% of all incoming funds came from victim-investors, which were then used to make Ponzi-style payments to earlier victim investors.

In addition to promising massive returns on investments, the conspirators used a number of ways to promote Zeek to current and potential investors.  For example, the conspirators hosted weekly conference calls and leadership calls, where participants could call in and listen to Burks, Dawn Wright Olivares and others make false representations intended to encourage victim-investors to continue to invest money and to recruit others to invest in Zeek.  Burks and Dawn Wright Olivares also organized and attended “Red Carpet Events,” where victim investors came to hear details of the scheme in person.  During these events, Burks and his conspirators made false representations about the massive retail profits generated by Zeek.  They also used electronic and print media, including websites, emails and journals, to make false and misleading statements about the success of Zeekler to recruit victim investors.

As the Ponzi scheme grew in size and scope it became unsustainable and it eventually began to unravel as the outstanding liability resulting from the bogus 125% return on investment continued to rise beyond control.  By August 2012, the conspirators fraudulently represented to the collective victims that their investments were worth nearly $3 billion, but had no accurate books and records to even determine how much cash on hand was available to pay such liability.  Contrary to representations made to victim investors, at that time, the conspirators had only $340 million available to pay out investors.

According to court records, Dawn Wright Olivares was closely involved in the strategic operations and ultimately served as the Chief Operations Officer of Zeek.  Dawn Wright Olivares also owned 95% of Wandering Phoenix, LLC, a company that she used, among other things, to receive payments from Zeek and RVG.  During the course of the conspiracy, Dawn Wright Olivares and Wandering Phoenix received approximately $7.2 million in victim funds.

Daniel Olivares was RVG’s senior technology officer and was responsible for, among other things, database design, management and operations for Zeek.  During the course of the conspiracy, Daniel Olivares personally enriched himself with victim funds totaling approximately $3.1 million.  Other unnamed co-conspirators also personally enriched themselves with millions of dollars of victim funds.

Dawn Wright Olivares and Dan Olivares previously pleaded guilty to one count of investment fraud conspiracy.  Dawn Wright Olivares also pleaded guilty to one count of tax fraud conspiracy.

In July 2016, a federal jury convicted Paul Burks of wire and mail fraud conspiracy, wire and mail fraud, and tax fraud conspiracy, following a three-week trial.  Burks is currently awaiting sentencing.

In making today’s announcement, U.S. Attorney Rose thanked the U.S. Secret Service and IRS-CI for investigating the case, and the U.S. Securities & Exchange Commission, Division of Enforcement for its assistance with the investigation.

The prosecution is handled by Assistant United States Attorneys Jenny Grus Sugar and Corey Ellis of the U.S. Attorney’s Office in Charlotte.

Additional information and updated court filings about this and related cases filings can be accessed at the district’s website: http://www.justice.gov/usao/ncw/ncwvwa.html.

Updated September 13, 2016

TelexFree: Merrill and Wanzeler Charged in Superseding Indictment

Posted by ASDUpdates on September 9, 20162 Comments

newtelexfreelogoIn a 27 page document filed yesterday, the Grand Jury has added a few charges to the 2 individuals running TelexFree in the USA.  The co-defendants are now charged with 17 counts each, as indicated below:

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The superseding indictment also lists all items up for possible forfeiture and the list is huge. I have added this new Indictment and attachments onto the Files Website.

TelexFree: Judge Hillman Issues Memorandum on Merrill’s Motions to Suppress

Posted by ASDUpdates on September 6, 2016One Comment

telexfree-logoAs with many Ponzi scammers that got caught, motions were filed to suppress information obtained by search warrants, claiming the affidavit used to obtain these search warrants was over-broad and inaccurate.  Here’s what Judge Hillman thought about these motions:

James Matthew Merrill (Defendant) has been indicted for eight counts of wire fraud in violation of 18 U.S.C. § 1343 and one count of conspiracy to commit wire fraud in violation of 18 U.S.C. § 1349. The charges are related to TelexFree, Inc. (TelexFree), a company that Merrill and others allegedly ran as an illegal pyramid scheme. Merrill has filed four motions to suppress evidence obtained pursuant to three search warrants: (1) a warrant to search TelexFree’s headquarters in Marlborough, Massachusetts; (2) a warrant to search Xand Corporation, an electronic storage facility in Marlborough, Massachusetts; and (3) a warrant to search Merrill’s personal email account. 1 He also moves for a hearing pursuant to Franks v. Delaware, 438 U.S. 154 (1978), arguing that the affidavit that supported the search warrants contained false statements and material omissions of fact. For the reasons set forth below, Merrill’s motions to suppress and for a Franks hearing (Docket Nos. 237, 238, 239, 244) are denied.

1 Merrill also moved to suppress evidence obtained pursuant to a warrant to search Exigo Office Inc., an electronic storage facility located in Texas. The government has represented that it will not introduce at trial any evidence obtained from this search. Accordingly, Merrill’s motion with regard to Exigo is moot.

The argument Merrill is making is based on an affidavit by James Soares, a Special agent with Homeland Security Investigations, Judge Hillman had this to say:

Merrill has not shown any material misstatements of fact in Soares’s analysis of
TelexFree’s incoming revenue. Rather, he disagrees with Soares’s conclusions based on the facts set forth in the affidavit. Soares acknowledged the existence of the back office system but opined that the ratio of participants buying into TelexFree as promoters versus people buying the phone plan was not likely to be substantially different for customers paying with bank deposits and credit cards as compared to customers paying through the back office. Even if that conclusion was questionable, the underlying facts were disclosed in the affidavit, and Merrill has not challenged their veracity. Accordingly, he has not shown any material misstatements to warrant a Franks hearing.