Defendants are “Traffic Monsoon” and Charles David Scoville. The Court appointed receiver is Peggy Hunt.
Here’s a link to the page.
Defendants are “Traffic Monsoon” and Charles David Scoville. The Court appointed receiver is Peggy Hunt.
Here’s a link to the page.
Although this document was entered on December 8th, I was asked to post a link for those interested in its contents. The SEC made a Motion for Summary Judgment and Injunctive Relief was Granted, including the following:
Chen is permanently restrained and enjoined from violating Section 5(a) and (c) of the Securities Act [15 U.S.C. § 77e] directly or indirectly
this Order by personal service or otherwise: (a) Chen’s officers, agents, servants, employees, and attorneys; and (b) other persons in active concert or participation with Chen or with anyone described in (a).
permanently restrained and enjoined from violating, directly or indirectly, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder 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.
Defendant shall pay disgorgement of ill-gotten gains, prejudgment interest thereon, and a civil penalty pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 U.S.C. § 78u(d)(3)]. The Court shall determine the amounts of the disgorgement and civil penalty upon motion of the Commission.
Here’s a link to the full document.
On December 19th, there was a PreTrial Conference held with Judge Klausner presiding. Here’s the Minutes from that Conference:
Case called. Court and counsel confer. Also present are Thomas A. Seamon, Receiver and David R. Zaro, counsel for the Receiver.
The Court will not vacate Order on Motion for Summary Judgment. The Court orders counsel to meet and confer to discuss further settlement and to return at 10:15 a.m.
Case recalled. The Court and counsel confer. Settlement was not reached. Jury Trial shall remain on calendar for January 10, 2017 at 9:00 a.m. Counsel shall file aw witness list pertaining to the issue of damages only.
THIS MATTER comes before the Court on the Receiver’s Motion to Enter Judgment and to Confirm Judgments as Final.
For good cause shown, the Motion is hereby GRANTED and the Final Judgments requested shall be entered as filed.
So far, three (3) Final Judgments have been entered today:
Kenneth Bell has also filed for Final Judgments against:
As of today, only these Defendants have had Final Judgments ordered, as follows:
Final Judgment is hereby entered against Defendant Jerry Napier in the amount of $2,349,670.59, which is comprised of $1,749,550.73 in net winnings from the ZeekRewards scheme and $600,119.86 in prejudgment interest, calculated at the North Carolina statutory rate of 8% per annum from August 17, 2012, which is on or after the date of the last fraudulent transfer payment to each Defendant, to November 29, 2016, the date of the Summary Judgment Order in this action.
Final Judgment is hereby entered against Defendant Darren Miller in the amount of $2,198,738.44, which is comprised of $1,637,167.55 in net winnings from the ZeekRewards scheme and $561,570.89 in prejudgment interest, calculated at the North Carolina statutory rate of 8% per annum from August 17, 2012, which is on or after the date of the last fraudulent transfer payment to each Defendant, to November 29, 2016, the date of the Summary Judgment Order in this action.
Final Judgment is hereby entered against Defendants Aaron Andrews, Shara Andrews, and Innovation Marketing, LLC, (The Andrews Defendants) jointly and severally, in the amount of $1,359,897.50 which is comprised of $1,012,571.58 in net winnings from the ZeekRewards scheme and $347,325.92 in prejudgment interest, calculated at the North Carolina statutory rate of 8% per annum from August 17, 2012, which is on or after the date of the last fraudulent transfer payment to each Defendant, to November 29, 2016, the date of the Summary Judgment Order in this action.
ANNOUNCEMENT FROM THE RECEIVER – December 9, 2016
On November 10, 2016 the Court granted the Receiver’s motion to disallow and forfeit recognized claims if the claimant does not electronically sign the required Release and OFAC certification by December 31, 2016. All claimants who fall into this category received emails on October 1, November 1 and December 1 asking them to complete the process. They received another email from the Receiver today making a personal appeal for them to sign the forms online. These claimants must follow these steps:
For further assistance completing the OFAC Certification screen, please view the instructional video found here: http://www.zeekrewardsreceivership.com/OFACandRelease.
Failure to complete this process by December 31, 2016 will result in forfeiture of claim, meaning a distribution check will never be issued.
AFFILIATES WHO HAVE ALREADY RECEIVED A DISTRIBUTION DO NOT NEED TO DO ANYTHING FURTHER IN ORDER TO BE ELIGIBLE TO RECEIVE ANY SUBSEQUENT DISTRIBUTION THAT THE RECEIVER MAY MAKE. Those affiliates have already completed the required process.
This is not a new opportunity to file a claim. The time to make a claim ended on September 5, 2013 by order of the Court. Please do not attempt to file a claim now.
In case filed by the Zeek Receiver, Kenneth Bell, the receivership filed civil suit against what were called “Net Winners” in the Zeek scam which garnered $1000 or more from the scheme. The list of Defendants included a large number of serial promoters of this type of pyramid/Ponzi scheme such as:
Todd Disner, Trudy Gilmond, Jerry Napier, Daren Miller, Rhonda Gates, David Sorrells, Aaron and Shara Andrews, T. Lemont Silver, Karen Silver, Michael Van Leeuwen, Duran Brockett, David and Mary Kettner and a “Defendant Class of Net Winners”.
Several of the individuals above were involved in ASD and other scams prior to promoting Zeek and bilking thousands of people on the false hopes of becoming rich with little or no effort. The majority of these defendants have already received judgments which resulted in them having to return monies to the receivership to be distributed to the victims.
The problem with scams like Zeek is the money was actually made from recruiting others, not from sales of products of services. Sadly, a new one pops up almost every day.
On March 26, 2014, the Court approved the Receiver’s Motion for an “Order Approving Distribution Procedures and Certain Other Related Relief” (Doc 199) and issued that order. In it, the Court specified the manner that the Receiver had the authority to settle claims, establish claims procedures and also appointed a “special master”, retired Judge Frank W. Bullock, Jr., to oversee any objections by claimants, and a method to appeal the determination of the Special Master.
On November 3, 2016, the Receiver filed a Motion to Disallow claims that were not filed properly by the deadline of December 31, 2016. Today, Judge Mullen granted that motion:
THIS MATTER is before the Court upon the Receiver’s Motion to Affirm the Disallowance of Claims and Forfeit of Distributions on account of such Claims for the failure by Affiliates to submit an OFAC Certification and Required Release pursuant to the Order Approving Distribution Procedures and Certain Other Related Relief (Doc. No. 199) (the “Motion”). The Court, having considered the Motion, the proceedings that have occurred in this Case, and the relevant case law, and after due deliberation and sufficient cause having been shown, Grants the Motion in all respects.
IT IS, THEREFORE, ORDERED that pursuant to Paragraph 37 of the Order, the Receiver may deem any claim of a Subject Affiliate that has failed to submit the Required Information by11:59 p.m., Eastern time, on December 31, 2016, as disallowed and the distribution to be made on account of any such claim as forfeited.
IT IS FURTHER ORDERED that the Receiver shall release any amounts held in reserve on account of a disallowed claim to the general pool of assets from which distributions will be made to holders’ of Allowed Claims.
IT IS FURTHER ORDERED that the Receiver may make limited exceptions to the disallowance of a claim and the forfeiture of the distributions on account of such claim for cause, in his sole discretion, at any time prior to making a final Distribution, but only in the event that such Subject Affiliate also provides the Required Information.
Signed: November 10, 2016
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?
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).
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].