EDITORIAL: SEC Announced TelexFree Prosecution 1 Year Ago Today, But Many MLMers Have Missed Or Ignored The Lessons
UPDATED 7:10 A.M. EDT APRIL 18 U.S.A. A year has passed since the U.S. Securities and Exchange Commission announced the prosecution of TelexFree. Here’s the lede from the PP Blog’s story on April 17, 2014:
The U.S. Securities and Exchange Commission (SEC) has filed charges against the alleged TelexFree pyramid scheme and a federal judge has granted an asset freeze.
TelexFree was a sham to mask an investment scheme known as “AdCentral” in which affiliates were told they could earn money without selling anything as long as they placed “meaningless ads” for the the program’s VOIP product on the Internet “and recruit[ed] others to do the same,” the SEC charged.
The TelexFree “program” was targeted mainly at “Dominican and Brazilian immigrants in the U.S.,” the SEC alleged.
We learned later that TelexFree had been under investigation since at least October 2013 by the U.S. Department of Homeland Security. This probe was part of an undercover operation. A criminal complaint was filed against alleged TelexFree principals James Merrill and Carlos Wanzeler in May 2014. They were indicted in July 2014.
Merrill is free on bail and is awaiting trial. U.S. prosecutors say Wanzeler ducked out of the United States via Canada in April 2014 and boarded a flight to Brazil. They describe him as a fugitive.
Some TelexFree members sent doodles to the federal judge presiding over the SEC’s fraud case. Redaction by PP Blog.
Carlos Costa, a TelexFree figure in Brazil, tried to turn the tables on investigators by running for a seat in Brazil’s Congress. This occurred alongside claims by U.S. prosecutors that TelexFree “has a disturbingly cult-like quality.”
Federal Police in Brazil carried out “Operation Orion” against TelexFree in July 2014. Costa reportedly suffered a nonfatal heart attack on Sept. 2, 2014. In October 2014, he was trounced at the polls in Brazil.
In a February 2015 filing in the TelexFree bankruptcy case, trustee Stephen B. Darr called TelexFree a “pyramid scheme” that may have involved 1 million or more participants globally and gathered as much as $1.8 billion in about two years of cross-border operation.
If the numbers hold up, it would mean that TelexFree has surpassed the Zeek Rewards scheme in both victims’ count and haul. Zeek is estimated to have created about 800,000 victims, while gathering about $897 million. Zeek was shut down by the SEC in August 2012. Zeek also operated for about two years.
Prior to Darr’s February 2015 observations about TelexFree, the SEC — in January 2015 — tweeted that its April 14, 2014, announcement about the TelexFree prosecution was the “#1 most-viewed news” item on the agency’s website last year.
Regardless, any number of American MLMers appear to have ignored important lessons that could be learned from the TelexFree and Zeek cases. “Programs” such as “Achieve Community” and “Wings Network” and “UFunClub” rose to the fore.
The SEC has brought charges against Achieve and Wings. UFunClub is under investigation in Thailand. There have been reports about arrests and suspects fleeing. Early reports put the U.S. dollar sum involved at $307 million.
