UPDATED 11:14 A.M. EDT U.S.A. TelexFree Trustee Stephen B. Darr has requested a stay in the lawsuit against MLM attorney Gerald Nehra, the Nehra and Waak law firm and certain other individuals or entities accused civilly of helping the judicially declared Ponzi- and pyramid scheme gain a head of steam.
“The Trustee seeks this stay at the request of the United States so as not to interfere with the proper administration and prosecution of the Criminal Action” against James Merrill, Darr advised Chief U.S. Bankruptcy Judge Melvin S. Hoffman of the District of Massachusetts.
Merrill, an alleged TelexFree principal from Massachusetts, has been under indictment for wire fraud and conspiracy since July 2014. His alleged business partner Carlos Wanzeler also was indicted, but fled to Brazil, prosecutors said. Merrill’s trial is scheduled for this fall.
Wanzeler allegedly fled the United States via Canada after TelexFree declared bankruptcy in April 2014. Darr has said the cross-border program generated more than $3 billion in illicit business.
“The Trustee was required to commence the Adversary Proceeding before the Criminal Action could be resolved because the expiration of the Statute of Limitation relevant to these actions was approaching and was clearly going to expire before the Criminal Action was resolved,” Darr advised Hoffman. “However, in commencing these actions, the Trustee does not intend to interfere with the proper administration of the Criminal Actions nor prejudice the Government’s prosecution of those actions.”
The government’s concern about proceeding with the adversary actions against Nehra, the firm and others appears to be that Merrill could gain an advantage in the criminal case through discovery in the adversary actions.
In April, Darr alleged that Nehra and the law firm were “actively involved” in promoting TelexFree’s Ponzi scheme and “duping” participants. Nehra and the firm are fighting the claim.
Nehra and the firm advised Hoffman they “anticipated participation in criminal proceedings related to the case,” but did not define the nature of the criminal proceedings or say whether they anticipated being called as witnesses or potential indictees.
“The Adversary Proceeding arises from the TelexFree Ponzi scheme that was perpetrated on thousands of mostly working class investors, domestic and worldwide, by James Merrill and Carlos Wanzeler and assisted by various individuals including those named in the Adversary Proceeding,” Darr advised Hoffman.
The judge has set a hearing on the request for the stay at 10 a.m. on July 27 in Courtroom 2, J.W. McCormack Post Office & Court House, 5 Post Office Square, 12th Floor, Boston.