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  • TelexFree’s Merrill Concerned About Internet ‘Spectacle’

    EDITOR’S NOTE: This is a follow-up to our Feb. 4 article that reported TelexFree figure James Merrill potentially could be forced to take the Fifth Amendment in front of a large audience at a music hall in Worcester, Mass., on Feb. 10.

    **____________________________**

    James Merrill
    James Merrill

    Forcing him to take the Fifth Amendment tomorrow at Mechanics Hall in front of an expected large crowd at a meeting of TelexFree creditors could affect his right to a fair trial in the criminal case against him in October, James Merrill argued yesterday in bankruptcy court.

    Through attorney Robert Goldstein, Merrill argued that a “spectacle” easily could ensue and that all of it could end up on the Internet.

    Trustee Stephen B. Darr’s plan to hold the meeting at the hall may set the stage for news outlets to photograph or record Merrill’s invocation of his right not to incriminate himself and for attendees with cell phones to do the same thing and “widely disseminate the spectacle on the Internet,” Merrill argued.

    Merrill will “appropriately, and necessarily” invoke the Fifth if forced to appear “and will respectfully decline to answer any questions regarding” TelexFree, which filed for Chapter 11 protection on a Sunday evening in April 2014.

    Shortly after the filing, state and federal regulators called TelexFree a massive, cross-border fraud. Darr went on to deem it a Ponzi- and pyramid scheme, and Chief Bankruptcy Judge Melvin S. Hoffman agreed. Merrill and Carlos Wanzeler, another TelexFree executive, were charged criminally in 2014, after an investigation by the U.S. Department of Homeland Security.

    TelexFree, which operated over the Internet and may have produced about $3 billion in illicit transactions in about two years, was the top story in DHS’s Daily Open Source Infrastructure Report on April 17, 2014.

    In the 2008 AdSurfDaily Ponzi scheme, accused operator Andy Bowdoin invoked his Fifth Amendment right at a civil proceeding while a parallel criminal investigation was under way. Some ASD supporters immediately used the Internet to circulate a story that Bowdoin was “too honest” to testify.

    ASD, a $119 million Ponzi scheme that ultimately sent Bowdoin to prison, and TelexFree operated in similar fashion. Prosecutors have described TelexFree as having cult-like qualities.

    Read Merrill’s brief. Hoffman has ordered Darr’s motion to compel Merrill’s attendance “continued generally.” How that would affect tomorrow’s meeting was not immediately clear.




  • Trustee Wants TelexFree’s Merrill To Appear At Meeting Next Week, Setting Stage For Potential 5th Amendment Showdown In Front Of Large Crowd

    James Merrill.
    James Merrill.

    BULLETIN: TelexFree Trustee Stephen B. Darr today asked Judge Melvin S. Hoffman for an order that would compel TelexFree executive James Merrill to appear at a meeting of creditors at 11 a.m. on Feb. 10 at Mechanics Hall in Worcester, Mass.

    Darr also wants Hoffman to designate Merrill as TelexFree’s corporate representative, setting the stage for him to be questioned by the office of the U.S. Trustee, an arm of the U.S. Department of Justice that participates in bankruptcy cases.

    Carlos Wanzeler, another TelexFree principal, reportedly fled to Brazil in 2014, a circumstance that makes Merrill the only remaining shareholder known to be on U.S. soil. Merrill, who faces criminal charges of operating a Ponzi scheme, has been under close supervision with an ankle monitor since 2014, although he is permitted to leave his Massachusetts home to attend court functions and certain other events.

    An appearance by Merrill at the meeting potentially sets the stage for him to invoke his Fifth Amendment right against self-incrimination before a large crowd at Mechanics Hall. On Jan. 13, the Telegram & Gazette reported that Darr had made plans to accommodate up to 1,000 people at the meeting, owing to the immense size of the TelexFree scheme.

    Mechanics Hall, which calls itself “an acoustical masterpiece,” typically is known as a venue for music and performances.

    “The historic performance hall, which can hold about 1,600 people, is an unusual choice for a meeting of bankruptcy creditors,” the Telegram & Gazette reported last month.”In most Worcester bankruptcy cases, creditors meet in a small room in a downtown office building.”

    Hoffman already has ruled TelexFree a Ponzi- and pyramid scheme. Darr has said it generated about $3 billion in illicit business.

    In an MLM clawback case for the ages, Darr is suing tens of thousands of alleged “winners.”

    Read Darr’s motion to compel Merrill’s attendance.

    UPDATE 6:08 P.M. Feb. 8. Randall G. Reese, via Twitter (@Chapter11Cases), is showing a screen shot of a document today that says Merrill opposes the motion to appear on Wednesday and questions whether his right to a fair trial in the criminal case could be compromised if he is forced to appear at the meeting. See shot in No. 2 position in Comments thread below.

  • Purported JAG Lawyer Linked To SVM Global Initiative Pleads Guilty To Unlicensed Practice Of Law And Offering A False Instrument For Filing

    svmUPDATED 6:29 P.M. ET U.S.A. Kenneth Goldstein, who became a curious sidebar in the bizarre story of the SVM Global Initiative “program” led by Sheila V. Tabarsi, has pleaded guilty to unlicensed practice of law and offering a false instrument for filing.

    The latter charge is a felony, according to the office of Bronx County District Attorney Darcel D. Clark in New York.

    Clark’s office confirmed the guilty pleas today to the PP Blog, saying they occurred on Jan. 22. Sentencing is set for March 22, absent a postponement. Clark’s office declined to comment on the possible penalties.

    “He pled guilty to both [charges],” Clark’s office said.

    In April 2015, after Tabarsi had claimed she was under investigation by the FBI, the PP Blog raised questions about whether “sovereign citizens” in the United States and Canada were involved in SVM and whether certain members have ties to the UFunClub cross-border scheme under criminal investigation in Thailand. (See link in opening paragraph above for details.)

    Goldstein was described in 2014 in the New York Post as an “ex-petty officer in the Coast Guard” who had “pawned himself off as a former military lawyer and nearly fooled a Long Island judge — until he started rambling like Joe Pesci in ‘My Cousin Vinny.’”

    He is suspected of unlicensed practice of law in at least two New York jurisdictions. The Bronx Chronicle reported in October 2015 that he was accused of “posing as a military lawyer in the Bronx and several other counties in New York and misrepresenting veterans in separate Family and Civil Court cases.”

    In a separate case, he is accused of threatening a veteran over the phone, according to the Chronicle.

    Tabarsi, who describes herself as a former Air Force member, a medical intuitive, a psychic and, most recently, a “Rev.,” has described Goldstein as a “USCG JAG OFFICER” and as “LIEUTENANT COMMANDER KENNETH GOLDSTEIN.”

    At one point in 2015, Tabarsi described the PP Blog as part of a terrorist organization that sought to “INCITE A RIOT and commit unprovoked ATTACKS on DECORATED UNITED STATES WARTIME VETERANS” and additionally carry out a “HATE CRIME.”

    Goldstein has claimed to the PP Blog that Tabarsi “already presented her business plan to a senatorial body and has their seal of approval.”

    Also see 2015 reports at BehindMLM.com:

    SVM Global Initiative Review: Matrix recruitment & poverty

    Tabarsi confirms SVM Global Initiative Ponzi concerns




  • BULLETIN: Zeek Receiver May Push For Contempt Against Payza

    breakingnews725BULLETIN: New court filings in the Zeek Rewards’ Ponzi- and pyramid-scheme case brought by the SEC in 2012 say Zeek receiver Kenneth D. Bell may ask a federal judge for a finding of contempt against Payza, a payment processor.

    The news comes as federal prosecutors continue a criminal investigation involving Payza and Obopay, another payment processor. Prosecutors are expected to make an announcement on the Payza/Obopay matter soon.

    Payza is  Ponzi-forum darling.

    Some of the Zeek money ended up in Moldova, according to previous filings by Bell. Precisely how that happened remains unclear, but Bell says he is working with authorities in both Moldova and the United States “to locate and recover the funds.”

    From a filing by Bell dated today (italics added):

    The Receiver Team continues its efforts to investigate and pursue outstanding funds from the processing relationship and flow of funds between Payza, Payment World, and Victoria Bank . The Team is working with government officials in both the United States and Moldova and with members of McGuireWoods Consulting to locate and recover the funds. The Receiver Team has also begun efforts to file a motion against these entities seeking the return of receivership assets and for a finding of contempt. The Receiver Team continues to investigate and pursue outstanding funds from Solid Trust Pay and Cyberprofit and is working with various government agencies in pursuit of these assets.




  • EAdGear Case: Judge Orders More Than $26 Million In Disgorgement And Penalties

    breakingnews725Another pyramid scheme has proven costly for its operators. Here, according to the SEC, is the rundown from the EAdGear case brought in 2014.

    eAdGear Holdings Limited and eAdGear Inc. have been ordered to disgorge $21 million in ill-gotten gains, pay prejudgment interest of $640,000 and pay a civil penalty in the amount of $1,000,000.

    Charles S. Wang and Cathy Zhang were ordered to disgorge $2.019 milion in ill-gotten gains and pay prejudgment interest of $61,280; Zhang further was ordered to a civil penalty of $200,000. Francis Y. Yuen and relief defendant Laurata Chan were ordered to disgorge $1.571 million in ill-gotten gains and pay prejudgment interest of $48,000.

    U.S. District Judge Richard Seeborg of the Northern District of California entered the final judgments in the SEC’s civil case.

    Wang and Yuen previously were sentenced to prison terms of 46 months each.

    Read the SEC’s statement.




  • BULLETIN: MyAdvertisingPays (MAPS) Again Referenced In TelexFree Litigation; Lawyer Calls It A Ponzi Scheme While Calling Simon Stepsys A ‘Ponzi Mogul’

    myadvertisingpaysBULLETIN: (6th update 7:23 p.m. ET U.S.A.) Class-action lawyers pursuing claims against TelexFree promoters have called the My Advertising Pays (MAPS) “program” a Ponzi scheme and described MAPS promoter Simon Stepsys as a “Ponzi mogul.”

    The case itself is not against MAPs. Even so, the lawyers now have made repeated references to MAPs and are lambasting the serial promotion of MLM fraud schemes. The newest reference to MAPS occurred in federal court filings in Massachusetts today. As the PP Blog reported last year, MAPS initially was mentioned in a proposed TelexFree-related class action filed in the Southern District of New York in December 2014.

    Daniil Shoyfer, an alleged promoter of TelexFree, plowed nearly $9,000 into MAPS a month after TelexFree filed bankruptcy in April 2014, according to attorney Alexander D. Wall. Shoyfer promptly was heralded by Stepsys, Wall contended.

    Stepsys, Wall alleged, “is an Internet Ponzi scheme mogul” currently promoting MAPS. He previously promoted the bizarre Banners Broker scheme that led to two arrests in Canada last month.

    Moving from one fraud scheme to another is a serious problem in MLM.

    A Stepsys-connected website includes “a paragraph, together with a photograph of Defendant Daniil Shoyfer, congratulating Mr. Shoyfer for reaching the ‘1200 Diamond level’ for his promotion of the MyAdvertisingPays scam,” Wall alleged.

    “This webpage also indicates that in May 2014 – the month following TelexFree’s declaration of bankruptcy – Mr. Shoyfer purchased ‘177 Credit Packs’ from MyAdvertisingPays. Upon information and belief, as well as research I have performed, [a] MyAdvertisingPays ‘Credit Pack’ costs $49.99,” Wall alleged. “Thus, Mr. Shoyfer invested at least $8,848.23 in a second Ponzi scheme in the month after TelexFree’s bankruptcy filing.”

    The class-action lawyers have been seeking a preliminary injunction against Shoyfer and an asset freeze that would prohibit dissipation of assets. Shoyfer has contended he believed TelexFree was legal and that there is a vendetta against him.

    MAPS has claimed recently to have closed itself to U.S. members, a possible indicator that it fears it is under investigation by American law enforcement.

    NOTE: Thanks to the ASD Updates Blog.




  • UPDATE: Sann Rodrigues Wants To Avoid ‘Con Air’ Flight

    Sann Rodrigues.
    Sann Rodrigues.

    Through defense counsel, TelexFree figure Sann Rodrigues said in court filings today that he wanted to avoid a flight on “Con Air” from Florida to Massachusetts to face a contempt proceeding in federal court there.

    “Con Air” is a nickname for the Justice Prisoner & Alien Transportation System (JPATS) operated by the U.S. Marshals Service. It’s also the title of a 1997 action film starring Nicolas Cage about a prisoner transport gone bad.

    Rodrigues, 44, is being held in Florida’s Pinellas County Jail, according to the Pinellas County Sheriff’s Office. Rodrigues resides in Davenport, Fla.

    U.S. District Judge Nathaniel M. Gorton of Massachusetts found Rodrigues in contempt last month and ordered him incarcerated on Jan. 15. The arrest was carried out yesterday by the Marshals, according to court filings.

    Robert Eckard, the lawyer for Rodrigues, advised Gorton today that his client desires to remain in Florida pending further order of the court.

    “The undersigned [Eckard] was advised by court personnel, before the start of yesterday’s hearing, that if the defendant was transported back to Boston for incarceration, it could take the United States Marshal’s service from one (1) to (3) months before the defendant would actually be back in Boston due [to] Federal Marshal service transportation routes, likely traversing the United States ending in California first before heading back to the east coast,” Eckard argued.

    “If the defendant is transported back to Boston, this would cause significant problems for the undersigned to be able to timely and effectively communicate with the defendant either for this case or the unrelated pending criminal case in Boston once he is loaded onto ‘Con Air.'”

    The SEC wants more information on whether Rodrigues will be held in Florida or Massachusetts, according to court filings.

    “The Commission seek[s] clarification as to whether he needs to be transported to Massachusetts by the United States Marshals Service or whether he should remain incarcerated in Florida pending further order of this Court,” the SEC said. “If he needs to be detained in Massachusetts, the Commission seeks clarification as to whether he may travel on bond using a commercial carrier or whether he needs to be escorted by the U.S. Marshal[s] Service.”

    NOTE: Thanks to the ASD Updates Blog.

    UPDATE 6:14 P.M. ET JAN. 22 U.S.A. Judge Gorton has issued an order that will keep Rodrigues in a Florida jail until the contempt is purged or further notice of the court.




  • ‘Phone Card’ Ponzi Schemer Caught With Pipe Bombs, IEDs And Thousands Of Rounds Of Ammunition Sentenced To Prison

    ponzinews1Istvan Merchenthaler, the “PhoneCard USA” Ponzi schemer who fabricated ties to Walmart and later was caught with pipe bombs, improvised explosive devices, a machine pistol and 16 other firearms spread across three states, has been sentenced to 140 months in federal prison.

    U.S. District Judge Robert F. Kelly of the Eastern District of Pennsylvania also ordered Merchenthaler to make restitution of more than $3.4 million, including more than $31,000 to the state of North Carolina “for the cost of a bomb-squad robot destroyed during an investigation of a storage facility containing several improvised explosive devices, Philly.com reported today.

    Prosecutors said yesterday that “several” IEDs linked to Merchenthaler in North Carolina exploded during a “render-safe” operation that resulted in damage to the robot and the storage facility.

    After the Ponzi case was brought in 2012, Merchenthaler jumped bail, stole two cars and fled from police. He later was captured in Maryland, investigators said.

    Here’s how prosecutors described the weaponry (italics added):

    Moreover, prior to and after jumping bail [in the Eastern District of Pennsylvania], Merchenthaler amassed approximately 17 firearms and over approximately 11,580 rounds of ammunition, as well as approximately 634 improvised explosive devices (“IEDs”), which he stored in Pennsylvania, North Carolina, and Maryland.  Approximately 67 of these IEDs were comprised of PVC pipe, almost all of which contained shrapnel in the form of nails, screws, or rocks.  The remaining approximately 567 IEDs were comprised of cardboard tubes in varying sizes and explosive power.  All of the IEDs – PVC and cardboard – were center primed with flash powder.  Merchenthaler drove these IEDs in his stolen vehicles to storage facilities in all three states.  During render safe procedures at a North Carolina storage facility, several of the IEDs exploded, resulting in damage to a bomb squad robot and the storage facility.




  • Is Profitable Sunrise Pyramid Case At Risk? SEC Declines Comment

    profitablesunriseimage1The SEC this afternoon declined comment on an order by a federal judge in Atlanta that could lead to the dismissal of the agency’s 2013 case against Profitable Sunrise, an alleged international pyramid scheme and offering fraud targeted at U.S. residents by one or more murky figures.

    Such a dismissal almost certainly would embolden overseas HYIP scammers who reach into the United States over the Internet to steal hundreds of millions of dollars. Profitable Sunrise targeted Christians.

    In April 2013, the PP Blog reported that the SEC alleged the “program” was using a “mail drop” in England and that “Profitable Sunrise operates for the benefit of unknown individuals and/or organizations doing businesses through companies formed in the Czech Republic and using bank accounts in the Czech Republic, Hungary, Latvia, and China, among other places.”

    Two days ago, on Jan. 19, Judge Thomas W. Thrash Jr. ordered the SEC to show cause within 21 days why the case should not be dismissed — apparently for lack of prosecution.

    “Decline comment beyond what we say in court filings,” the agency told the PP Blog today.

    How the agency would proceed in the next three weeks was unclear.

    Thrash’s order says there has been no action in the case since July 15, 2015, a period of more than six months.

    From the judge’s order (italics added):

    The above complaint was filed on April 4, 2013, on April 4, 2013 the Court granted plaintiff’s Motion for Temporary Restraining Order; on April 15, 2013 the Court granted plaintiff’s Motion for Preliminary Injunction; Clerk’s Entries of Default have been entered as to various defendants; on July 15, 2015 the Court directed the Clerk of Court to Receive Repatriated Funds. Since that date no further action has occurred; IS THEREFORE ORDERED that the plaintiff show cause in writing within twenty (21) days why the case should not be dismissed. The Clerk is DIRECTED to submit the case to the Court for further action at the expiration of the 21 days. SO ORDERED, this 19th day of January 2016.

    One of the claimed “plans” of Profitable Sunrise was bizarrely dubbed the “Long Haul” and purported to pay 2.7 percent a day. At least 34 U.S. states and provinces in Canada issued Investor Alerts or cease-and-desist orders against Profitable Sunrise.

    Among other things, the scheme demonstrated the dangers of doing business with exceptionally murky enterprises making claims that fabulous wealth would flow to investors. U.S. promoters working for commissions apparently believed the “program” was operated by “Roman Novak” and his brother “Radoslav,” a purported attorney.

    Whether the brothers actually exist is unclear. So is the final sum gathered by the “program,” which had a presence on well-known Ponzi-scheme forums such as TalkGold and MoneyMakerGroup.

    No receiver has been appointed to date in the Profitable Sunrise case. How victims would go about filing claims is unclear. So, too, is the amount of money available to victims from actions such as asset freezes.

    Hungary is reported to have suspected Profitable Sunrise of money-laundering.

    In May 2013, the PP Blog reported a Virginia man had petitioned the U.S. court for return of more than $57,000 wired to Profitable Sunrise. The SEC later objected to the petition, arguing it could open the floodgates to similar petitions while the agency was working to repatriate assets that one day could be distributed to victims.

    Christian author James Paris has said he feared for his safety and the safety of his family when writing about Profitable Sunrise. (See PP Blog October 2013 comment on the matter at the RealScam.com antiscam forum.)

    See PP Blog’s tag archive on references to Profitable Sunrise or use the Blog’s search function near the upper-right corner.

    NOTE: Our thanks to the ASD Updates Blog.




  • Full Statement Of SEC On Jailing Of Sann Rodrigues

    newtelexfreelogoEDITOR’S NOTE: As the PP Blog reported yesterday, TelexFree figure Sann Rodrigues has been jailed. The SEC today released a litigation statement on the matter and related developments. It is reproduced below in its entirety. 

    **__________________________**

    Florida Resident Ordered to Jail Based On Violating Court Orders Obtained by the SEC

    The Securities and Exchange Commission announced today that Sanderley Rodrigues de Vasconcelos (“Rodrigues”) of Davenport, Florida, who is charged with promoting a pyramid scheme, was ordered to jail for civil contempt arising from his repeated violations of court orders obtained by the Commission in its civil action filed in 2014 against Rodrigues.

    On April 15, 2014, the Commission filed an emergency civil action against TelexFree, Inc., Rodrigues and several other defendants and obtained from the U.S. District Court in Boston certain preliminary relief, including an order freezing the assets of Rodrigues. On June 10, 2015, Rodrigues consented to a court order requiring him to provide an accounting listing all assets and transactions over $500. On August 12, 2015, the Commission asked the court to hold Rodrigues in contempt, alleging that Rodrigues had transferred or disposed of assets and had failed to provide the court-ordered accounting. On December 18, 2015, the judge in the SEC’s civil case held Rodrigues in contempt for violating the terms of the court’s orders by: 1) transferring $233,473 out of his bank accounts; 2) selling a Mercedes Benz CLS; 3) selling a Ferrari F340; 4) transferring three Florida condominiums; and 4) failing to provide the court-ordered accounting. The court ordered Rodrigues to return all assets that he had transferred or disposed of in violation of the asset freeze, with a deadline of January 15, 2016. The court further warned Rodrigues that, if he failed to do so, he would be incarcerated for the contempt. On January 15, 2016, the Commission notified the court that Rodrigues had failed to comply with the December 18, 2015 order. On January 15, 2016, the court ordered Rodrigues held in jail until such time as he complies with the court’s December 18, 2015, order.

    In related proceedings, on November 25, 2015, the U.S. Bankruptcy Court in the District of Massachusetts ordered that the debtors in the TelexFree bankruptcy proceeding operated a Ponzi and pyramid scheme and are jointly and severally liable for the claims of victims.

    The SEC’s investigation was conducted by Scott R. Stanley, James Fay, Mark Albers, John McCann, Frank Huntington and Kevin Kelcourse of the SEC’s Boston Regional Office. The SEC’s litigation is being led by Mr. Huntington and Deena Bernstein.

    For further information, see Litigation Release Nos. 22974 (April 17, 2014)(SEC Halts Pyramid Scheme Targeting Dominican and Brazilian Immigrants) and 22992 (May 13, 2014) (Criminal Charges Filed Against Two Principals of Massachusetts-Based Telexfree)

    http://www.sec.gov/litigation/litreleases/2016/lr23450.htm

  • BULLETIN: Sann Rodrigues, TelexFree Figure, Ordered Jailed

    Sann Rodrigues.
    Sann Rodrigues.

    BULLETIN:  (2nd Update 10:46 P.M. ET U.S.A.) TelexFree figure Sann Rodrigues has been ordered jailed.

    The order, dated Jan. 15, was issued by U.S. District Judge Nathaniel M. Gorton of the District of Massachusetts. Gorton found Rodrigues in civil contempt last month for violating an asset freeze.

    Rodrigues did not purge the contempt by Jan. 15, so Gorton ordered the U.S. Marshals Service to incarcerate him, according to the order. The huckster was charged by the SEC in April 2014 with fraud.

    The SEC has described Rodrigues as a recidivist securities fraudster who claimed God invented MLM and “binary.” He also was charged criminally with immigration fraud. A separate judge in that case had threatened to revoke bail if Rodrigues did not comply with orders in the SEC’s civil case.

    Whether Rodrigues now faces a bail-revocation hearing in the criminal case was not immediately clear.

    TelexFree was a pyramid- and Ponzi scheme that generated about $3 billion in illicit economic activity, according to bankruptcy trustee Stephen B. Darr.

    The PP Blog reported today that Rodrigues, who claimed to have made $3 million in TelexFree, was not listed among the scheme’s top winners in recent lawsuits filed by Darr. TelexFree had billed Rodrigues as its “TOP PROMOTER.”

    NOTE: Our thanks to the ASD Updates Blog.