URGENT >> BULLETIN >> MOVING: (6th Update 8 p.m. EDT U.S.A.) TelexFree Trustee Stephen B. Darr has sued MLM attorney Gerald Nehra and the Nehra and Waak law firm, alleging they were “actively involved” in promoting TelexFree’s Ponzi scheme and “duping” participants.
Nehra and the firm have asked for more time to respond to the April 1 complaint, saying through court filings that they “anticipated participation in criminal proceedings related to the case.”
Chief Bankruptcy Judge Melvin S. Hoffman extended the response deadline until June 1. The original deadline was May 2.
Whether Nehra or the firm considered themselves potential TelexFree criminal defendants was unclear in the response. TelexFree principals James Merrill and Carlos Wanzeler are the sole criminal defendants to date.
Separately, prosecutors in the Zeek Rewards’ criminal case against Paul Burks said in court filings in the Western District of North Carolina Monday that Nehra and law partner Richard Waak may be called as witnesses in the case against Burks.
Nehra and Waak have settled with Zeek receiver Kenneth D. Bell, who alleged they “encouraged investors to participate in the [Zeek] scheme by knowingly allowing their names to be used in providing a false façade of legality and legitimacy and gave improper legal advice that allowed the scheme to continue far longer than it would have without the Defendants’ support.”
Darr wants Nehra and the firm to return all legal fees paid to them by TelexFree between May 2012 and April 2014 — about $24,000. Hoffman has ruled TelexFree a Ponzi- and pyramid scheme, and Darr contends neither Nehra nor the firm provided any “compensable advice” during the two years they represented TelexFree.
The trustee further contends that Nehra appeared in a YouTube video promoting TelexFree.
Representing Zeek and TelexFree created incredible problems for the two lawyers. At least three of their MLM clients have been charged criminally and a mountain of litigation has been filed against Nehra and the firm, including actions by Darr, Bell and class-action attorneys.
In the settlement with Bell, Nehra and Waak agreed to a confession of judgment for $100 million. They contended “that they acted in good faith as legal counsel,” but now “acknowledge and agree that, based on their current knowledge, during the period they served as counsel RVG in fact operated an unlawful Ponzi an pyramid scheme involving an unregistered investment contract that caused hundreds of millions of dollars in losses to innocent victims of the scheme,” according to filings from Bell.
Government attorneys handing the Burks’ criminal case quoted the settlement language in their May 2 filing. RVG, or Rex Venture Group, was the operator of Zeek.
Zeek and TelexFree combined allegedly gathered on the order of $3.9 billion while creating hundreds and hundreds of thousands of victims globally.
A TelexFree video featuring Nehra appeared on YouTube in August 2013, according to Darr’s complaint. That’s two months after authorities in Brazil called TelexFree a pyramid scheme.
Also in August 2013, MLM attorney Jeffrey Babener advised TelexFree that it was operating a pyramid scheme, Darr alleged in September 2014.
TelexFree nevertheless continued to gather money until it collapsed in bankruptcy in April 2014, Darr alleged. The last payment to Nehra and the Nehra and Waak firm was made on April 3, 2014, just 10 days before the implosion, according to Darr.
Read Darr’s complaint against Nehra and the firm.
NOTE: Our thanks to the ASD Updates Blog.