PatrickPretty.com

Month: May 2014

  • BULLETIN: TelexFree Chapter 11 Case Now In Hands Of Massachusetts Court

    breakingnews72BULLETIN: The TelexFree Chapter 11 bankrupcy case filed in Nevada last month now has been formally transferred to Massachusetts and has been assigned to U.S. Bankruptcy Judge Melvin S. Hoffman of the Central Division in Worcester.

    U.S. Bankruptcy Judge August B. Landis of Nevada ordered the case transferred to Massachussetts earlier this week. The SEC argued successfully for the transfer, saying the state was the “nerve center” of TelexFree.

    TelexFree is alleged by the Massachusetts Securities Division and the SEC to be a massive Ponzi- and pyramid scheme.

    Like the Nevada court, the Massachusetts court has established a TelexFree information page. Click here.

    Hoffman already has issued the first order since the transfer — a status conference May 27 at 2 p.m. in Courtroom 3 of Donohue Federal Building in Worcester.

    Housekeeping chores such as transferring docket records from Nevada are under way. Until the transfer is complete, Hoffman has authorized attorneys involved in the case to file emergency pleadings from Boston, Springfield or Worcester.

  • ZEEK RECEIVER: ‘Multilayered Investigation Into [Rex Venture Group] And Its Insiders, Advisors, And Financial Institutions’ Continues

    ponzinews1The court-appointed receiver in the Zeek Rewards Ponzi- and pyramid case says his “multitilayered investigation into [Zeek operator Rex Venture Group] and its insiders, advisors, and financial institutions” continues.

    Receiver Kenneth D. Bell has been at the helm since the epic collapse of the Zeek MLM HYIP scheme in August 2012. The SEC initially filed civil charges to halt the $850 million fraud. A parallel criminal probe by federal prosecutors in North Carolina to date has resulted in the arrest and prosecution of two Zeek insiders, both of whom pleaded guilty.

    Bell did not say in his May 7 report to Senior U.S. District Judge Graham C. Mullen precisely who the receivership was investigating. Zeek is known to have had members and vendors in common with the $119 million AdSurfDaily Ponzi scheme, which collapsed in 2008.

    Bell so far has sued several members of ASD who became alleged winners in Zeek. (See March 3, 2014, PP Blog story and Comments thread.) Zeek also had members in common with TelexFree, an alleged Ponzi- and pyramid scheme that gathered more than $1.2 billion. Class-action attorneys have alleged RICO violations at TelexFree involving vendors and MLM attorney Gerald Nehra, who also performed work for Zeek, according to Zeek promos.

    “The Receiver has begun to investigate possible claims against financial institutions that facilitated the [Zeek] scheme,” Bell advised Mullen. “If the Receiver becomes convinced that there are colorable causes of action against banks and other financial institutions, he will solicit other law firms to undertake this work.”

    And, Bell noted, “The Receiver continues to evaluate potential claims against RVG’s third-party advisors, consultants, and others who received fraudulent transfers but who were not Affiliate Investors.

    “These claims,” he continued, “are varied in light of the diverse range of involvement these parties had with RVG. The Receiver intends to file multiple third-party actions, likely grouping defendants in these actions based on the similarity of claims asserted against them.”

    Moreover, Bell said, he “has been investigating allegations that certain insiders and net winners may be sheltering, hiding, or dissipating assets fraudulently transferred or held. The Receiver intends to fully pursue legal recourse in these situations so that funds are preserved and may be returned to victims of the ZeekRewards scheme.”

    Bids to flummox the receivership were not limited to insiders and winners, Bell said.

    “The Receiver Team also identified one creditor that appears to have taken numerous actions that were in direct violation of the Freeze Order and greatly damaged the estate,” Bell said. “The Receiver is in the process of determining what actions should be taken in regard to these violations.”

    Bell did not identify the creditor.

    An examination of of transactions that occurred at offshore processors such as Payza and SolidTrustPay continues, Bell said.

    “The Receiver Team is continuing its investigation of and pursuit of any outstanding funds, including any potential transfers or withdrawals, from Payza and Solid Trust Pay,” Bell said.

    Foreign transactions involving Payment World and CyberProfit also are under scrutiny, Bell said.

    In addition, he asserted that his team “is investigating potential improper transfers totaling approximately $5.8 million from a Trust Account set up by Preferred Merchants’ CEO Jaymes Meyer for which Rex Venture Group was the beneficiary,” Bell said. “The Receiver Team has issued a subpoena to Preferred Merchants to obtain additional information and is engaged in conversations with Preferred Merchants’ counsel regarding these transfers and the production of this information.”

    Transactions at Plastic Cash International also are under scrutiny, Bell said.

    ‘The Receiver Team is investigating potential improper transfers or withdrawals from Plastic Cash International,” Bell said. “This inquiry includes an analysis of the flow of funds through Network Merchants and SecureNet, which facilitated the flow of funds between Rex Venture Group and Plastic Cash International.”

    Meanwhile, scrutiny of transactions involving NXPay, another Zeek Vendor, continues, Bell said.

    “The Receiver Team completed its reconciliation of account information for NxPay, determining an outstanding amount of over $13 million, including improper post-freeze Order disbursements, and is analyzing potential options to recover this outstanding amount,” Bell said.

    Negotiations with various parties over document production and information-sharing continue, Bell said.

    “As part of this effort, the Receiver recently conducted an interview of a key fact witness with knowledge of the scheme,” Bell said.

    He did not identify the individual.

    Read Bell’s May 7 report. Visit the receivership website.

  • BOSTON GLOBE: Massachusetts Issues Subpoena To Wings Network ‘Program’

    cautionflag3rd Update 12:58 P.M. EDT U.S.A. The office of Massachusetts Commonwealth Secretary William Galvin has issued a subpoena to Wings Network, the Boston Globe is reporting.

    From the Globe (italics added):

    “We attended one of their events,’’ Galvin said. “We had heard from some investors who, in light of TelexFree, had become concerned — and we’re concerned.’’

    Galvin heads the Massachusetts Securities Division, which brought civil fraud charges against TelexFree last month after an investigation that lasted for weeks. Galvin’s investigators also brought fraud allegations against the WCM777 “program” in November.

    Galvin’s office alleged that TelexFree was a combined Ponzi- and pyramid scheme that had gathered more than $1.2 billion.

    Both TelexFree and WCM777 were targeted at the Brazilian community in Massachusetts, according to filings. In addition, the “programs” targeted speakers of Spanish and Chinese. The U.S. Securities and Exchange Commission (SEC) also filed charges against the “programs.”

    No charges have been brought against Wings Network. The Massachusetts probe is ongoing, the Globe reports.

    Like WCM777, Wings Network says it is in the cloud-computing business. Like TelexFree, Wings Network says it’s involved in “apps.” TelexFree also pushed a VOIP product.

    Galvin’s office issued a warning on pyramid schemes last month, saying that investigators have encountered “recent schemes” involving “products related to internet services, mobile marketing platforms, app sales, cloud computing services, and voice-over-internet applications.”

    The HYIP world is infamous for reload schemes in which victims of previous scams are targeted again by purveyors of purported emerging “opportunities.”

    There is a Wings Network outlet in Framingham, Mass., according to a photo in the Globe.

    The Framingham area appears to have been a TelexFree stronghold.

    Like TelexFree, AdSurfDaily, Zeek Rewards, Profitable Sunrise and other schemes that have come under regulatory scrutinty, Wings Network has a presence on well-known Ponzi-scheme boards such as TalkGold and MoneyMakerGroup.

    Also see March 22, 2014, PP Blog story on the interconnectivity of schemes .

     

  • REPORTS: Dominican Man Despondent Over TelexFree Losses Found Unharmed

    recommendedreading1There are reports in Dominican media and across Twitter that a Dominican man who contemplated taking his own life two weeks ago over TelexFree losses has been found unharmed.

    The man reportedly was found near Santiago at the home of a relative and told police that thoughts of his children helped keep him from doing the unthinkable.

    News that the man is safe appears to have led to an outpouring of relief on Twitter.

     

     

  • [Test]

    Please ignore . . .

  • BULLETIN: PonziTracker.com: Judge Moves TelexFree Bankruptcy Case To Massachusetts And Suspends Proceedings Until Transfer Occurs

    BULLETIN: (4th Update 3:28 p.m. EDT U.S.A.) U.S. Bankruptcy Judge August B. Landis of Nevada has transferred the TelexFree Chapter 11 case to Massachusetts, PonziTracker.com reported at 2:27 p.m.

    At 2:34 p.m., PonziTracker reported that Landis has suspended all proceedings in the case until the transfer to Massachusetts can be completed.

    Click here.

    The SEC sought the transfer to Massachusetts last month, arguing that the state was TelexFree’s “nerve center” and that the bankruptcy filing in Nevada on Oct. 13 was a “transparent attempt to avoid Massachusetts, where their ‘business’ and numerous witnesses are located and where various government agencies have been investigating their fraudulent conduct.”

    Also see follow-up story by PonziTracker.

  • EDITORIAL: TelexFree, Rabbit Holes And Vomit

    "man vomiting icon" download provided by OpenClipart.org.
    “man vomiting icon” download provided by OpenClipart.org.

    TelexFree, an alleged $1.2 billion Ponzi- and pyramid scheme targeted at immigrants, is an exceptionally dangerous MLM malignancy and criminal enterprise. The SEC, the Massachusetts Securities Division and the U.S. Department of Justice have an obligation to society at large to treat TelexFree with maximum legal prejudice and to annihilate it.

    This, we believe, is happening.

    MSD has filed an action. The SEC has filed an action. The office of the U.S. Trustee, the Justice Department’s watchdog arm in bankruptcy petitions, is seeking to intervene in TelexFree’s Chapter 11 case in Nevada. On Friday, Jordan Maglich of PonziTracker.com reported that the SEC asserted at a key bankruptcy hearing that federal prosecutors also have entered the TelexFree fray through the filing of forfeiture actions.

    TelexFree, it seems, finds itself the target of a richly deserved paper-nuking by a government righteously angered by the preposterous “opportunity” and its gaggle of reliably felonious pitchmen.

    Regardless, the process of killing TelexFree dead and delivering it to the judiciary for final pronouncement inevitably will create an opportunity for MLM’s criminal wing and robotic Stepfordians to serve up a vomitous spectacle. Members of the public at large should pay close attention to this spectacle and use it to inform their thinking.

    EXTREME CAUTION WARRANTED: Watch the rancid TelexFree spectacle from a distance: If you get too close to the ever-hurling Stepfordians and their upstream programmers who load the vomit-inducing talking points, you might find yourself suddenly wondering why your fellow man ever questioned the beauty of Soviet propaganda night at Jonestown. You even could find yourself waxing nostalgically for the Peoples Temple itself.

    Like Zeek Rewards and AdSurfDaily before it, TelexFree was a vessel created to divert the wages of the MLM proletariat to the MLM Politburo, known in HYIP scam circles as the “leaders.”  Some of those “leaders” have Ferraris and Hummers and BMWs and blue-chip investment accounts that reportedly contained millions and millions of dollars.

    Little wonder some angry affiliates showed up at TelexFree’s broom closet office in Massachusetts to voice their displeasure a mere 12 days before TelexFree filed for bankruptcy protection in Nevada, a state from which TelexFree operated a billion-dollar business through a mailbox.

    Merriam-Webster.com defines “rabbit hole” as a “bizarre or difficult state or situation — usually used in the phrase down the rabbit hole.”

    In the hours leading up to last week’s key hearing for TelexFree in bankruptcy court, the U.S. Department of Justice saw fit to recommend looking down the TelexFree “rabbit hole.”  Based on the Merriam-Webster definition, our take is that the take of the Justice Department — through U.S. Trustee Tracy Hope Davis —  was practically perfect.

    We believe the Justice Department, the SEC and MSD will find Chernobyl, Bhopal and Love Canal down that hole. There’s also a fair chance they’ll find Al Capone wearing an Easter Bunny suit.

    TelexFree provided the financial world with a glimpse into what an Extinction Level Event driven by hapless MLM buffoons and their Stepfordian followers might look like. TelexFree was an attack on free enterprise, not an innocent expression of the same.

    Kill it. Kill it dead.

  • URGENT >> BULLETIN >> MOVING: TelexFree, Gerald Nehra MLM Law Firm, Banks, Processors Sued In Prospective Class Action That Alleges RICO Violations

    breakingnews72URGENT >> BULLETIN >> MOVING: (18th update 3:49 P.M. EDT U.S.A.) TelexFree, MLM attorney Gerald Nehra, “Doe” insiders and several banks have been sued in a prospective class-action that alleges fraud and violations of the federal RICO (racketeering) statute.

    “Certain Defendants share joint and severable liability, including the Doe Inside Promoters, the licensed professionals such as the RLP Defendants, including certified public accountants and lawyers that specialized in sheltering so-called Multi-Level Marketing schemes having aided and abetted TelexFree’s Pyramid Ponzi Scheme by providing TelexFree with legal and financial advice and assistance during the course of the fraud, despite knowledge of the fraudulent nature of TelexFree’s operation,” the complaint alleges.

    Among other things, Nehra was accused in the complaint of turning a blind eye to securities issues at TelexFree, encouraging others to conceal those issues and engaging in other misconduct.

    Nehra, according to the complaint, was not merely providing zealous representation to TelexFree, he counseled “TelexFree on methods to evade United States securities laws that were intended to offer, in part, protection from pyramid Ponzi schemes; all to enrich himself financially and serve his own selfish interests.”

    With Nehra understanding that “his legal opinions and representations would be used by TelexFree as a marketing tool to further and advance their business model,” his “opinions were packaged and promoted as part of TelexFree’s total ‘post Brazilian shut down package’ to the members of the putative class,” according to the complaint.

    The complaint further alleges that Nehra’s actions in misrepresenting TelexFree as a legitimate business encouraged TelexFree members “unknowingly” to “participate in the evasion of federal and state securities laws.”

    Named defendants included TelexFree LLC, TelexFree Inc., “Paralegal Doe [who] served as TelexFree, LLC’s agent, servant or employee,” TelexFree Financial Inc., TelexElectric LLLP, Telex Mobile Holdings Inc., James M. Merrill, Carlos N. Wanzeler, Steven M. Labriola, Joseph H. Craft, Craft Financial Solutions LLC, Carlos Costa, Gerald P. Nehra, Gerald P. Nehra, Attorney at Law PLLC, Richard W. Waak (Nehra law partner), Law Offices of Nehra and Waak, Richard W. Waak Attorney at Law PLLC, TD Bank NA, Citizens Financial Group Inc., Citizens Bank of Massachusetts, Fidelity Co-Operative Bank, Middlesex Savings Bank, Global Payroll Gateway Inc., International Payout Systems Inc. (I-Payout), ProPay Inc., “Banks Doe,”  “Doe Inside Promoters” and “Credit Processors Doe.”

    Merrill, Wanzeler, Labriola and Craft are former TelexFree managers or executives. The Massachusetts Securities Division has described TelexFree as a combined Ponzi- and pyramid scheme that gathered more than $1.2 billion and crossed national borders. The SEC also has charged TelexFree, Merrill, Wanzeler, Labriola and Craft with fraud, alleging that the firm conducted business in at least 20 U.S. states and mainly targeted Brazilian and Dominican immigrants.

    Plaintiffs are identified as Waldemara Martins and Leandro Valentim.

    The complaint alleges that Craft incorporated TelexFree Financial and that the entity “was fraudulently set up for the purpose of sheltering funds rightfully belonging to the putative class.”

    Among the contentions in the complaint (italics added):

    On March 9, 2014, TelexFree changed its compensation plan, thereby requiring Promoters to sell its VoIP product to qualify for the payments that TelexFree had previously promised to pay them.

    TelexFree’s former officers or employees stated to the TelexFree transition team that under the Pre March 2014 standard form contract TelexFree owes its promoters over $5 billion dollars.

    The rule change generated a storm of protests from Promoters who were unable to
    recover their money. On April 1, 2014, dozens of Promoters descended upon TelexFree’s Marlborough, Massachusetts office to protest this change and attempt to regain access to their money.

    Reporting on TelexFree-related matters by BehindMLM.com, a publication that reports on evolving MLM frauds, is referenced in the complaint.

    In addition, according to the complaint, “TelexFree mailed fraudulent and inaccurate 1099 (Miscellaneous Income) forms to investors, possibly to create the illusion that they had made payments to investors.”

    HYIP schemes in recent years have advised participants to avoid calling the “program” an “investment program.” Here is what the complaint alleges on this subject:

    “TelexFree’s Contract at Section 2.6.5 (m) mandates that Promoters are not to use the term investment with respect to the registration costs . . . Co-Defendant and Company Counsel Attorney Gerald P. Nehra, through his affiliated companies (Law Offices of Nehra and Waak , Gerald P. Nehra, Attorney at Law, PLLC, and Richard W. Waak, Attorney at Law, PLLC), and under the direct supervision of Co-Defendants Richard W. Waak and Richard W. Waak Attorney at Law, PLLC provided this deceitful advice for the purpose of furthering perpetuating Defendants unlawful Pyramid Ponzi Scheme.”

    In the complaint, the plaintiffs further asserted that “Attorney Nehra’s extensive experience in multi-level marketing, and particularly his involvement with the Ponzi schemes involving Ad SurfDaily and Zeek Rewards, armed him with the knowledge of what constitutes violations of United States securities law. Indeed, Attorney Nehra was well aware that the use of semantics and obscured phraseology to obfuscate securities laws fails to legitimize TelexFree’s illegal Pyramid Ponzi Scheme.”

    Craft was accused in the complaint of “Overseeing TelexFree’s creation of falsified accounting records,” “Fraudulently certifying TelexFree’s business operations and accounting practices as good and lawful, despite actual knowledge of their unlawful and illegitimate nature” and “Concealing the fact that the AdCentral Packages purveyed by TelexFree were actually securities.”

    At the same time, Craft was accused of “Concealing and absconding with investor assets.”

    Costa, a TelexFree figure in Brazil, was accused of publicly supporting “TelexFree’s illegal and corrupt activities.”

    The banks and processors were accused of aiding and abetting a fraud scheme.

  • BULLETIN: Cash, Weapons, Electronics Reportedly Seized In TelexFree-Related Raid In Dominican Republic; Alleged Promoter Labeled Fugitive

    Source: Public Ministry.
    Source: Public Ministry.

    BULLETIN: (Updated 12:27 p.m. EDT U.S.A.) A TelexFree-related police raid coordinated by prosecutors in the Dominican Republic has resulted in the seizure of cash, at least two weapons and computer (tablets) and phone equipment (smart phones), the Public Ministry says in a statement in Spanish.

    The weapons were identified as a pistol and a shotgun.

    Alleged TelexFree promoter Carlos Manuel Vanterpool Severino has been labeled a fugitive, according to the statement.

    Five TelexFree-related raids occurred in San Pedro de Macoris, according to the statement. The raids appear to have taken place last week.

    The total amount of seized cash  was not immediately clear. A Google translation suggests it exceeded $10,000 U.S.

    TelexFree is alleged in the United States to be a combined Ponzi- and pyramid scheme that gathered more than $1.2 billion.

  • TelexFree Live Bankruptcy-Court Coverage By Jordan Maglich Of Ponzi Tracker

    Jordan Maglich of PonziTracker is providing live coverage of today’s key TelexFree session in U.S. Bankruptcy Court in Nevada:

    12:44 p.m. Hearing beginning:

    Click here.

    1:07 p.m. PPBlog note: Based on Jordan’s reporting, it looks as though the U.S. Attorney’s office has filed civil and criminal forfeiture actions. This is similar to what happened in the AdSurfDaily MLM HYIP case in 2008.

    1:18 p.m. PPBlog note: One way to view the forfeiture actions is that the United States perceives an attack on the country’s banking infrastructure, opening the door for banks and payment processors effectively to become warehouses and distribution centers for fraud proceeds. For the sake of discussion, let’s say TelexFree has 700,000 members. This could mean there are 700,000 conduits to offload proceeds accumulated during a Ponzi scheme. The FBI has been warning about this type of thing for YEARS.

    4:30 p.m. PPBlog note: Testimony resumes after break for lunch. Visit PonziTracker.

  • DEVELOPING STORY: Reports Of TelexFree-Related Arrests In Dominican Republic

    (2ND UPDATE 11:39 A.M. EDT U.S.A.) In the hours leading up to a key appearance by TelexFree in Bankruptcy Court in Nevada today, there are reports in Dominican media that a TelexFree-related police raid occurred in San Pedro de Macoris and that arrests were made.

    TelexFree is accused in the United States of operating a combined Ponzi- and pyramid scheme that gathered more than $1.2 billion.

    Also see this report.