About 14,000 TelexFree members in Massachusetts have received a payout from a $3.5 million fund set up last year as a result of a settlement between the state Securities Division and Fidelity Co-Operative Bank, the office of Commonwealth Secretary William Galvin said today.
“While this money does not make the TelexFREE victims whole, the distribution does provide the first real monetary relief received by Massachusetts victims of this international pyramid scheme,” Galvin said. “I am very pleased that my office was able to get some money back for these victims.”
The first distribution consisted of $2.9 million from the fund. Each recipient of the first distribution will receive $205.52, Galvin’s office said.
From the news release dated today (italics added):
Under the terms of the consent order, the bank established a Massachusetts Victim Relief Fund and retained Grant Thornton LLP as independent claims administrator. The amount of the fund was set at $3.5 million.
This first group of claimants was assembled by Grant Thornton based on information provided to the administrator by the Securities Division. These Massachusetts victims were derived from records subpoenaed by the Division from TelexFREE as well as victims who contacted the Division.
A second group eligible for distribution will be those claimants who submitted claims to the Division but for whom additional information is needed to validate their claim. A third group are those claimants who file a valid claim to the independent claims administrator after July 3, the date the distribution plan was submitted.
EDITOR’S NOTE: The MLM “program” known as Wings Network is alleged to have operated through two business entities that used the name “Tropikgadget.” The SEC’s case, announced Friday, is filed in U.S. District Court for the District of Massachusetts. That’s the same venue in which the agency’s epic TelexFree case was filed last year.
There can be no doubt — zero, none — that vulnerable immigrant populations in Massachusetts are being targeted in one MLM scheme after another. Speakers of Spanish or Portuguese may be particularly at risk. It’s also apparent that Asian, Haitian and African population groups are being targeted and that the risk is not unique to Massachusetts residents. The WCM777 “program,” for example, brushed through Massachusetts, where it was aimed at speakers of Portuguese and was stopped by the Massachusetts Securities Division in late 2013.
MSD also has squared off against a “program” known as EmGoldEx. In this scam, investors were promised returns of up to 1,105% and photos of children “getting paid” were used as lures to drive dollars.
One of the Tropikgadget entities — Tropikgadget Unipessoal LDA — allegedly was set up in the Madeira Free Trade Zone in November 2013 and later abandoned. Madeira, whose largest city is Funchal, is a North Atlantic Portuguese archipelago slightly closer to continental Africa than continental Europe. It is worth pointing out that the SEC publicly thanked both Portugal’s securities regulator (Comissão do Mercado de Valores Mobiliários) and the office of Portugal’s Attorney General (Procuradoria-Geral da República of Portugal) for assistance in the American probe.
The other Tropikgadget entity — Tropikgadget FZE — appears to have been set up in Sharjah, United Arab Emirates, also in November 2013. Sharjah, on the Persian Gulf, is the UAE’s third most populous city, behind Dubai and Abu Dhabi, according to WikiPedia. The paper presence of these companies at geographic points on the North Atlantic and the Persian Gulf more than 4,300 miles away from each other and how they enlisted Massachusetts residents to do their bidding probably is a story unto itself, but it is a story for another day. What’s news today is that Wings Network was operating in Massachusetts at Ground Zero for TelexFree after the TelexFree action and, like TelexFree, is accused of fleecing vulnerable immigrant populations.
At least seven of the 12 charged Wings Network promoters had addresses in Marlborough, Mass. This is potentially important because TelexFree’s U.S. operations were based in Marlborough. TelexFree operated through various U.S. entities and a Brazilian entity known as Ympactus. Brazil-based TelexFree/Ympactus figure Carlos Costa has TelexFree business partners in Massachusetts, waved the flags of Madeira and Portugal in a 2013 TelexFree promo and invoked God in appeals to support TelexFree. Sann Rodrigues, a charged TelexFree promoter associated with an MLM entity known as iFreeX that also operated in Massachusetts and has come under scrutiny, has claimed “God” invented MLM and “binary.” Rodrigues, according to the SEC, is a recidivist pyramid-schemer.
There’s also evidence that the Zeek Rewards “program” taken down by the SEC in 2012 targeted vulnerable people.
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Funchal, Madeira, to Sharjah, UAE. Source: Google Maps.
UPDATED 11:32 A.M. ET U.S.A. The SEC’s “Wings Network” case announced Friday is the latest example of the MLM world’s intolerable capacity to deceive. Though the facts alleged by the SEC are alarming, the action against two companies, three officers and 12 promoters is not an indictment of the trade. Indeed, the agency worked with the Direct Selling Association to expose one of the most mind-numbing lies.
But you still have to wonder if MLM and network marketing in general are on the road to perdition. This is because the horrifying abuses and thematic lies that propped up Wings Network are so common across the larger MLM trade that one can be forgiven for wondering if targeting vulnerable population groups and institutionalizing prevarication is Rule No. 1.
How DSA Got Involved In The Wings Network Case
Adolfo Franco, the trade association’s executive vice president and chief operating officer, sits at the intersection of commerce and government affairs. He’s an old political hand and has worked as a Republican strategist and assistant administrator for Latin America and the Caribbean for the U.S. Agency for International Development (USAID). Franco wants the MLM industry to prosper, and he wants to make sure he has a wholesome story to tell in government corridors.
Wings Network didn’t give him one, to be sure.
You see, Wings Network is accused by the SEC of using the DSA’s name to sugarcoat a creeping, cross-border fraud scheme that ultimately gathered at least $23.5 million. What actually happened, according to the SEC and an affidavit prepared by Franco, is that DSA received an “e-mailed request” for a DSA membership “application.” It then sent out the application, which was never returned. Not only was the application not returned, according to the affidavit, DSA never even heard back from Wings Network.
What allegedly happened next will surprise no one who follows the bizarre dramas MLM has been serving up for the past several years. This simple request for a membership application was conflated by Wings Network and affiliates as an endorsement by DSA of Wings Network.
By April 2014, according to the SEC, DSA became aware of this ribald deception. The association reacted by sending Wings Network a cease-and-desist letter, directing Wings Network and affiliates to stop claiming membership in DSA and stating point-blank that “any indication that Wings Network is a member of the DSA is fraudulent.”
Multiple Layers Of Deception
Could it get worse? Sure. Wings Network hucksters also are accused of duping participants into believing the “program,” which advertised guaranteed income, had the additional benefit of insuring them against loss.
Anyone who’s been following the unbelievably noxious example of TelexFree can tell you that the same thing allegedly happened there. The same thing currently is happening in a “program” known as “MooreFund,” and it previously happened in the AdSurfDaily Ponzi scheme in 2008 broken up by the U.S. Secret Service.
The MLM scammers look for a tiny kernel of truth and then wrap a lie around it: A “program” may have a bank account, for example. Money in the account may be insured by the FDIC in the event of a bank collapse.
From this, the “programs” themselves and affiliates conflate a fantastically malignant construction by which no one can lose money because of the “insurance.” It is just a contemptible lie. It’s also one that has been bettered by new versions of the lie. These versions — as is the case with Wings Network, TelexFree and MooreFund — hold that private insurers or even software companies such as Symantec have the companies’ backs and that these private insurers never would do business with a fraud scheme.
Supplementing this lie are companion lies — advanced by Wings Network, TelexFree and others — that a business registration with a Secretary of State or equivalent agency domestically or overseas is proof that there is no underlying scam. (One need only to look at Bernard L. Madoff Investment Securities LLC to understand just how preposterous this type of lie is.)
Here’s the thing: The type of lies advanced by Wings Network are not unusual for “opportunities” using an MLM or network-marketing business model. DSA happened to be the victim of brand-leeching and runaway disingenuousness in this case, but other cases show it’s hardly alone. Even the names of the U.S. government and various U.S. agencies have been dropped in this fashion.
Not even the “brands” of God and Jesus Christ are off-limits in the MLM sphere. Sometimes an asserted endorsement by a deity is supplemented by suggestions that living legends of entertainment and business have piled aboard a “program” train.
This is a short summary of these tactics as employed by recent MLM or network-marketing schemes that either cratered on their own or collapsed after regulatory intervention. (Note: Some background information also appears in the summary):
WCM777. Operated by Ming Xu. Targeted people who spoke Spanish, Portuguese, English and Asian languages. Dropped names of God, “Yahweh,” Jesus Christ, Al Gore, Steve Wozniak, Sylvester Stallone, “Rocky,” Eric Garcetti, Siemens, Goldman Sachs, the Denny’s restaurant chain and many, many more famous companies. (As many as 700.) Basic sales message: Send us money. Get rich. Estimated haul: $80 million in less than a year. Estimated number of victims: tens to hundreds of thousands.
TelexFree. Operated by James Merrill, Carlos Wanzeler and Carlos Costa. Largely targeted people in the United States and internationally who spoke Spanish, Portuguese and English. Global penetration at an almost unfathomable level. Appears to have created black market and back-alley economy in Massachusetts. Became subject of undercover investigation by the U.S. Department of Homeland Security. Dropped names of God, Jesus Christ, MLM Attorney Gerald Nehra, President Obama, Massachusetts Commonwealth Secretary William Galvin, the SEC, the U.S. Attorney General. Basic sales message: Send us money. Get rich. Estimated haul: $1.82 billion in about two years. Estimated number of victims: hundreds of thousands to more than 1.8 million.
Zeek Rewards. Operated by Paul R. Burks. Targeted people who spoke Spanish, Portuguese, English and Asian languages. Global penetration at an almost unfathomable level. Affiliates targeted Christians. Dropped names of the Association of Network Marketing Professionals, MLM attorneys Gerald Nehra and Kevin Grimes, plus MLM consultants Keith Laggos and Troy Dooly. Basic sales message: Send us money. Get rich. Estimated haul: $897 million in less than two years. Estimated number of victims: hundreds of thousands. “Clawback” cases to return alleged ill-gotten gains may affect 10,000 or more affiliates.
eAdGear. Operated by Charles Wang and Francis Yuen. “Primarily” targeted “investors in the U.S., China, and Taiwan,” according to the SEC. Dropped names of Google, Yahoo, Target Corp., Lbrands (Victoria’s Secret), Avon, Sears, Nordstrom, eBay, QVC, HSN, J.C. Penney, Banana Republic, Dillard’s, Kohl’s, Macy’s, Amazon.com, Men’s Wearhouse, Kmart, New York magazine and many, many more. (As many as 253 brands were abused.) Basic sales message: Send us money. Get rich. Estimated haul: $129 million. Estimated number of victims: tens of thousands.)
Wings Network now stands accused of targeting “many members of the Brazilian and Dominican immigrant communities in Massachusetts” in a combined pyramid- and Ponzi scheme that raised at least $23.5 million.
If that sounds familiar, perhaps it is because the TelexFree “program” was accused last year by the SEC of doing the same thing in the same place. Like Wings Network, TelexFree reached across national borders to plunder investors. Recent filings by the court-appointed trustee in the TelexFree bankruptcy case — and these filings are subject to amendment in part because there are more than 1 trillion disparate data points involved in the reverse-engineering of TelexFree — list the “nature” of the company’s business as “pyramid scheme.”
Other filings by Stephen B. Darr, the trustee, suggest that TelexFree gathered more than $1.8 billion in about two years of operation through a series of entities in the United States and an affiliate in Brazil known as Ympactus. The dollar volume alone is simply mind-boggling, more so when one considers the records so far denote “1,894,940 Participant names, spanning 35,110 pages.”
Some readers who sift through the TelexFree material will need a name-pronunciation guide and a world atlas. TelexFree didn’t just mow down Americans. The records suggest, for example, that the “Embassy Of Nigeria P O Box 1019 Addis Ababa Ethiopia” has contacted Darr. One document lists “Baker Island,” which WikiPedia says is an uninhabited Pacific atoll tended to by the U.S. Fish and Wildlife Service, as the “country” of an investor.
It is clear that TelexFree had investors (at least) in Argentina, Australia, Belarus, Belgium, Bolivia, Cambodia, Canada, Chile, China, Colombia, Croatia, Cyprus, Dominican Republic, Ecuador, Egypt, El Salvador, France, French Polynesia, Germany, Ghana, Guatemala, Honduras, Hong Kong, Hungary, India, Indonesia, Ireland, Italy, Japan, Jordan, Kenya, Lebanon, Luxembourg, Malaysia, Mexico, Moldova, Netherlands, New Zealand, Nigeria, Norway, Paraguay, Peru, Philippines, Poland, Portugal, Puerto Rico, Qatar, Romania, Russia, Rwanda, San Marino, Serbia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Tanzania, Thailand, Togo, Turks and Caicos, U.S. Virgin Islands, Uganda, Ukraine, United Arab Emirates, United Kingdom, United States, “Unknown” country, Uruguay, Uzbekistan and Venezuela.
MLM in this form is “fraud creep” running wild. It is posing dangers to individual participants, including those who can ill afford to take a financial hit. Beyond that, it is posing a danger to the U.S. financial infrastructure.
Economic security is national security, friends. These MLM HYIP “programs” pose an untenable security threat. Many of them are shrouded in multiple layers of mystery.
DSA Needs To Do More
It is good to see that the DSA worked with the SEC on the Wings Network case. It would be better yet if the organization studied why so many MLM HYIPers appear to move from fraud scheme to fraud scheme to fraud scheme.
Where did these people start their “MLM journeys?” Did they start at, say, Herbalife or Amway after buying into the dream and the attendant hype? And did they get churned by those “traditional” MLMs, only to become shark bait for the HYIPs?
With so many of the scams selling the message that it’s nearly impossible to make money in “traditional” MLMs and that 97 percent of people who latch onto the MLM dream of riches emerge as losers or highly vulnerable treaders of water in rough seas, isn’t it time for those traditional MLMs to question whether they are creating the refugees and providing the training for the targeting?
Herbalife is not an HYIP. But it sells a dream and has a high burn rate. The most recent scheme to sell against traditional MLM is “Achieve Community,” taken down by the SEC last month.
Whether or not “the 97 percent” claim is precisely true is immaterial. What’s material is the ready availability of vulnerable population groups and refugees from “traditional” MLMs.
TelexFree even may have channeled Herbalife, calling its cheerleading sessions “extravaganzas” and latching onto the sport of soccer.
Stemming this hurtful tide should be a top priority at DSA. The wave of scams is not docile. It very well might be eroding protective shores in violent fashion and creeping up on the road to perdition.
Racing legend Emerson Fittipaldi somehow ended up in a car with TelexFree figure Sann Rodrigues. Source: Video on DailyMotion.
UPDATED 2:14 P.M. ET U.S.A. It is not unusual for financial fraudsters to seek to rub elbows with famous people or to imply ties to them as a means of sanitizing purported “opportunities” or accenting their own bona fides. Recent examples of this include Florida-based Ponzi-schemer/racketeer Scott Rothstein, who mixed with the elite as his epic fraud scheme spiraled out of control.
Florida-based AdSurfDaily Ponzi schemer Andy Bowdoin (and any number of his promoters) falsely implied that then-President George W. Bush was on ASD’s train. The Mantria Corp. Ponzi scheme in Colorado traded on images of former President Bill Clinton and famous politicians or business executives.
The WCM777 scam traded on purported ties to Siemens and scores of famous companies. Siemens publicy refuted the WCM777 claims.
TelexFree, alleged to have gathered hundreds of millions of dollars in a combined Ponzi- and pyramid scheme targeted in no small measure at Brazilians and people who speak Portuguese or Spanish, aligned itself with the Botafogo soccer club in Brazil. The PR results were disastrous.
Now comes word that Sann Rodrigues, a figure in both the TelexFree and iFreeX schemes, is seen in a video in which he is driving a car. That in itself wouldn’t be unusual, in that Rodrigues previously has recorded one or more videos that put him behind the wheel of a flashy ride.
But in this case the passenger in the car is Emerson Fittipaldi, the Brazilian racing legend who won the Formula One World Championship twice and also is a two-time winner of the Indianapolis 500.
The PP Blog has sought comment from Fittipaldi through multiple channels and hopes to hear back from the legend. If Fittipaldi or his organization responds, we’ll make sure you see that response.
In September 2014, Galvin issued a warning about iFreeX, another “program” associated with Rodrigues. T-Mobile, the famous phone company, later said it was checking to see if its branding material was being misused by iFreeX.
Precisely how Fittipaldi ended up in a car with Rodrigues is unclear. Early research suggests Fittipaldi made an appearance at a hotel in the area of Orlando, Fla., on or around Jan. 6 of this year. Rodrigues may reside in the Orlando area.
The Orlando event appears to have been arranged by a venture known as DFRF. The asserted operator of that venture is Daniel Fernandez Rojo Filho. (The Ferdandez name also has been spelled with a trailing “s,” as opposed to a “z.”) His name surfaced as part of the Evolution Market Group/Finanzas Forex case in 2010.
It is clear that some Brazilians interested in the TelexFree case are closely following the appearance of Fittipaldi alongside Rodrigues, wondering if the racing legend is being duped by an alleged recidivist swindler.
As the PP Blog reported on May 15, Massachusetts Commonwealth Secretary William Galvin sued the Wings Network MLM “program” and some of its promoters, alleging securities violations and a “thinly veiled pyramid scheme” targeting minority communities.
Now, Nevada Secretary of State Ross Miller has published a warning on Wings Network, saying the online “program” even is being sold “door-to-door” and is targeting Spanish and Portuguese prospects.
Miller is encouraging residents of Nevada who have information on Wings Network to contact his Securities Division here or by calling 702-486-2440.
“It is vital that every investor conduct the most thorough due diligence possible when making an investment,” Miller said in a statement. “Investing is a complicated and risky process. Even the initial receipt of interest payments or distributions paid to some investors, or an investment sold by someone you know, doesn’t guarantee that an investment is legitimate. A Ponzi scheme may have similar attributes. Potential investors just can’t be careful enough. And always remember that if it sounds too good to be true, it probably is.”
Secretary of State Ross Miller warns Nevadans to beware of a possibly fraudulent investment scheme targeting minority communities, specifically Spanish and Portuguese. Wings Network is a multi-level marketing program that is advertising online, and being sold door-to-door or through friends and relatives.
Wings Network offers investors various packages ranging from $49 to $1,499. The “Elite” package purportedly requires an investor to purchase the package for $1,499, pay an activation fee of $49, and recruit two additional people to buy the package. The seller then allegedly promises that the investor is guaranteed to receive a minimum of $750 per month for one year afterward.
Investors may be told that Wings Network is associated with smartphone applications compatible with Google Play and Apple. Individuals who purchase the “Elite” package gain access to the Wings Network website, which provides them with information related to their purchase. Wings Network is allegedly associated with Tropikgadget FZE located in the United Arab Emirates.
The Secretary of State’s Securities Division believes Wings Network’s proposed business opportunity is an investment contract and a security that should be, but isn’t, registered with the State of Nevada. Some multi-level marketing programs may be structured in such a way that they constitute a security and should be registered as such. Miller cautions individuals not to buy or sell packages from Wings Network without conducting thorough research and seeking independent legal advice.
Although the dotcom landing page for WingsNetwork appears not to be loading properly at least in the United States, other pages on the site continue to be accessible from the United States. The PP Blog today observed the flags of the United States, Spain, Portugal, Italy, France, Germany and Russia on the site. WingsNetwork subdomains with Wings Network affiliate pitches that point prospects to YouTube promos and lead-capture pages also were observed.
In addition, the Blog observed a specific domain named a respondent in the Massachusetts action — WingsNetworkGlobal.com — that appears to have been repurposed by a onetime Wings Network affiliate to drive traffic to a video pitch for something called “The Millionaire’s Brain.”
“Listen,” a male narrator intones. “You’re skeptical. You’ve heard big claims before and they didn’t pan out. I get it.”
Opportunity-hopping is a frequent occurrence in MLM or direct-sales programs. Some affiliates of such programs proceed from fraud scheme to fraud scheme to fraud scheme.
Research suggests that the WingsNetworkGlobal domain previously was used to promote alleged scams such as TelexFree and WCM777, both of which were sued by the SEC and became the subjects of regulatory actions by the Massachusetts Securities Division.
URGENT >> BULLETIN >> MOVING: (14th Update 4:33 p.m. EDT U.S.A.) Massachusetts has charged promoters of the EmGoldEx MLM “program” with securities fraud and selling unregistered securities, alleging they “created a complex web entangling investors throughout the Commonwealth” in a “pyramid scheme” that offered “guaranteed returns of up to 1,105% for recruiting more individuals.”
The civil prosecution was brought by Commonwealth Secretary William Galvin and the Massachusetts Securities Division, which alleged that photos of children “getting paid” by the “program” were used as lures to drive dollars to the scam.
Children also were used to stack downlines so promoters could “reach the Pay Spot faster,” the state alleged.
And, the state alleged, “Investors in the EmGoldex Marketing Program are also able to purchase investment positions directly from other investors, rather than through EmGoldex, creating even greater risks for potential new investors.”
Similar allegations that members could bypass the “program” itself to purchase positions were made in the TelexFree case earlier this year, a circumstance that suggests multilayered criminality in MLM HYIP “programs.”
Named respondents are EmGoldEx Team USA Inc. of Andover, Mass.; Matthew Michael D’ Agati of Methuen, Mass.; Joseph Zingales of Methuen; James Vincent Piemonte of Methuen; and Jonathan Herman Seigler, formerly of Boston and now of New Hampshire.
D’ Agati, Zingales, Piemonte and Seigler are accused of recruiting “hundreds of investors into the scheme,” according to the 41 page complaint. MSD is asking for disgorgement and financial sanctions.
“Using multiple pooled bank accounts, Respondents have collected over $473,000 in Massachusetts for the EmGoldex Marketing Program,” the state alleged, further alleging that “over $282,659 has been wired to EmGoldex financial institutions overseas.”
The Massachusetts entity was a recruiting arm for EMGX FS Ltd., “an entity purportedly registered in the Seychelles, with a principal place of business located at Suite I, Second Floor, Sound and Vision House Francis Rachel Str. Victoria, Mahe Seychelles[.] EmGoldex maintains an internet website at www.emgoldex.com,” the state alleged.
Seychelles is a nation associated with money-laundering.
News that Massachusetts was investigating EmGoldEx broke on Aug. 8.
Like other HYIP schemes, EmGoldEx was positioned as a “Plan B.”
“Respondents even use the Team USA Homepage to pitch the EmGoldex Marketing Program as a retirement vehicle, noting that EmGoldex can create a “[p]Ian B to care for you and your family in the later years,” the state alleged. “Respondents further add that membership in the EmGoldex Marketing Program is a fully transferrable asset upon death, providing perpetual residual income for an investor’s family.”
Facebook and Twitter “at least” were used to drive recruiting, Massachusetts alleged.
One of the key prongs of the Massachusetts-based pitch was that even “children” could earn through EmGoldEx, the state alleged.
From the complaint (italics added):
148. The Team USA Homepage advertises the EmGoldex Marketing Program as a simple and relatively quick way to earn significant residual income.
149. Respondents also advertise on the Team USA Homepage that through the EmGoldex Marketing Program, even children are able to make significant profits, with little to no effort of their own.
150. In a section on the Team USA Homepage titled “Local Success Stories,” Respondents feature at least three photos of children, with one caption reading, “Paid $4000 in only 13 weeks! Yes, even your children can get paid!!”
151. The Team USA Homepage “Local Success Stories” section also includes photos of a number of other EmGoldex investors who are members of Team USA. Each photo is emblazoned on an American flag background, with the title “GOLDEN $4000 CLUB.”
152. The “successful” investors received their payouts by recruiting new investors into the EmGoldex Marketing Program, not through the sale of any purported product.”
Like earlier MLM scams such as TelexFree and WCM777, EmGoldEx picked up a local head of steam when the Massachusetts promoters hosted hotel pitchfests, Massachusetts alleged.
Some local events for EmGoldEx charged admission fees of $10 and $25, and a purported “boot camp” for EmGoldEx held on Saturdays and Sundays charged an admission fee of $79 and $99, the state alleged.
“According to marketing materials Team USA provided to the Division, Team USA represented EmGoldex as a ‘life changing opportunity’ for new investors. These advertising and marketing materials from Team USA are also adorned with pictures of gold bars, bags of cash and phrases such as ‘NOW YOU GET PAID,’” the state alleged.
The scheme also took advantage of the popular culture, Massachusetts alleged.
“For their part, according to documents that Team USA produced to the Division, D’ Agati and Zingales adopted speeches from popular movies, such as ‘Rocky’ and ‘Any Given Sunday.’”
Moreover, the state alleged, attendees of a launch event were told “the speakers . . . were ‘not bottom feeders,’ and included lawyers, millionaires, and other very successful business people.’”
1.) Reports began to surface late Thursday on Twitter and Facebook that TelexFree has been cleared by a judge of U.S. pyramid-scheme charges. These reports are false. Period.
Perhaps to add credibility to the claim, a photo that appeared to depict a female TV reporter sitting in a studio was posted on Facebook. A computer to which a TelexFree logo was affixed sat to the reporter’s right. Below these images was a text message in Portuguese.
The headline was “FORTE VITÓRIA TELEXFREE NOS ESTADOS UNIDOS.” Google’s translate tool (to English) translated it to this: “STRONG Telexfree VICTORY IN THE UNITED STATES.”
Another Portuguese section read as such: “Corte americana declarou que a empresa não pratica “Pirâmide Financeira” e nomeou um interventor, Stephen B. Darr, que deve dar início ao processo de recuperação judicial, que tem autonomia de liquidar ou manter o funcionamento da empresa.”
The Google translation tool translated this section to: “American Court stated that the company does not practice “financial pyramid” and appointed a receiver, Stephen B. Darr, who shall initiate the process of bankruptcy, it has autonomy to liquidate or keep running the business.”
No American court has said that TelexFree was not a pyramid scheme or not a “financial pyramid.” Darr is the court-appointed trustee in the TelexFree bankruptcy case in Massachusetts. He has said he has no intention of reorganizing or reopening the company.
Twitter and Facebook were used today to drive TelexFree visitors to images of Helena Soares. She is wearing an old TelexFree logo on her racing outfit.
Whether TelexFree had or has sponsored her was not immediately clear. What is clear is that there are a number of references to Soares in the context of TelexFree online. One of them is a YouTube video titled “Deaf Deaf TelexFree.” Promo text appears to be in Russian.
This may spark questions about whether TelexFree was targeted at members of the international hearing-impaired community. HYIP scams such as Noobing and Imperia Invest have been targeted at investors who cannot hear.
Today’s Twitter/Facebook references to Soares depict her as a “Campeã” (champion) of TelexFree.
It is not unusual for Ponzi schemes to seek to associate themselves with celebrities, politicians, business stars and sports stars. This particular form of brand-leeching surfaces in scheme after scheme after scheme. A recent major example of this is the WCM777 scam, which tried to associate itself with the sport of golf, Jesus Christ, Harvard College, the Denny’s Restaurant chain, Apple co-founder Steve Wozniak and former U.S. Vice President Al Gore — and many others.
3.) As the PP Blog reported on Sept. 30, 2014, Massachusetts Commonwealth Secretary William Galvin issued a warning on a an emerging “program” known as IFreeX that is being targeted at TelexFree members. iFreeX may be a reload scheme designed to fleece TelexFree members for a second time. On Oct. 1, the Blog reported that IFreeX appears to have lifted branding material of T-Mobile, including images of Carly Foulkes, “the T-Mobile Girl” famous for wearing pink summer dresses in TV spots.
T-Mobile said it was looking into the situation.
A large image of Foulkes appeared today on Twitter in an iFreeX promo targeted at TelexFree members.
The use of the letter “X” in HYIP scams has led to questions about whether purveyors are speaking in a sort of secret code. The OneX scheme used an “X” and an image of a bomb as part of its logo, and HYIP scams have been known to have ties to “sovereign citizens” and antigovernment extremists.
UPDATED 8 A.M. EDT U.S.A. New England Public Radio has a minute-long audio report on TelexFree, iFreeX and Sann Rodrigues, including comments from Massachusetts Commonwealth Secretary William Galvin.
Rodrigues, accused in April 2014 by the U.S. Securities and Exchange Commission of fraud over his alleged role in TelexFree, earlier (in 2006) was accused of fraud by the SEC in a separate alleged pyramid scheme involving phone products. iFreeX may constitute at least his third dance in securities- and affinity-fraud schemes involving communications products.
Galvin reportedly told the station that the “current whereabouts” of Rodrigues is unknown. The charged pitchman hails from Brazil, once resided in Massachusetts and also has lived in Florida.
On Dec. 19, 2013, the PP Blog reported that TelexFree puff pieces were appearing in a publication that featured a columnist who asserted Jesus Christ was the person who inspired modern network marketers through his recruitment of 12 disciples.
Ads for an apparent cash-gifting scheme appeared in the same publication.
SEC case filings alleged that, on March 15, Rodrigues’ co-defendant Faith Sloan claimed on her website that the TelexFree compensation plan was changing and was not in final form — “[b]ut is Getting BETTER as Jesus said.”
Regulators have described TelexFree as a billion-dollar pyramid- and Ponzi scheme that operated across national borders.
Claims of divine authority or inspiration are not unusual in MLM HYIP frauds. In the 2008 AdSurfDaily case, for instance, accused operator Andy Bowdoin claimed God was on his side and compared the U.S. Secret Service to “Satan” and the 9/11 terrorists. Bowoin later was sentenced to federal prison for his $119 million Ponzi scheme.
Affinity fraud may occur in many contexts: appeals to religious faith, appeals to common interests, appeals to common heritage, appeals to common political interests and more.
Foulkes, a Canadian model, is known colloquially as “the T-Mobile Girl.” Millions of television viewers were charmed by Foulkes, who helped T-Mobile build its brand and also is known colloquially as “the girl in pink.”
In 2013, Business Insider called Foulkes “one of the most recognizable brand spokespeople out there right now.”
A promo for iFreeX appears to show Foulkes in full T-Mobile wardrobe regalia, clad in her traditional pink summer dress and displaying a cell phone. A logo for iFreeX appears just below her image.
T-Mobile said this afternoon that it “will look into it.”
It is not unusual for MLM “programs” to engage in brand-leeching. Most of the recent HYIP schemes taken down by the SEC have traded on the names, reputations and imagery of famous companies.
“iFreex appears to be nothing more than a rebranded TelexFREE fraud for mobile phones,” Galvin said yesterday. “Everyone, but especially those in the Brazilian and other immigrant communities that are the target of these pitches, need to be skeptical of any scheme that offers guaranteed returns with little or no effort. Unfortunately, we have seen an increase in these pyramid schemes in the past year.”
TelexFree is alleged to have operated a billion-dollar, cross border pyramid and Ponzi scheme. Reload scams typically pop up to replace cratered “programs.”
“IFREEX PRE LAUNCH / PRÉ LANCEMENT/ PRÉ LANÇAMENTO!” the text section of an IFreeX promo on YouTube screams.
Massachusetts Commonwealth Secretary William Galvin.
URGENT >> BULLETIN >> MOVING: Massachusetts Commonwealth Secretary William Galvin has issued a warning on an emerging scheme known as “IFreeX.”
Like TelexFree before it, IFreeX is being pitched by two-time SEC pyramid-scheme defendant Sann Rodrigues and is being targeted at the Brazilian community.
Rodrigues also is known as Sanderley Rodrigues de Vasconcelos, and individuals already have filed complaints about his promotion of IFreeX, Galvin’s office said. The headline on a state news release is, “SECRETARY GALVIN WARNS OF NEW PHONE SCAM TARGETING BRAZILIAN COMMUNITY.”
This is the entire statement issued by the Massachusetts Securities Division a short time ago (italics/logo graphic added by PP Blog):
Secretary of the Commonwealth William F. Galvin today warned investors, especially persons in the Brazilian community, about iFreex, a phone service app promising lucrative returns with minimal effort. It appears to be much like TelexFREE, a scam that targeted the Brazilian and other minority communities.
According to complaints made to the Securities Division, Sanderley Rodrigues de Vasconcelos, also known as Sann Rodrigues, who was once a top TelexFREE promoter, is now promoting iFreex, enticing investors to pre-register with promises of a new iPhone.
On his Facebook page, Rodrigues, a former Revere resident, even claimed that iFreex would be the new TelexFREE. TelexFREE was charged by the Massachusetts Securities Division and the U.S. Securities and Exchange Commission earlier this year with fraud in operating a pyramid scheme. It is now in bankruptcy.
“iFreex appears to be nothing more than a rebranded TelexFREE fraud for mobile phones,” Secretary Galvin said. “Everyone, but especially those in the Brazilian and other immigrant communities that are the target of these pitches, need to be skeptical of any scheme that offers guaranteed returns with little or no effort. Unfortunately, we have seen an increase in these pyramid schemes in the past year.”
Rodrigues, who was charged by the SEC in the TelexFREE case, was charged in 2006 with a similar telecommunications scheme . . . and barred from securities dealings in Massachusetts. That scheme, too, targeted the Brazilian community.
iFreex appears to have many of the same characteristics as other pyramid schemes the Securities Division has recently brought actions against, including Wings, TelexFREE and WCM777.
While there is little information available about the iFreex operations, management, and headquarters, it is scheduled to go live in early November and is currently accepting preregistrations with the promise to investors of a new iPhone.
Those who have information about iFreex are encouraged to call the Securities Division at the toll-free 1-800-269-5428.
BULLETIN: (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.
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.
The EmGoldEx “program” describes gold as “money” and an ancient investment vehicle available in a “new splendor.”
If TelexFree, WCM777 and Wings Network were not enough, the office of Massachusetts Commonwealth Secretary William Galvin now is investigating the “EmGoldEx” program.
Secretary of State William F. Galvin’s office is investigating the Andover operation of Emgoldex Team USA Inc., a company that recruits investors to buy gold online and pays bonuses for referring friends and acquaintances.
The degree to which EmGoldEx has penetrated Massachusetts is unclear. “Gold” and other shiny-object schemes typically ride on the coattails of MLM HYIP recruiting scams. Narratives surrounding such schemes often are incongruous, if not downright wild, sometimes focusing on tales of spectacular profit opportunities in Europe and the Middle East and a chance to deal with purported royal families or upstream investors interested in elevating people out of poverty.
EmGoldEx purportedly operates from Dubai. Here is a verbatim snippet of the EmGoldEx narrative as it appears in challenged English: “To become a client of the Internet – shop, it is necessary to be registered and make an Order. In the Internet shop an account will be opened for you and the purchase price will be fixed for 24 hours.”
Hidden text on the page appears to be in Russian.
As part of the TelexFree probe in April, Galvin’s office alleged a Massachusetts entity had asserted that it bought “TelexFree packages, and all sorts of real estate within the U.S.A. or foreign countries.” Investigators further alleged that the enterprise asserted it was backed by “Dubai investors.”
Regulators in Quebec issued a warning on a “program” known as Karatbars International earlier this year. Other recent (or relatively recent) gold-themed “programs” that have been targeted by regulators include Gold Nugget Invest (HYIP/shiny-object scheme that collapsed in 2010 amid bizarre, companion claims INTERPOL was investigating the SEC); and Gold Quest International (HYIP with possible links to the “sovereign citizens movement” and operated in part by a purported “Lord”).
In October 2013, the office of North Carolina Secretary of State Elaine F. Marshall announced criminal charges against Rondell Scott Hedrick, 48, of Lexington, N.C.
Investigators linked Hedrick to an alleged “precious metals scam” that involved trawling for investor cash on Craigslist.
One investor, according to the state, wired Hedrick $5,000 after Hedrick had provided instructions and claimed he’d be leaving for Dubai soon and providing the investor a return of 200 percent.
Shiny-object scams are close cousins to prime-bank swindles, which produce equally wild narratives. (See Sept. 30, 2011, PP Blog story on the experience of U.S. Ponzi schemer Marian Morgan, who was arrested in Sri Lanka.)
