BULLETIN: Massachusetts Bank For TelexFree Settles With Securities Division For $3.5 Million; All Settlement Proceeds Will Go To Victims In The State; Bank Will Establish ‘Massachusetts Victim Relief Fund’

breakingnews72BULLETIN: (3rd Update 1:34 p.m. EDT U.S.A.) A Massachusetts bank that established accounts for TelexFree and whose president is the brother of alleged TelexFree Ponzi- and pyramid-schemer James Merrill has settled with the Massachusetts Securities Division for $3.5 million.

The settlement between MSD and Fidelity Co-operative of Fitchburg means that an escrow account consisting of the $3.5 million and whatever interest it draws will be set up for TelexFree victims who reside in the state. With MSD helping shepherd the process and maintaining veto power to protect the interest of victims, the bank will retain an independent claims administrator at its own expense to manage claims and disbursements.

The escrow account will be called the “Massachusetts Victim Relief Fund.”

At some point at least 120 days in the future, the administrator shall “determine an independent plan of Distribution.” TelexFree victims in Massachusetts will be able to file claims. Those with approved claims will be compensated under a formula established by the claims administrator.

Precisely when the claim-filing period will begin was not immediately clear. Also unclear is precisely how many TelexFree victims reside in Massachusetts. What is clear is that MSD — with the consent of Fidelity Co-operative —  has arranged a means by which TelexFree victims residing in the state will receive money some of them may need desperately.

Using a series of banks and payment vendors, TelexFree might have scammed as much as $90 million in Massachusetts alone. Its overall scam may have gathered more than $1.2 billion across the world.

MSD brought alarming allegations of fraud against TelexFree in a civil action on April 15. By April 30, it had opened an investigation into Fidelity Co-operative’s role in the TelexFree case.

As part of the settlement, the bank neither admitted nor denied the state’s allegations that it did not perform adequate due diligence on TelexFree before permitting the company to open three accounts in August and September of 2013.

Only after receiving millions of dollars in TelexFree deposits for a period of between two and three months did Fidelity Co-operative conduct any legitimate due diligence on TelexFree, MSD alleged. On Nov. 27, 2013, according to MSD, bank president John Merrill asked Fidelity’s compliance and Bank Secrecy Act officer to review TelexFree’s banking activivity.

Merrill is the brother of TelexFree figure James Merrill, later to be indicted with fellow TelexFree figure Carlos Wanzeler on charges of wire fraud and wire-fraud conspiracy.

The bank’s compliance officer — by performing simple Internet searches — soon came to realize that TelexFree’s operations in Brazil had been shuttered amid pyramid-scheme allegations, according to MSD. The officer notified John Merrill of his findings and also relayed his concerns to an outside consultant the bank used for compliance and BSA issues.

By Dec. 3, the bank advised TelexFree that it was closing its accounts by Dec. 31, MSD alleged.

And, MSD alleged, Fidelity Co-operative also had opened personal accounts for James Merrill and Carlos Wanzeler. After the bank began conducting due diligence on TelexFree in earnest on Nov. 27 and during a period in which TelexFree accounts were pending closure, MSD alleged, Wanzeler transferred $3.5 million from his personal account at Fidelity Bank “to an overseas bank account held in Singapore at the Oversea-Chinese Banking Corporation.”

Citing evidence listed by prosecutors in the office of U.S. Attorney Carmen Ortiz of the District of Massachusetts, MSD alleged that James Merrill and Wanzeler transferred more than “$10.4 million out of Fidelity Bank, in multiple transactions using personal accounts, to various other financial institutions after November 27, 2013.”

Through both business and personal accounts at Fidelity Co-operative, “TelexFREE and its principals caused further harm to Massachusetts victims of the TelexFREE scheme,” MSD alleged.

Massachusetts Commonwealth Secretary William Galvin oversees MSD, which has been squaring off against multiple cross-border pyramid schemes.

Read the consent order between MSD and Fidelity Co-operative.

About the Author

7 Responses to “BULLETIN: Massachusetts Bank For TelexFree Settles With Securities Division For $3.5 Million; All Settlement Proceeds Will Go To Victims In The State; Bank Will Establish ‘Massachusetts Victim Relief Fund’”

  1. Quick note: For heaven’s sake! When will all this end?

    A new “program” that is calling itself “GlobalMultLevel” appears to have launched and is targeting TelexFree victims.

    Here is a Google Translation from Portuguese to English of a pitch that appeared on Twitter and rotated to Facebook:

    _____________________________________________

    New Telexfree based in Panama.

    Enquiries Inbox

    Let’s start the Partner network as you like to work for everyone to do upgrade in 30 days I’m paying the Partner positions for those who are interested the nasty comments will be deleting inbox call me I will give more information.

    Make the Registers on the link below in package $ 50 partner then log into the same site gives me the invoice and login that you created that I already active here on time. [Link deleted by PP Blog.]

    ________________________________________

    The “program” appears also to have pages in Spanish and English. Here is what a page in English says:

    Welcome! The Global Mult Level was created by a group of entrepreneurs in MLM, applying all his experience and strategy, thus forming a new concept of multi levels.

    We work with a VOIP telephony technology, where we sell packages of minutes and offer great rewards for our publishers such as:

    Binary Bonus
    Bonus ternary
    Residual Bonus
    Bonus Advertising
    Bonus Direct Indication
    Bonus Dream Team
    Leadership Bonus

    This Bonus is for our advisers who will be helping us to publish our products.

    Our goal is to grow globally and thus help all of our publishers grow with our company in a safe and balanced way.

    To pay and receive our system, we offer different platforms, such as:
    Neteller and Bitcoin ensuring that your payments are in a safe place.
    You can invite family, friends, partners, spread our idea of this great project in any and all media, such as social networking and digital media.
    Come to success, join our team Global Mult Level.

    ________________________________________

    It could be another scam seeking to take advantage of Bitcoin.

    See our BitClub Network coverage:

    http://patrickpretty.com/tag/bitclub-network/

    Patrick

      (Quote)

  2.   (Quote)

  3. Quick note. Bankruptcy Trustee Stephen B. Darr is now seeking authority to subpoena Fidelity Co-operative Bank. Link current as of this time:

    https://www.kccllc.net/telexfree/document/1440987140922000000000058

    Meanwhile, Carlos Wanzeler is opposing the trustee’s motion to waive the attorney-client privilege. Link current as of this time.

    https://www.kccllc.net/telexfree/document/1440987140922000000000061

    Patrick

      (Quote)

  4. This is so unfair, why is it that it is only the States victims that will be refunded? What about non Americans that their money is frozed by the American Government? Will they send the money back from where it came from (Africa especially)so that we can withdraw it? What about the tax that was paid out of the foreigners money for the benefit of the State? As a non American I feel really sad and unfairly treated. Please what is the States plans for the foreigners whose money is hooked in the States?

      (Quote)

  5. Blessing Anya Hutchinson: This is so unfair, why is it that it is only the States victims that will be refunded?

    It’s probably not safe to assume that “only” residents of Massachusetts will get a compensation remedy. The case is in bankruptcy court. Over time, people from other areas may be provided a means to apply for a share of whatever money is left.

    Blessing Anya Hutchinson: Will they send the money back from where it came from (Africa especially)so that we can withdraw it?

    Precisely how things will work in the claims process through the bankruptcy court is unclear. The site is here:

    https://www.kccllc.net/telexfree

    Court filings in the bankruptcy case are here:

    https://www.kccllc.net/telexfree/document/list/3846

    You might want to consider visiting the sites from time to time to keep up on matters.

    Patience will be required as the process works its way through the courts.

    I wish you the best.

    Patrick

      (Quote)

  6. iam victime of telexfree ilive in kigali rwanda non job because i lost 2200$ at telexfree. my God bress u and your family. [Deleted by PP Blog]

      (Quote)

  7. im victime of telexfree and my son too…we lost a lot money..i just wish to get the money we work so hard for.. back thanks

      (Quote)

Leave a Reply