Ah, finally. It looks like they are starting to go after the paid people who pontificate and speciously sanitize these online schemes; couldn’t happen to a more deserving ass-hat. He is described as a “consultant” in the press release; I would have chosen a different descriptor.
Tag Archives: SEC
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.
/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?
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).
I checked the docket just now and saw this; it’s sort of what I thought would happen. Not sure what it means for the victims of “Roman Novak” or whoever that low life crook actually is.
DEFAULT FINAL JUDGMENT ENTERED against Defendant Inter Reef Ltd. dba Profitable Sunrise and Relief Defendants Melland Company S.R.O., Color Shock S.R.O., Solutions Company S.R.O., and Fortuna-K S.R.O., the Court hereby enters final judgment in favor of the Securities and Exchange Commission and against the Defendant and Relief Defendants.
IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Defendant is permanently restrained and enjoined from violating, directly or indirectly, Section 10(b) of the Securities Exchange Act of 1934 [15 U.S.C. § 78j(b)] and Rule 10b-5 promulgated thereunder [17 C.F.R. § 240.10b-5], by using any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, in connection with the purchase or sale of any security.
IT IS HEREBY FURTHER ORDERED, ADJUDGED, AND DECREED that Defendant and Relief Defendants are liable, jointly and severally, for disgorgement of all sums raised in the enterprise described in the Commissions Complaint, including, but not limited to, all amounts transmitted from the United States to accounts outside the United States, including to accounts held in the name of the Relief Defendants wherever those accounts are located, together with prejudgment interest thereon. The Commission may move to amend this Final Judgment within 90 days to more precisely quantify the amount of disgorgement and prejudgment interest and defendant and relief defendants shall satisfy the disgorgement obligation within 14 days after entry this Final Judgment.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that this Court shall retain jurisdiction of this matter for the purposes of enforcing the terms of this Final Judgment. (See judgment for further details) Signed by Judge Thomas W. Thrash, Jr. on 3/16/2016
Here is the Final Judgment Order for those who would like to see the details.
RECEIVER FILES MOTION TO RECOVER AND SECURES INTERIM FREEZE OF $13 MILLION IN OUTSTANDING RECEIVERSHIP ASSETS
On February 11, the Receiver filed a Motion seeking to recover $13,174,015.48 in outstanding Receivership Assets from Payza, Payment World, VictoriaBank (a Moldovan financial institution), and their affiliates or, alternatively, to hold these entities in contempt for violating the Court’s August 17, 2012 Agreed Order Appointing Temporary Receiver and Freezing Assets of Defendant Rex Venture Group, LLC, as amended on August 30, 2012 (“Freeze Order”). On February 12, the Court ordered an immediate interim freeze of $13,174,015.48 at a United States correspondent bank account for VictoriaBank pending resolution of the Receiver’s Motion on the merits.
These funds are outstanding Receivership Assets from the payment processing relationship between Rex Ventures Group LLC, Payza, and PaymentWorld, for which a percentage of the processed funds were held on reserve at VictoriaBank in Moldova. For the past 3.5 years, the Receiver Team has worked diligently and devoted significant time and resources in its investigation, analysis, and various other efforts to reconcile and recover these outstanding funds, including negotiations with Payza, PaymentWorld, and VictoriaBank (collectively, “Respondents”) and coordination with United States and Moldovan government authorities. In direct violation of the Court’s Freeze Order, and despite the Receiver’s repeated requests, the Respondents refused to pay the Receivership Estate the outstanding assets. Each of the Respondents has had some role in failing to freeze and or return the outstanding Receivership Assets from this payment processing relationship.
With the Respondents’ failure to comply with the Court’s Freeze Order and increased risk of dissipation of funds, the Receiver, after exhausting a myriad of other options, filed the above-referenced Motion. Pending resolution of the Motion on the merits, the Court issued an immediate interim freeze of the full $13,174,015.48 at VictoriaBank’s correspondent bank account at a United States bank. The Receiver anticipates the Court will set a briefing schedule and hearing date to facilitate the resolution of this Motion on the merits. The Receiver will work diligently in pursuing a successful resolution of the Motion in hopes of securing the recovery of these funds for the benefit of ZeekRewards’ victims.
The Receiver’s legal filings and the Court’s order freezing the funds pending resolution of the Receiver’s motion are available at the links below:
The Receiver’s Motion for an Order Directing Payza, Payment World, and VictoriaBank to Turn Over Receivership Assets and/or Find Them in Contempt of the Court’s Order Freezing and Preserving Receivership Assets
Memorandum in Support of the Receiver’s Motion for an Order Directing Payza, Payment World, and VictoriaBank to Turn Over Receivership Assets and/or Find Them in Contempt of the Court’s Order Freezing and Preserving Receivership Assets
The Court will convene a hearing on the motion of defendant Sanderley Rodrigues de Vasconcelos for release from custody and for approval of a payment plan (Docket No. 376) on Thursday, March 17, 2016 at 11:15 am. At that hearing defendant will be afforded the opportunity to prove that he is unable to purge his civil contempt by the submission of a sworn financial statement providing a complete accounting of defendant’s assets, an affidavit and/or sworn testimony. Regardless of the means chosen by defendant, his presentation of evidence will be subject to the Court’s holding in its Memorandum and Order dated December 18, 2015 (Docket No. 359) with respect to defendant’s waiver of the Fifth Amendment privilege against self-incrimination.
Defendant shall appear at the hearing via video conference and his counsel may also do likewise.
The SEC has filed its Opposition to a February 15th Motion from Sanderley Rodrigues de Vascolcelos for “Release from Custody and to Approve a Payment Plan” or to schedule an Evidentiary Hearing. This opposition begins like this:
Rodrigues now attempts to obtain release from custody for civil contempt by arguing that: 1) he should be released because he has adequately demonstrated his inability to pay back the dissipated funds as required by this Court’s December 21, 2015 order and instead should be allowed to implement a payment plan; and 2) he should be allowed to use other frozen funds to replace the funds that he already dissipated. Neither of these arguments is availing. Instead, at minimum, this Court should require an evidentiary hearing wherein he demonstrates his inability to obtain funds where he would be subject to cross-examination. If this Court does order his release, the Commission respectfully requests that any payment plan ordered as a condition of the release require him to pay more than 20% of money earned from any business development course, book or other endeavor.
The SEC goes on to state that Rodrigues has not proven that he has an inability to comply with the Court’s Order, or to use it as an affirmative defense. Instead, they say, Rodrigues only provided a cursory declaration saying the accounting he provided was adequate, and believes the SEC’s own status report was evidence that this accounting adequately demonstrates his inability to pay. But, the information the SEC has was “unsworn information” regarding Rodrigues’ domestic holdings, but lacked information about his international holdings which are outside the asset freeze. The SEC did not push for a sworn accounting in the hopes that the involved parties could resolve the issue.
The Commission’s decision not to push for a sworn accounting, however, does not relieve Rodrigues’ burden to provide to this Court detailed sworn evidence that he has an inability to pay and thereby excuse his failure to purge his contempt. Rodrigues seeks to avoid this requirement by suggesting that he must not have the ability to comply because he is still in jail, which is evidence enough that he cannot purge his contempt.
Yet, Rodrigues has only been in jail for 27 days. He has cited no case that supports that less than a month in jail is sufficient evidence that he has no ability to comply with a court order without other evidence.
Thus, at minimum the Commission requests an evidentiary hearing at which Rodrigues, under oath provide evidence that he has an inability to comply with this Court’s order and that he be subject to cross-examination to test the veracity of his claim.
And, the SEC is not going along with Rodrigues’ suggestion that he is allowed to use Frozen Assets to pay of the contempt. I have uploaded the full document onto the Files Website.
Adding to their arguments, there is a Declaration filed by Mark Albers, a forensic accountant in the Boston Office of the SEC, part of which states this:
I was asked to review certain documents, including bank statements, bank transaction documents, and bank wire transfer records concerning personal and business accounts under the control of Rodrigues, as well as bank accounts belonging to defendants TelexFree, Inc. and TelexFree, LLC (collectively “TelexFree”). Members of the Commission’s accounting staff working under my supervision assisted with the review of these documents.
The bank records reflect that, from October 2012 through April 2014, business or personal accounts under the control of Rodrigues likely received more than $1.51 million from TelexFree or its investors.
And, it gets even better:
Based on our communications with Mr. Rodrigues, it is our understanding that he had no other source of income during this time period other than TelexFree-related activity.
There was an additional $3.92 million in cash deposits made into Mr. Rodrigues’ personal and business accounts over this time period. Assuming all of those deposits were related to TelexFree, the total amount of Mr. Rodrigues’ earnings from Telexfree could be as high as $5.44 million.
And there you have it. It is a poetic equivalent to “Water, water everywhere and nary a drop to drink”.
12-cv-519 (SEC Case) On February 1st, Kenneth Bell filed is Status Report for the Fourth Quarter of 2015. I have uploaded it onto the Files Website, click here for that document.
12-cv-519 (SEC Case) Kenneth Bell continues to go after Zeek receivership assets by getting an Order directing Sooper Credit Union to turn over the sum of $2,200.00 that represents proceeds of Cashier’s Checks within 30 days.
14-cv-91 (Bell v Disner) The attorney representing the “Defendant Class of Net Winners”, Kevin Edmundson, has filed his first application for reimbursement of professional fees and expenses, which are: (a) Berkeley Research Group $ 70,775.78, (b) Edmundson PLLC $ 2,800.00, and (c) Kelly Hart & Hallman LLP $ 6,976.70
14-cv-91 (Bell v Disner) William R. Terpening and Jefferson A. Moors filed a Motion to allow
them to withdraw as counsel for any and all parties in this case, including Rhonda Gates;
Innovation Marketing LLC; Aaron Andrews; Shara Andrews, who are part of the Defendant Class.
Alleged “Net winner” Darryle Douglas is in some trouble with the Court following his failure to appear, as Ordered, at a Show Cause Hearing held on December 3rd. The Hearing was for him to show cause why he should not be found in contempt of a Court order issued on September 15, 2015 which required him to return to the Receiver the Zeek Rewards database in his possession, to produce certain financial records, and to submit to a deposition by the Receiver..
The Court was satisfied that Douglas (right) had received the September 15th Order and that he has violated that Order. The Court also found that: (emphasis added)
“the Receivership has suffered and will continue to suffer harm because of Mr. Douglas’ violation of the Order. Mr. Douglas was previously found liable for more than $2 million to the Receivership in the form of fraudulent transfers and prejudgment interest, and under the Agreed Order in this matter, these are Receivership Assets belonging to the Receivership Estate. Mr. Douglas’s failure to return the database and these Receivership Assets not only harm the Receivership, but they also violate the Agreed Order in obstructing the Receiver’s efforts.
It is, therefore, ORDERED, that Darryle Douglas is in civil contempt for violation of this Court’s Order.
It is further ORDERED that Mr. Douglas shall be incarcerated until he agrees to comply in full with the Court’s Order dated September 15, 2015.
The United States Marshal is hereby DIRECTED to issue and execute a warrant for Mr. Douglas’ arrest and incarceration until he can be brought before this Court and until he agrees to comply with the Order in question.”
Litigation Release No. 23421 / December 8, 2015
Securities and Exchange Commission v. Trudy R. Gilmond, U.S. District Court for Western District of North Carolina (Civil Action No. 3:15-CV-00591)
SEC Charges ZeekRewards Pyramid-Ponzi Scheme Promoter
On December 4, 2015, the Securities and Exchange Commission filed suit in the United States District Court for the Western District of North Carolina against Trudy R. Gilmond for her participation in the fraudulent unregistered offer and sale of securities through Rex Venture Group LLC d/b/a ZeekRewards.com, an internet-based combined Ponzi and pyramid scheme. According to the Complaint, from approximately January 2011 until August 2012, when the ZeekRewards website was shut down, Rex Venture Group raised more than $850 million from approximately one million internet customers nationwide and overseas through the website.
The Complaint alleges that Gilmond solicited investors through the Internet and other means to participate in the ZeekRewards program, a self-described “affiliate advertising division” for the companion website, Zeekler.com, through which the company operated penny auctions. The ZeekRewards program offered customers several ways to earn money, two of which – the “Retail Profit Pool” and the “Matrix” – involved purchasing securities in the form of investment contracts. These securities offerings were not registered with the SEC as required under the federal securities laws.
According to the Complaint, Gilmond and others lured investors to ZeekRewards by promising investors a share of the company’s daily net profits in the form of daily profit share awards. The company’s purported calculations consistently resulted in daily award averaging approximately 1.5 percent per day, fraudulently conveying the false impression that the company was extremely profitable. In fact, the daily award percentage was fabricated and investor payouts bore no relation to the company’s net profits. Approximately 98% of ZeekRewards’ total revenues and the “net profits” paid to investors were comprised of funds received from new investors in classic Ponzi scheme fashion. When the company was shut down in August 2012, it was teetering on collapse.
The Complaint further alleges that Gilmond was one of the most successful and prolific promoters of ZeekRewards. From at least September 2011 until ZeekRewards was shut down in August 2012, Gilmond worked closely with the company founders and served as a senior “field liaison” to promote the scheme, persuading scores of unsophisticated retail investors to buy ZeekRewards securities upon the promise of profit sharing. Gilmond also helped conceal from investors and regulators the true nature of the ZeekRewards scheme. She policed affiliate advertisements and communications to ensure they did not use investment-related terms that otherwise may have triggered regulatory scrutiny. Gilmond reaped more than $1.7 million in transaction-based commissions and bogus profit-sharing for her recruiting efforts.
The Commission alleged that Gilmond offered and sold securities in violation of the registration provisions of Section 5 of the Securities Act, acted as an unregistered broker-dealer in violation of Section 15 of the Exchange Act, and violated the antifraud provisions of the Section 17 of the Securities Act. The Complaint requests a permanent injunction, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties.
The SEC’s investigation is continuing.