Month: May 2014
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UPDATE: TelexFree Figure James Merrill Will Remain Jailed; [MAY 21 DEVELOPMENT: Merrill’s Brother Subpoenaed In State Probe, Boston Globe Reports]
(UPDATED 11:30 A.M. EDT MAY 21 U.S.A. See Update at bottom of this brief, originally published May 20.)TelexFree figure James Merrill was unable to persuade a federal magistrate judge to free him, the PP Blog has learned.
Judge David Hennessy declined Merrill’s bail application today, the office of U.S. Attorney Carmen Ortiz said moments ago.
Merrill, 53, was arrested and detained May 9 on wire-fraud conspiracy charges. TelexFree co-owner Carlos Wanzeler, 45, has been labeled a fugitive. Wanzeler’s wife Katia, meanwhile, was arrested last week and detained as a material witness.
See May 16 PP Blog story. See related story dated today.
May 21 update: The Boston Globe is reporting (see Globe Tweet in Comments thread below) that John F. Merrill, the brother of James Merrill, has been subpoenaed by the Massachusetts Securities Division led by Commonwealth Secretary William Galvin. John Merrill is a banker at Fidelity Bank.
See March 9, 2014, PP Blog report. The report references a February 2014 document on file at the Washington State Utilities and Transportation Commission that purported to be a TelexFree LLC “Balance Sheet.” The document lists two accounts at Fidelity Bank and outlines purported TelexFree loans to other TelexFree-related enterprises, including TelexElectric LLLP, Telexfree Financial Inc., TelexMobile and Ympactus.
When the Massachusetts Securities Division filed an action against TelexFree last month, the state alleged that TelexFree financial filings with the Washington State Utilities and Transportation Commission were at odds with information TelexFree had provided the investigators in Massachusetts.
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HYIP RIPPLES: FBI Issues ‘Wanted’ Poster For Florida Attorney Implicated In ‘Commodities Online’ Caper; Michael Ralph Casey Called ‘Armed And Dangerous’
Michael Ralph Casey. Source: FBI. A Florida attorney the SEC has described as “anything but lawyerly” is now the subject of an FBI “Wanted” poster and is considered “armed and dangerous.”
The FBI issued the poster after Michael Ralph Casey “failed to appear for a court hearing and a bench warrant was issued for his arrest by the United States District Court, Southern District of Florida.”
Casey, 67, was required to appear in court on April 29, but did not show, the FBI said. Along with James C. Howard III and Louis N. Gallo III, Casey was charged both civilly and criminally in September 2012 for his alleged role in Commodities Online.
The SEC has described Commodities Online as a securities swindle led by two convicted felons (Howard and Gallo) with narcotics rap sheets. The “program” allegedly was married to a boiler-room operation and tried to sanitize itself by bringing in Casey, who allegedly turned a blind eye to the scam.
Commodities Online is alleged to have gathered tens of millions of dollars. The “program” operators were accused of moving millions of dollars offshore while the SEC was closing in in 2011.
The alleged Commodities Online swindle also is notable for peripheral ties to other HYIP debacles. A Nevada company known as SSH2 Acquisitions sued James Clark Howard in 2010, alleging it had been ripped off in a Ponzi scheme. AdSurfDaily Ponzi figure Terralynn Hoy, later listed as an alleged winner in the Zeek Rewards Ponzi scheme, was listed in Nevada records as a director of SSH2.
Meanwhile, BWFC Processing Center LLC, the registered agent of SSH2, is associated with Joseph Craft, a figure in the alleged TelexFree pyramid- and Ponzi scheme.
ASD was an alleged $119 million Ponzi scheme; Zeek was alleged to be a combined Ponzi- and pyramid swindle that gathered $850 million, and TelexFree has been described by regulators as a combined pyramid- and Ponzi fraud that gathered $1.2 billion.
Hoy was a moderator at the now-defunct “Surfs Up” forum that cheered for ASD Ponzi schemer Andy Bowdoin. She also moderated a defunct forum that led cheers for AdViewGlobal, an ASD reload scam that collapsed in 2009. Surf’s Up disappeared mysteriously in early 2010. Earlier this year, the court-appointed receiver in the Zeek case identified Hoy as a Zeek winner.
She has not been accused of wrongdoing.
View the FBI’s “Wanted” poster on Casey.
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Katia Wanzeler, Wife Of Alleged TelexFree Fugitive, Remains In Federal Custody As Couple’s 22nd Wedding Anniversary Nears
UPDATED 11:13 A.M. EDT U.S.A. Katia Helia Wanzeler, the wife of alleged TelexFree fugitive Carlos Wanzeler, remains in federal custody, according to the Federal Bureau of Prisons website.Katia, 49, is listed as an inmate at the Metropolitan Detention Center in Brooklyn, a federal facility situated in the largest (by population) of New York City’s five boroughs. She is expected to be moved to Massachusetts to make an appearance before a grand jury investigating TelexFree, an alleged pyramid- and Ponzi scheme that gathered $1.2 billion.
Details of the move are unclear. Katia, a resident of Northborough, Mass., was arrested as a material witness last week at John F. Kennedy International Airport in New York, after “someone in Brazil” allegedly purchased her a one-way ticket to fly there. Her husband allegedly flew to Brazil on April 17, after ducking into Canada late on the evening of April 15. TelexFree’s offices in Marlborough, Mass., were raided at approximately 2 p.m. on that date.
Records in Worcester, Mass., show that the former Katia Helia Barbosa wed Carlos Nataniel Wanzeler on June 20, 1992. If Carlos Wanzeler remains in Brazil, it means he does so as the couple’s 22nd wedding anniversary approaches and his wife is being detained by U.S. authorities.
It also means that he remains in Brazil while James Merrill, his TelexFree business partner, remains in a U.S. jail. Merrill was arrested in Worcester on May 9 on a charge of wire-fraud conspiracy. Both Merrill and Wanzeler also face civil actions by the U.S. Securities and Exchange Commission and the Massachusetts Securities Division, the state-level regulator. In addition, they face at least two prospective class-action lawsuits, including one that alleges violations of the federal racketeering (RICO) statute.
At a TelexFree confab in Spain earlier this year, Merrill spoke of Carlos Wanzeler in glowing terms, calling him one of “the greatest leaders” he’d ever met. He said the same thing about Carlos Costa, a business partner and TelexFree figure in Brazil.
Whether Merrill continues to hold Carlos Wanzeler and Carlos Costa in high regard is unclear.
TelexFree appears to have had at least one video personality with the surname of Barbosa: Helio Barbosa. Whether he is related to Katia Helia (née Barbosa) Wanzeler was not immediately clear. At least one YouTube video in Portuguese shows Helio Barbosa with Carlos Wanzeler. The video appears to have been shot at a TelexFree event in Newport Beach, Calif., in July 2013.
A TelexFree report aired in recent hours on the Brazilian television show “Fantastico” suggested that TelexFree continued to operate in Brazil. A link to a print version of the report was posted by a reader of BehindMLM.com.
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UPDATE: TelexFree’s James Merrill Remains In Custody
UPDATED 8:14 p.m. EDT U.S.A. James Merrill, the onetime president of TelexFree arrested and detained May 9 on wire-fraud conspiracy charges, was not freed at a bail hearing today and will remain in custody.
“The judge took the matter under advisement,” the office of U.S. Attorney Carmen Ortiz of the District of Massachusetts said early this evening. “Merrill remains in custody until such time” the judge rules on his bail application.
Precisely when the judge intended to rule was not immediately clear. It is believed the ruling will come next week.
Merrill proposed to surrender his passport and to sign over the equity in his Ashland (Mass.) home to secure his appearance at further court proceedings. The Merrill property equity was estimated at $300,000, and Merrill contended he was not a flight risk.
His TelexFree business partner — Carlos Wanzeler — has been labeled a fugitive by the U.S. Department of Justice. An affidavit says Wanzeler ducked into Canada after dark on April 15, the day TelexFree’s offices were raided in Marlborough, Mass. Two days after that, Wanzeler boarded a plane in Toronto and flew to Brazil.
Through his attorney Beverly B. Chorbajian, Merrill said he would not flee.
“Here, the government recites that Merrill is a risk merely because he ‘might’ flee,” Chorbajian argued. “There is absolutely no evidence of any indication that this is the case.”
Merrill’s wife, Chorbajian advised the judge, described him a loving family man with an interest in the community. Merrill, his wife said, has been a youth-baseball coach, a fine son to his mother and a friend who comforted a childhood friend dying of Lou Gehrig’s disease.
“His [C]atholic faith is important to him and has sustained him these past few months through this ordeal,” Merrill’s wife said, according to a defense memo to the judge.
From the remarks of Merrill’s wife as presented the judge (italics added):
He only took more interest in TelexFree because he saw a future with this business in spite of all his frustrations with the way it was being run. He spent countless hours working to make it better – finding consultants to help, consulting attorneys, and so forth. He was so vested in seeing it on the right path. Conspiracy to commit fraud is so far from his intentions and actions.
Repeating a contention in the TelexFree bankruptcy case, Chorbajian argued that Merrill was not part of a plot to hide money. Bankruptcy attorneys argued that cashier’s checks were destined to be placed in a safe-deposit box when found in the possession of former TelexFree CFO Joe Craft.
Nearly $38 million in cashier’s checks were discovered during the April 15 raid of TelexFree’s headquarters. TelexFree had declared bankruptcy two days earlier.
Wanzeler, according to a government affidavit, spent all or parts of three days in Canada prior to flying to Brazil. What he did there remains a mystery.
Maps estimate that it’s a four and a half-hour drive from Northborough, Mass. (where Wanzeler resided) to the Lacolle border crossing through which Wanzeler allegedly entered Canada at roughly 11 p.m. on the date of the TelexFree raid. If the government’s timeline is accurate, it may mean Wanzeler was in Canada for at least an hour on April 15, all day on April 16 and part of the day on April 17. Assuming Wanzeler chose an efficient route, he would have passed through New Hampshire and Vermont prior to arriving at Lacolle.
What he did with time on his hands in Canada is unclear, potentially leading to questions about whether he retrieved TelexFree cash that might have been stockpiled north of the U.S. border. Also unclear is why Wanzeler allegedly chose to fly out of Toronto, roughly six hours from the Lacolle crossing in Quebec. Montreal is much closer to Lacolle.
Toronto is about 281 miles from Lacolle, according to maps. Montreal is only about 41 miles.
TelexFree is alleged to be a combined pyramid- and Ponzi scheme that may have gathered $1.2 billion.
NOTE: Thanks to the ASD Updates Blog.
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BULLETIN: Feds Say Carlos Wanzeler Left U.S. For Canada On Same Day Homeland Security Raided TelexFree Offices; Alleged Fugitive Then Flew To Brazil On Date His Home Was Raided; Wanzeler’s Wife Arrested As Material Witness After Telling Agents Husband Was Staying In Hotel
(10th Update 10:53 p.m. EDT U.S.A.) Federal agents arrested Massachusetts resident Katia Wanzeler at John F. Kennedy International Airport in New York yesterday after “someone in Brazil” purchased her a “one-way ticket” two days ago and paid cash, the U.S. Department of Homeland Security alleges in an affidavit.Katia, the wife of alleged TelexFree fugitive Carlos Wanzeler, was arrested as a material witness. She was born in 1965, according to the affidavit.
Late in the evening of April 15 — the same day federal agents raided TelexFree headquarters in Marlborough, Mass. — Carlos Wanzeler and his daughter Lyvia “drove to the US/Canada border crossing at Lacolle, PQ (Provence de Quebec) in a BMW,” according to the affidavit.
The vehicle bore Massachusetts plates registered to Acceris Realty Estate LLC, a company for which Katia Wanzeler is the registered agent, according to the affidavit.
Two days later — on April 17, the same day federal agents raided the Wanzeler home in Northborough, Mass. — Carlos Wanzeler and his daughter “boarded Air Canada flight number 90 From Toronto to Sao Paulo, Brazil. Carlos Wanzeler entered Brazil using his Brazilian passport,” according to the affidavit.
On April 26, according to the affidavit, Lyvia flew back to the United States from Brazil on a round-trip ticket paid for with her father’s frequent-flyer miles. But on May 1, according to the affidavit, Lyvia left the United States, flying from Boston to Italy.
Prior to the April 15 and April 17 raids, according to the affidavit, “Katia Wanzeler traveled with James Merrill to retrieve over $27 million dollars in ca[s]hiers checks from a Wells Fargo bank in Connecticut. The majority of the checks were payable to TelexFree entities but one of the checks, in the amount of $2,000,634.76, was payable to ‘Katia B Wanzeler.’”
James Merrill is Carlos Wanzeler’s co-defendant in a criminal case filed last week that alleges wire-fraud conspiracy. The travel by Katia Wanzeler with James Merrill occurred on April 11, according to the affidavit.
When agents raided the Wanzeler home on April 17, according to the affidavit, Katia Wanzeler “informed agents that her husband had been staying in a hotel ‘on the advice of counsel.’ In reality Carlos Wanzeler had fled the country after driving into Canada and then flying to Brazil . . .”
The affidavit also notes that Carlos Wanzeler and James Merrill are under investigation for crimes beyond wire fraud, including securities fraud and money laundering.
Katia Wanzeler is a material witness, according to the affidavit, because “significant sums of money were moved from TelexFree bank accounts into a Wells Fargo account in the name of Katia Wanzeler.
“On February 28, 2014,” the affidavit continues, “two transfers from TelexFree account XXXX8498 at Wells Fargo were initiated into Katia Wanzeler’s Wells Fargo account XXXX3716, one in the amount of $1,000,000 and another in the amount of $2,500,000. Subsequently, $1,500,000 of those funds were transferred into a Wells Fargo brokerage account in the name Katia Wanzeler.”
TelexFree declared bankruptcy late on the evening of April 13, a Sunday. Two days after that, according to the affidavit, Carlos Wanzeler entered Canada at 11 p.m. And two days after that — on April 17 — he was on a plane for Brazil.
On May 13, someone in Brazil paid cash to buy Katia Wanzeler a one-way ticket to Brazil, according to the affidavit.
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UPDATE: FOR SPEAKERS OF SPANISH OR PORTUGUESE: SEC’s TelexFree Complaint Now Available In Your Language
Update: SEC press release, complaint re TelexFree pyramid scheme now available in Spanish and Portuguese: http://t.co/SJ4X4lSKaz
— SEC_News (@SEC_News) May 15, 2014
Link for Spanish:
http://www.sec.gov/enforce/Article/telexfree-press-release-and-complaint-spanish-version.html
Link for Portuguese:
http://www.sec.gov/enforce/Article/telexfree-press-release-and-complaint-portuguese-version.html
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URGENT >> BULLETIN >> MOVING: ‘Wings Network’ And Alleged Promoters Charged
URGENT >> BULLETIN >> MOVING: (16th Update 12:27 p.m. EDT U.S.A.) “Wings Network,” an MLM “program” in part targeted at TelexFree participants, has been charged in Massachusetts with operating a pyramid scheme and selling unregistered securities as investment contracts as part of a securities-fraud scheme.Several individual promoters or alleged recipients of fraud-scheme proceeds were named in the civil complaint.
The allegations were brought by the office of Massachusetts Commonwealth Secretary William Galvin, who oversees the Massachusetts Securities Division. Galvin’s office earlier brought fraud charges against TelexFree and banned a similar “program” known as WCM777 from the state. The SEC later sued both TelexFree and WCM777.
“This case is another example of unscrupulous operators preying on vulnerable immigrant communities with promises of great riches, in this instance a bogus means of downloading electronic content,” Galvin said. “In reality, these operators only sought to rope more participants into their scheme.”
In a statement moments ago, Galvin’s office said three individuals in Central Massachusetts had been charged as promoters.
“Within five months, Wings Network collected $12,546,226 from 8,914 Massachusetts investors,” Galvin’s office said, citing the complaint.
Named respondents include Priscila and Geovani Bento of Auburn, and Vinicius Aguiar of Marlborough.
Some of the money was “wire transferred” to Sergio Tanaka of Florida and Tropikgadget, Tanaka’s company based in the United Arab Emirates and Portugal,” Galvin’s office said.
“Tanaka and his company are respondents in the complaint,” Galvin’s office said.
Aguiar, Galvin’s office said, conducted transactions as BRAZUSA Communication Company, Eagle Team, Grupo Aguiar, and Grupo Internacional.
Carlos Barbosa of Madeira, Portugal, is a party referenced in the complaint. Barbosa purportedly is the CEO of Wings Network.
“Respondent Barbosa was videotaped in April, 2014 giving a Wings Network presentation to over 960 Massachusetts investors,” Galvin’s office said.
From a statement by Galvin’s office (italics/carriage returns added):
Wings Network purported to sell mobile marketing platforms that allow consumers to download electronic content for a fee, the complaint stated, but added, “The marketing materials, online selling presentations and assertions by the individual respondents make it clear that the primary purpose of Wings Network is to recruit additional members.”
Of the sales pitches for this “thinly veiled pyramid scheme,” the complaint says, “The use of trendy internet terms combined with meaningless high technology buzzwords and slick websites are all devices to dazzle prospective investors and induce them to purchase their way into the Wings Network scheme.”
“The product itself is redundant because it is not necessary to use any product including Respondents’ product, to download electronic content,” the complaint charges, “The true purpose of the program was to recruit additional participants into the Wings Network and investors were told that recruitment was how the investor was going to make any significant money.”
The complaint seeks a cease and desist order, and a requirement that the respondents offer to compensate investors who suffered losses through the alleged wrongdoing.
A message on the Wings Network website today claims “no wrong doing has been alleged.”
Based on today’s complaint by Galvin’s office, the message on the website appears not to reflect the current reality.
Read the complaint.
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BULLETIN: REPORT: Wanzeler’s Wife Arrested; [UPDATE: U.S. Attorney’s Office Confirms Arrest]
BULLETIN: (6th update 6:10 p.m. EDT U.S.A.) There are reports on Twitter, citing a Boston Globe story, that the wife of accused TelexFree figure Carlos Wanzeler has been arrested at an airport.The office of U.S. Attorney Carmen Ortiz of the District of Massachusetts confirmed the arrest to the PP Blog at 11:46 a.m., saying “Katia Wanzeler was arrested last evening at JFK Airport [in New York] as she attempted to board a flight to Brazil.”
Katia Wanzeler, Oritiz’ office said, “will appear in federal court in [New York] today for an initial appearance.”
Carlos Wanzeler was charged criminally last week, as was TelexFree figure James Merrill. Court records show that federal undercover agents conducted a probe into TelexFree’s operations. The probe began at least by October 2013.
TelexFree has been described as a combined pyramid- and Ponzi scheme that gathered more than $1.2 billion. The U.S. Department of Justice has labeled Carlos Wanzeler a fugitive.
PP Blog story continued here.
#TelexFree co-owner’s wife arrested as she tried to leave the country http://t.co/wMuzqLIr5P via @BostonGlobe
— Beth Healy (@HealyBeth) May 15, 2014
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BULLETIN: Special Master Compares Zeek Case To Madoff, Stanford And Enron
BULLETIN: With the MLM world only now coming to grips with the alleged $1.2 billion TelexFree Ponzi- and pyramid fraud, the special master in the Zeek Rewards criminal action has compared the Zeek case to the Bernard Madoff and Allen Stanford Ponzi schemes and the notorious Enron securities swindle involving former CEO Jeffrey Skilling.Special Master Kenneth D. Bell made the comparison as a means of bringing some logistical efficiencies to the criminal case in which former Zeek executives Dawn Wright-Olivares and Daniel Olivares were charged in December 2013.
Like TelexFree, Zeek operated as an MLM HYIP “program.”
Bell, who also is the court-appointed receiver in the SEC’s civil case against Zeek, has proposed in his role as special master that the court impose electronic noticing procedures on the criminal side of things to keep victims informed.
The Madoff swindle, Bell noted, included “thousands” of victims. Stanford’s swindle, meanwhile, included “tens of thousands” of victims. So did the Enron case.
In each case, Bell noted, judges approved electronic noticing procedures because of the impracticality or downright impossibility of dealing with so many victims on an individual basis.
“In light of the vast number of potential victims spanning the globe in [the Zeek] case, it is difficult to envision a better candidate” for electronic noticing, Bell advised the court.
And, Bell noted, “[b]y many counts, the ZeekRewards scheme created more victims than any other Ponzi scheme in history. As a consequence of its internet-based focus, the scheme generated more than 700,000 victims in over 150 countries.”
Wright-Olivares and Olivares turned blind eyes to Zeek’s massive fraud, which gathered more than $850 million, according to court filings.
It is possible that the alleged TelexFree Ponzi/pyramid is even larger than Zeek in terms of both victims and dollars consumed, a circumstance apt to trigger alarm in the law-enforcement community because of the relentlessness and brazenness of the cross-border schemes. Until final TelexFree numbers become known, Zeek continues to hold the title of of the largest HYIP swindle in U.S. history.
As special master, Bell is proposing that the court permit noticing on both a U.S. Department of Justice website and the website of the Zeek receivership. Many Zeek victims already are familiar with the receivership website.
TelexFree figures James Merrill and Carlos Wanzeler were charged criminally last week. They’re also defendants in an SEC civil action.
The SEC charged Zeek in August 2012. TelexFree may have surpassed it in raw fraud volume less than two years later.
NOTE: Thanks to the ASD Updates Blog.