URGENT >> BULLETIN >> MOVING: TelexFree, Gerald Nehra MLM Law Firm, Banks, Processors Sued In Prospective Class Action That Alleges RICO Violations

breakingnews72URGENT >> BULLETIN >> MOVING: (18th update 3:49 P.M. EDT U.S.A.) TelexFree, MLM attorney Gerald Nehra, “Doe” insiders and several banks have been sued in a prospective class-action that alleges fraud and violations of the federal RICO (racketeering) statute.

“Certain Defendants share joint and severable liability, including the Doe Inside Promoters, the licensed professionals such as the RLP Defendants, including certified public accountants and lawyers that specialized in sheltering so-called Multi-Level Marketing schemes having aided and abetted TelexFree’s Pyramid Ponzi Scheme by providing TelexFree with legal and financial advice and assistance during the course of the fraud, despite knowledge of the fraudulent nature of TelexFree’s operation,” the complaint alleges.

Among other things, Nehra was accused in the complaint of turning a blind eye to securities issues at TelexFree, encouraging others to conceal those issues and engaging in other misconduct.

Nehra, according to the complaint, was not merely providing zealous representation to TelexFree, he counseled “TelexFree on methods to evade United States securities laws that were intended to offer, in part, protection from pyramid Ponzi schemes; all to enrich himself financially and serve his own selfish interests.”

With Nehra understanding that “his legal opinions and representations would be used by TelexFree as a marketing tool to further and advance their business model,” his “opinions were packaged and promoted as part of TelexFree’s total ‘post Brazilian shut down package’ to the members of the putative class,” according to the complaint.

The complaint further alleges that Nehra’s actions in misrepresenting TelexFree as a legitimate business encouraged TelexFree members “unknowingly” to “participate in the evasion of federal and state securities laws.”

Named defendants included TelexFree LLC, TelexFree Inc., “Paralegal Doe [who] served as TelexFree, LLC’s agent, servant or employee,” TelexFree Financial Inc., TelexElectric LLLP, Telex Mobile Holdings Inc., James M. Merrill, Carlos N. Wanzeler, Steven M. Labriola, Joseph H. Craft, Craft Financial Solutions LLC, Carlos Costa, Gerald P. Nehra, Gerald P. Nehra, Attorney at Law PLLC, Richard W. Waak (Nehra law partner), Law Offices of Nehra and Waak, Richard W. Waak Attorney at Law PLLC, TD Bank NA, Citizens Financial Group Inc., Citizens Bank of Massachusetts, Fidelity Co-Operative Bank, Middlesex Savings Bank, Global Payroll Gateway Inc., International Payout Systems Inc. (I-Payout), ProPay Inc., “Banks Doe,”  “Doe Inside Promoters” and “Credit Processors Doe.”

Merrill, Wanzeler, Labriola and Craft are former TelexFree managers or executives. The Massachusetts Securities Division has described TelexFree as a combined Ponzi- and pyramid scheme that gathered more than $1.2 billion and crossed national borders. The SEC also has charged TelexFree, Merrill, Wanzeler, Labriola and Craft with fraud, alleging that the firm conducted business in at least 20 U.S. states and mainly targeted Brazilian and Dominican immigrants.

Plaintiffs are identified as Waldemara Martins and Leandro Valentim.

The complaint alleges that Craft incorporated TelexFree Financial and that the entity “was fraudulently set up for the purpose of sheltering funds rightfully belonging to the putative class.”

Among the contentions in the complaint (italics added):

On March 9, 2014, TelexFree changed its compensation plan, thereby requiring Promoters to sell its VoIP product to qualify for the payments that TelexFree had previously promised to pay them.

TelexFree’s former officers or employees stated to the TelexFree transition team that under the Pre March 2014 standard form contract TelexFree owes its promoters over $5 billion dollars.

The rule change generated a storm of protests from Promoters who were unable to
recover their money. On April 1, 2014, dozens of Promoters descended upon TelexFree’s Marlborough, Massachusetts office to protest this change and attempt to regain access to their money.

Reporting on TelexFree-related matters by BehindMLM.com, a publication that reports on evolving MLM frauds, is referenced in the complaint.

In addition, according to the complaint, “TelexFree mailed fraudulent and inaccurate 1099 (Miscellaneous Income) forms to investors, possibly to create the illusion that they had made payments to investors.”

HYIP schemes in recent years have advised participants to avoid calling the “program” an “investment program.” Here is what the complaint alleges on this subject:

“TelexFree’s Contract at Section 2.6.5 (m) mandates that Promoters are not to use the term investment with respect to the registration costs . . . Co-Defendant and Company Counsel Attorney Gerald P. Nehra, through his affiliated companies (Law Offices of Nehra and Waak , Gerald P. Nehra, Attorney at Law, PLLC, and Richard W. Waak, Attorney at Law, PLLC), and under the direct supervision of Co-Defendants Richard W. Waak and Richard W. Waak Attorney at Law, PLLC provided this deceitful advice for the purpose of furthering perpetuating Defendants unlawful Pyramid Ponzi Scheme.”

In the complaint, the plaintiffs further asserted that “Attorney Nehra’s extensive experience in multi-level marketing, and particularly his involvement with the Ponzi schemes involving Ad SurfDaily and Zeek Rewards, armed him with the knowledge of what constitutes violations of United States securities law. Indeed, Attorney Nehra was well aware that the use of semantics and obscured phraseology to obfuscate securities laws fails to legitimize TelexFree’s illegal Pyramid Ponzi Scheme.”

Craft was accused in the complaint of “Overseeing TelexFree’s creation of falsified accounting records,” “Fraudulently certifying TelexFree’s business operations and accounting practices as good and lawful, despite actual knowledge of their unlawful and illegitimate nature” and “Concealing the fact that the AdCentral Packages purveyed by TelexFree were actually securities.”

At the same time, Craft was accused of “Concealing and absconding with investor assets.”

Costa, a TelexFree figure in Brazil, was accused of publicly supporting “TelexFree’s illegal and corrupt activities.”

The banks and processors were accused of aiding and abetting a fraud scheme.

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22 Responses to “URGENT >> BULLETIN >> MOVING: TelexFree, Gerald Nehra MLM Law Firm, Banks, Processors Sued In Prospective Class Action That Alleges RICO Violations”

  1. Lawyers for the plaintiffs: COTTON, DRIGGS, WALCH, HOLLEY, WOLOSON & THOMPSON of Las Vegas, specifically Richard F. Holley and Ogonna M. Atamoh.

    Also: Robert J. Bonsignore of BONSIGNORE LLC of Belmont, N.H.

    Patrick

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  2. Gerald Nehra and Faith Sloan both named as defendants in (separate) lawsuits for promoting the same company. All I can say is, It’s About Effing Time!!!

    For both of them.

    Utterly fitting, both have been pimping ponzi schemes for years though admittedly not in the same ways. But both have been making money by helping to promote other than legal MLM companies and the attention they both are drawing in the legal system is quite richly deserved.

    It’s a little difficult to decide which of the two has earned more contempt. Faith has been a pimp for at least a decade with a far higher total number of “opportunities” to her name. While Gerry may have as few as three major ponzi schemes under his belt but he is also a Respected MLM Expert™ with the legal knowledge and factual understanding to deprive him of any excuse for his involvement in helping to promote these schemes.

    In fact he uses his legal knowledge, reputation and expertise to convey an impression that a company is legitimate while attempting to evade any legal responsibility for conveying that impression.

    And he might pull that off (yet) again.

    The truly sad thing here is no matter how this lawsuit plays out there is no one in the “Mainstream MLM community” who will ever hold him accountable. In fact if he is anything other than nailed to the proverbial floor it will be viewed as a total vindication. It doesn’t matter how many tens of thousands of people, many of whom don’t speak English so can’t appreciate Gerry’s skills at verbal slight of hand but who lost millions of dollars in part because they believed that Gerald Nehra, preeminent MLM attorney told them TelexFree was legitimate.

    Nothing like this matters in the legitimate MLM community. They simply do not care. At all.

    So why (aside from lawsuits) should Gerry care? Or Faith for that matter.

    Two peas in the exact same pod.

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  3. Maybe the next name we here being charged will be Keith Laggos!

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  4. Maybe Laggos is next!

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  5. This part of the complaint (below) strongly resembles language used by federal prosecutors in both the AdSurfDaily forfeiture action against ASD cash/property and the parallel criminal prosecution of ASD’s Andy Bowdoin:

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    “. . . the plaintiffs further asserted that “Attorney Nehra’s extensive experience in multi-level marketing, and particularly his involvement with the Ponzi schemes involving Ad SurfDaily and Zeek Rewards, armed him with the knowledge of what constitutes violations of United States securities law. Indeed, Attorney Nehra was well aware that the use of semantics and obscured phraseology to obfuscate securities laws fails to legitimize TelexFree’s illegal Pyramid Ponzi Scheme.”

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    In the ASD case, Bowdoin was accused of engaging in semantics to disguise the nature of the ASD securities scheme. Prosecutors argued, for example, that his previous experience as a securities felon effectively educated him on securities laws and that he engaged in wordplay to skirt those laws. This wordplay actually demonstrated his knowledge of the law.

    Now, the class-action attorneys, in effect, are arguing that Nehra had to have understood semantic wordplay to duck securities laws AND the actual securities laws because of his involvement with both Zeek and ASD.

    It’s basically the Feds’ argument against Bowdoin applied to Nehra.

    Patrick

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  6. While it is interesting that Gerald Nehra has been named in a possible class action lawsuit, it would have been fantastic if the Feds had charged him along with Faith Sloan and the others they have named in their action. It makes one wonder if the feds amend their filing and add him and the other insiders to the mix.

    I don’t think Gerald is out of the woods with Zeek either. It is going to be interesting to see who is charged of the “insiders” in Zeek, as has been stated by the Receiver. He definitely was one of the insiders.

    You can bet that we will still be talking about Zeek and TelexFree in the years to come with all the lawsuits that I feel will be forthcoming. Both of them are a long, long, long way from being over. The good news is that the government is setting great legal precedent in these cases to try future Ponzi’s, insiders, and their promoters.

    I may run out of popcorn before these end. LOL!

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  7. For background:

    http://patrickpretty.com/2010/12/02/the-day-wink-nod-died-use-of-money-magnet-line-rallies-ad-packages-and-rebates-backfires-on-bowdoin-grand-jury-uses-terms-repeatedly-in-indictment-prosecution-has-damning-asd/

    The grand jury that indicted Bowdoin cited this email:

    “[L]et’s don’t (sic) use the words investment and returns. Instead, lets (sic) use ad sales and surfing commissions. The Attorney Generals in the U.S. don’t like for us to use these words in our program?”

    Patrick

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  8. GlimDropper: It’s a little difficult to decide which of the two has earned more contempt. Faith has been a pimp for at least a decade with a far higher total number of “opportunities” to her name. While Gerry may have as few as three major ponzi schemes under his belt but he is also a Respected MLM Expert™ with the legal knowledge and factual understanding to deprive him of any excuse for his involvement in helping to promote these schemes.

    Hello Glim,

    I’m thinking other MLM lawyers will see this as a defining moment. At a minimum, the lawsuit demonstrates that some lawyers see MLM lawyers as worthy targets — perhaps especially if they’re speechifying on behalf of HYIP clients.

    It really looks like rent-a-shingle. The plaintiffs, of course, will have to prove these allegations. Regardless, the MLM lawyers now know that their names and RICO appearing in the same sentence is a possibility if the client is an HYIP.

    I’m also thinking that the MLM lawyers now know that bad things can happen when a lawyer or shingle effectively get used as stage props. I think society probably is prepared to tolerate the Hummers and BMWs (and such) on the stage and perhaps even cash raining down on gleeful human props called to the stage.

    But I doubt society is going to tolerate lawyers on the stage running cover for schemes that promise/suggest that $15,125 sent in will return $57,200 in a year.

    Patrick

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  9. Quick note: It’s interesting that both the SEC and the class-action lawyers referenced the Brazilian asset freeze and the effective shutdown action.

    In essence, the allegation is that Nehra appeared at at TelexFree rah-rah fest in Newport Beach AFTER those events and gave TelexFree his blessing.

    We’ve reported previously that the TelexFree pitchfest continued even after reports of death threats against a judge and prosecutor. All of these things play into virtually every MLM stereotype and makes the trade look beyond clueless.

    Nehra also suggested from the Newport Beach stage last summer that Montana was aboard the TelexFree train — and then this happened last month:

    http://patrickpretty.com/2014/04/29/bulletin-montana-halts-telexfree-state-says-firm-supplied-incomplete-inaccurate-information-and-continued-to-operate-after-claiming-it-had-pulled-out/

    Plus, there was a Zeek guy involved in the Newport Beach event:

    http://patrickpretty.com/2014/04/29/wanting-more-from-zeek-to-telexfree/

    This, at a minimum, is just horrible capitalism. It makes MLM look ridiculous. It makes American business look ridiculous.

    Patrick

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  10. And just to make sure we don’t throw the baby out with the bathwater… this is one lawyer who appear to have made several poor choices. Unfortunately, he happens to be one of the most famous in the the limited world (only a handful in the world?) of MLM lawyers.

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  11. Patrick WHAT should happen in court today?

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  12. TTL DF: Patrick WHAT should happen in court today?

    The course for justice should be set — for TelexFree, for its promoters, for the government (the people).

    Patrick

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  13. judge would never accept a bankruptcy that or I’m wrong?

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  14. Even if he “accepts” bankruptcy it doesn’t have to be the way TelexFree wanted it (their people, keep their money)

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  15. If TelexFree’s bankruptcy is approved, all the ringleaders will run and get away with the money they may have hidden away for themselves. Everyone else gets scre*d. That’s why the authoritis must be going after the ringleaders and their cohorts under them in order to serve the best interest of justice, at least in the U.S.

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  16. Who were the MLM Lawyers that were doing compliance for Zeke?? Don’t they deserve being thumped on the head??? Or has every one here missed some major points in their rush to bash one MLM Attorney??? Get facts in order at least!

    Rod

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  17. RodCook: Who were the MLM Lawyers that were doing compliance for Zeke??

    Gerald Nehra and Kevin Grimes?

    RodCook: Don’t they deserve being thumped on the head???

    Translation – prosicuted to the full extent of the law – yes.

    RodCook: Or has every one here missed some major points in their rush to bash one MLM Attorney???

    The same Ponzi profiting lawyer – sorry, “MLM attorney” – that said ASD wasn’t a ponzi scheme? The same Ponzi profiting lawyer – sorry, “MLM attorney” – that advised “don’t call it an investment” to further an obvious ponzi scheme?

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  18. @RodCook — I have no beef with Grimes. I sincerely think he was only doing compliance and his name was used without his tacit permission for the halo effect. But Nehra and Waak… Sorry, they deserve every bit of legal *and* PR hit coming to them. Nehra had been defending TelexFree for MONTHS, and Zeek even longer. There are signs that Nehra was the one who advised Sann Rodrigues on his ponzi Universo FoneClub.

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  19. THE OWNERS OF TELEXFREE WAS GETTING AWAY FOR A YEAR WITH THE CRIME.
    THEY ARE RIP OFF SO MANY PEOPLE, AND THE ASKING FOR THE BANKRUPTCY
    PROTECTION,THEY PAYING FOR THE LAWYERS FROM THE MONEY THEY STALL FROM
    PEOPLE.
    I BELIEVE IN JUSTICE OF OUR SYSTEM, I BELIEVE , THAT CROOKS WILL PAY.
    ITS OUTRAGEOUS THAT PEOPLE ALL OVER THE WORLD GOT RIPPED OFF , AND
    THEY HAVE THE WRIGHT TO DEFEND THEMSELF.
    I HOPE IT THE WOULDNT GET THE CHANCE TO BE IN BUSINESS AGAIN.

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  20. IM SURPRIZE THAT TELEXFREE GOT AWAY WITH THE PYRAMID SCAM,
    EVERYBODY OVERLOOK THIS FOR OVER A YEAR, THIS IS WHY SO MANY PEOPLE LOST MONEY,

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  21. ISNT IT ABOUT TIME , TO PUT THE CROOKS IN JAIL,
    WHAT ITS THERE TO INVESTIGATE, THAT CROOKS ,THAT
    STOLE SO MUCH MONEY FROM THE INNOCENT PEOPLE,
    SHOULD BE IN JAIL A LONG TOME AGO , AND TO GIVE MONEY
    TO PEOPLE, WHO LOST THERE SAVINGS

    JOSEPH SHIKHMAN:
    IM SURPRIZE THAT TELEXFREE GOT AWAY WITH THE PYRAMID SCAM,
    EVERYBODY OVERLOOK THIS FOR OVER A YEAR, THIS IS WHY SO MANY PEOPLE LOST MONEY,

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