Tag Archives: criminal

Zeek Rewards: Paul Burks Sentencing Set For Mid-February

Judge Cogburn has issued the following Order:

THIS MATTER is before the court on the parties’ Joint Motion to Continue Sentencing (#119). Having considered the motion and reviewed the pleadings, the court enters the following Order. The court notes that the parties have requested that the court continue the sentencing hearing to or after January 30, 2017 and have reported that February 9th, 2017 is a known conflict for the counsels’ schedules.

ORDER
IT IS, THEREFORE, ORDERED that the parties’ Joint Motion to Continue Sentencing (#119) is GRANTED, and the Clerk of Court is instructed to place this matter on the next appropriate sentencing calendar.

The case docket sets a tentative date:

Sentencing set for 2/13/2017 09:30 AM in Courtroom, 401 W Trade St, Charlotte, NC 28202 before District Judge Max O. Cogburn Jr.

TelexFree: DOJ Press Release on Merrill

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….

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!

TelexFree: USA Motion to Exclude Civil Settlement with Gerald Nehra

carlos-wanzeler-and-james-merrill-telexfree-management-criminalsIn the federal criminal case against Merrill and Wanzeler, the government has filed a Motion in Limine (a motion filed by a party to a lawsuit which asks the court for an order or ruling limiting or preventing certain evidence from being presented by the other side at the trial of the case).

As most of you may recall, Nehra and Waak entered into a civil settlement agreement with the Zeek Rewards receiver in case 14-cv-351 in the Western District of North Carolina:

On September 21, 2015, the court appointed receiver filed a complaint against Nehra and Waak (both individually and against the firm Nehra & Waak) to recover damages from the harm that Zeek caused. Among other things, the complaint alleged that Nehra and Waak knew or should have known that Zeek was perpetrating an unlawful pyramid scheme.
In December 2016, Nehra, Waak, and their firm Nehra & Waak entered into a settlement agreement with the receiver. As part of the settlement agreement, Nehra and Waak agreed that “[w]hile they contend they acted in good faith as legal counsel, . . . acknowledge and agree that, based on their current knowledge, during the period of time they served as counsel for [Zeek, it ] in fact operated as an unlawful Ponzi and pyramid
scheme involving an unregistered investment contract that caused hundreds of millions of dollars in losses to innocent victims in the scheme.” As part of the agreement, Nehra and Waak agreed to a confession of judgement and paid $100,000 to the receiver. The district court accepted the settlement agreement and it was publicly filed on December 11, 2015.

I guess the public admission that Nehra and Waak knew they participated in one Ponzi scheme and then went on to participate in another might not look good for their veracity in the TelexFree criminal trial.

 

The United States respectfully moves this Court to exclude any evidence and/or
cross examination of government witness Gerald P. Nehra, a prior attorney for TelexFree,
regarding a December 2015 civil settlement agreement that Nehra and his firm entered
into with a court appointed asset receiver in the Western District of North Carolina. The
settlement agreement is not relevant to Nehra’s credibility and is entirely collateral to the
subject matter and issues of this case.

Almost seeking to minimize Nehra’s involvement, the motion states:

While Nehra had some interactions with Burks, it was Nehra’s partner Waak who
was the primary attorney on the case. Waak was named as possible witness at trial, but did not testify. Nehra was not named or called as a witness.

As if this was not already a “side-show” the USA states:

The defendant should be precluded from questioning Nehra, or introducing any
evidence, about a civil settlement agreement in a case entirely unrelated to TelexFree and the charged defendants in this case. The settlement does not constitute proper
impeachment, and if admitted, would amount to confusing and timely side-show.

Their reasoning is this:

  1. unless shown otherwise, the agreement is not relevant to the typical proper avenues of impeachment; bias, perception, or recollection of events.
  2. specific rules of evidence prohibit its’ admissibility.
  3. while Nehra’s firm represented Zeek, it was Nerha’s partner Waak who primarily represented Zeek, not Nehra. Waak was called as witness, not Nehra. For this reason, Nehra’s connection to Zeek was more tangential and, for that reason, is less relevant.
  4. it should be noted that the government is not moving to prohibit any reference, Nehra & Waak’s representation of to Zeek or the fact that Zeek and its principal ultimately faced SEC enforcement action and criminal prosecution.

During the charged conspiracy, Nehra received several emails from various TelexFree promoters who raised concerns about possible enforcement action against TelexFree, citing Zeek. Nehra forwarded each of these emails to the defendant.
Instead, the government is seeking a pre-trial ruling to preclude the introduction of
any evidence or any reference to the settlement agreement.

BREAKING: Sann Rodrigues Makes Plea Deal in Visa Fraud Case

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.

 

TelexFree: Merrill and Wanzeler Charged in Superseding Indictment

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

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.

 

TelexFree: Judge Denies Merrill’s Motion to Suppress Evidence

newtelexfreelogoBack in May of this year, James Merrill filed for a motion for a Franks Hearing and also to

suppress all evidence derived from any and all search warrants issued pursuant to an affidavit of Special Agent John S. Soares, as the affidavit submitted in support of the search warrants contained false statements and/or reckless misstatements of fact, as well as material omissions of facts, all of which ultimately render the search warrants invalid, see Franks v. Delaware, 438 U.S. 154 (1978).

Just like other scammers caught in the act, he claims the search warrants were obtained through false statements, omitted material information, and that the search warrant affidavit does not establish probable cause to issue a warrant.  Seems like many other Ponzi operators have made the same claim when they got caught; it did not work out well for them, either.

Today, Magistrate Judge Hillman denied these motions.

Zeek Rewards: Sentencing for the Dawn Wright-Olivares and Daniel Olivares

zeekrewardsHere is the latest update from Kenneth Bell, Zeek Receiver. He has included an email address for victims to provide information that may be used at the Sentencing Hearing:

 

ANNOUNCEMENT FROM THE RECEIVER – August 29, 2016

On September 13, 2016 at 9:30 AM Dawn Wright-Olivares and Daniel Olivares will be sentenced in United States District Court for the Western District of North Carolina for their roles in the ZeekRewards Ponzi and pyramid scheme. The sentencing hearings are open to the public and will be held at the Federal Courthouse at 401 W. Trade Street, Charlotte, NC.

Victims of these offenses are entitled to be heard at sentencing. If a victim would like to have a letter describing the impact that ZeekRewards had on them submitted to the Court please send an email to HearingLetter@zeekrewardsreceivership.com. In particular, the Court would like to hear about any of the below circumstances:

  • Becoming insolvent;
  • Filing for bankruptcy under the Bankruptcy Code;
  • Suffering substantial loss of a retirement, education, or other savings or investment fund;
  • Making substantial changes to his or her employment, such as postponing his or her retirement plans;
  • Making substantial changes to his or her living arrangements, such as relocating to a less expensive home; and
  • Suffering substantial harm to his or her ability to obtain credit.

I will be attending the hearings on behalf of all ZeekRewards victims and will present your letters to the Court.

Zeek Rewards: Verdict Sheet, Burks Criminal Trial

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Tax Crimes Handbook, SECTION 4 CONSPIRACY TO COMMIT OFFENSE OR TO
DEFRAUD THE UNITED STATES – 18 U.S.C. § 371

Overt Act:
[b] In furtherance of the conspiracy. The government must prove that the commission of
the overt act was in furtherance of the conspiracy. Grunewald v. United States, 353 U.S. 391,
396-397 (1957); Braverman v. United States, 317 U.S. 49, 53 (1942); United States v.
Provenzano, 615 F.2d 37, 45-46 (2d Cir.), cert. denied, 446 U.S. 953 (1980); Castro v. United
States, 296 F.2d 540, 542-543 (5th Cir. 1961). The overt act must have been calculated to
achieve some goal or objective of the conspiracy. Grunewald, 353 U.S. at 414-15.

 

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