PatrickPretty.com

Day: May 13, 2014

  • Full Statement By SEC On U.S. Justice Department’s Filing Last Week Of Criminal Charges Against TelexFree Figures

    U.S. SECURITIES AND EXCHANGE COMMISSION

    Litigation Release No. 22992 / May 13, 2014

    Securities and Exchange Commission v. TelexFree, Inc. et al., Civil Action No. 1:14-cv-11858-DJC (United States District Court for the District of Massachusetts)

    United States v. Carlos Nataniel Wanzeler and James Matthew Merrill, Case No. 14-MJ-4172-DHH (United States District Court for the District of Massachusetts)

    Criminal Charges Filed Against Two Principals of Massachusetts-Based Telexfree

    On Friday, May 9, 2014, the U.S. Attorney for the District of Massachusetts charged James M. Merrill, of Ashland, Massachusetts, and Carlos N. Wanzeler, of Northborough, Massachusetts, with conspiracy to commit wire fraud in connection with the alleged TelexFree pyramid scheme previously charged by the Securities and Exchange Commission. Federal authorities arrested Merrill on Friday, and an arrest warrant was issued for Wanzeler, who the Department of Justice announced is a fugitive. The Department of Justice also announced it has executed 37 seizure warrants seizing assets relating to the fraudulent pyramid scheme.

    The criminal charges against Merrill and Wanzeler related to the same conduct charged in a civil enforcement action filed by the SEC on Tuesday, April 15, 2014, against Merrill, Wanzeler, and others. Those charges were filed under seal, in connection with the Commission’s request for an immediate asset freeze. That asset freeze, which the U.S. District Court in Boston ordered on Wednesday, April 16, secured millions of dollars of funds and prevented the potential dissipation of investor assets. After the SEC staff implemented the asset freeze, at the SEC’s request the Court lifted the seal on April 17. On April 30, 2014, the Court entered preliminary injunctions extending the asset freeze as to defendants Santiago De La Rosa, of Lynn, Massachusetts, and Randy N. Crosby, of Alpharetta, Georgia. On May 8 and 9, the Court entered preliminary injunctions extending the asset freeze as to all the remaining defendants (Merrill, Wanzeler, TelexFree, Inc., TelexFree, LLC, Joseph H. Craft, of Boonville, Indiana, Steve Labriola, of Northbridge, Massachusetts, Faith R. Sloan, of Chicago, Illinois, and relief defendants (TelexFree Financial, Inc., TelexElectric, LLLP, and Telex Mobile Holdings, Inc.).

    The SEC alleges that TelexFree, Inc. and TelexFree, LLC claim to run a multilevel marketing company that sells telephone service based on “voice over Internet” (VoIP) technology but actually are operating an elaborate pyramid scheme. In addition to charging the company, the SEC charged several TelexFree officers and promoters, and named several entities related to TelexFree as relief defendants based on their receipt of investor funds. According to the SEC’s complaint filed in federal court in Massachusetts, the defendants sold securities in the form of TelexFree “memberships” that promised annual returns of 200 percent or more for those who promoted TelexFree by recruiting new members and placing TelexFree advertisements on free Internet ad sites. The SEC complaint alleges that TelexFree’s VoIP sales revenues of approximately $1.3 million from August 2012 through March 2014 are barely one percent of the more than $1.1 billion needed to cover its promised payments to its promoters. As a result, in classic pyramid scheme fashion, TelexFree was paying earlier investors, not with revenue from selling its VoIP product but with money received from newer investors.

    In related proceedings, on May 6, 2014, the U.S. Bankruptcy Court in the District of Nevada granted the SEC’s motion to transfer venue of those proceedings from Nevada to Massachusetts. The SEC had contended that the TelexFree entities hastily filed for bankruptcy in Nevada on Sunday night, April 13, 2014, in a transparent attempt to avoid Massachusetts. The SEC had noted that TelexFree does virtually no business in Nevada but rather was headquartered in Marlborough, Massachusetts. The SEC also argued that TelexFree did not have a legitimate business capable of reorganization under the bankruptcy code. The bankruptcy case will be transferred to Massachusetts for all further proceedings.

    Source: http://www.sec.gov/litigation/litreleases/2014/lr22992.htm

  • Could NLRB Decision Deal Blow To MLM HYIP Stepfordland?

    EDITOR’S NOTE: This story is about a policy at a healthcare facility, not an MLM. Even so, some MLMs HYIPs seek to enforce positivity rules, a circumstance that drives robotic thinking, also known as Stepfordianism.

    __________________________

    recommendedreading1We’re thinking the uber-bizarre Banners Broker “program” here, but Banners Broker hardly is the only HYIP “opportunity” that reaches across America and behaves as though North Korea’s dear leader Kim Jong-un is on the policy board.

    What to do if you answer the phones/email for an MLM HYIP  and you sense something is seriously amiss with the “program” — but management has let it be known that the company has an enforceable positivity policy that gags “negative” talk and perhaps implies the enterprise must be protected at the exclusion of rational thought?

    A recent decision by the National Labor Relations Board (NLRB) went against a Michigan hospital that had the following prongs in its policy manual:

    • employees will not make “negative comments about our fellow team members,” including coworkers and managers.
    • employees will “represent [the Respondent] in the community in a positive and professional manner in every opportunity;”
    • employees “will not engage in or listen to negativity or gossip.”

    If you work for an HYIP — and if the boss or bosses tell you to avoid reading all those negative blogs — perhaps its time to speak with a labor lawyer familiar with the case of Hills and Dales General Hospital.

    JDSupra.com has a brief on the case.

    Entrepreneur, via Yahoo, has a story on the decision: Turns Out It Is Illegal to Force Employees to Be Positive

    MLM HYIPs create scores of Stepfordians enrolled as independent contractors. Banners Broker threatened earlier this year to gag negative members and seize their “earnings.” It also threatened to send out reliable Stepfordians to monitor members predisposed to behave like thinking, feeling human beings.

  • Alleged TelexFree Promoter Hauled In Front Of TV Cameras In Uganda

    From NTV report.
    From NTV report.

    A man asserted to be a promoter of at least three fraud schemes, including TelexFree, has been hauled in front of TV cameras in Uganda. The report below is from NTV Uganda.

    The embarrassing appearance of the suspect may raise the stakes for promoters of online fraud schemes and create even more disastrous PR for cross-border MLM schemes. TelexFree has been accused in the United States of operating a $1.2 billion pyramid- and Ponzi scheme. In court filings, the SEC repeatedly has pointed to TelexFree promos that appeared on YouTube.

    Whether TelexFree, which now is batting civil and criminal fraud charges in the United States, would provide counsel for the alleged Ugandan affiliate was not immediately clear. Accused HYIP purveyors typically find themselves on their own, perhaps facing prosecution and the need to hire attorneys at their own expense.

    Some HYIP promoters proceed from scheme to scheme to scheme. At least eight alleged TelexFree managers/executives and promoters face civil charges in the United States. Two of those — James Merrill and Carlos Wanzeler — face criminal charges. The various probes are ongoing.

    The United States had labeled Wanzeler a fugitive.