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Tag: Carlos Costa

  • RECOMMENDED READING: 50,000 Spaniards Reportedly Plowed Money Into TelexFree

    recommendedreading1In February 2014, the PP Blog reported that TelexFree had planned a purported “international convention” in Spain in early March.

    The pitch for the convention, hosted in Madrid, was voiced by Sann Rogrigues, whom the U.S. Securities and Exchange Commission successfully had sued in 2006 amid allegations he was operating a pyramid scheme and engaging in affinity fraud aimed at the Brazilian community.

    Rodrigues, now accused of securities fraud and a defendant in the SEC’s TelexFree civil case announced in April, reportedly was one of TelexFree’s top hucksters and had “earned” millions of dollars.

    As the PP Blog reported in February (italics added):

    The promo [for the Madrid convention] curiously is playing against the backdrop of an image of the Pyramids of Giza. For good measure, images of other famous world landmarks are thrown in. These include St. Basil’s Cathedral (near the Kremlin) in Moscow; Big Ben in London; The Eiffel Tower in Paris; the Empire State Building and the Statue of Liberty in New York; the Leaning Tower of Pisa; and the Burj al Arab Hotel in Dubai.

    Despite the fact TelexFree was under investigation in Brazil and almost certainly knew its days were numbered in the United States because investigators were closing in, TelexFree proceeded with the Madrid event. The confab was held under a cloud growing increasingly black. On Feb. 28, the eve of the convention, the PP Blog reported that Massachusetts securities regulators were investigating TelexFree, the first confirmation of such a probe by a regulator in the United States.

    James Merrill, TelexFree’s former president, attended the Madrid event with at least two other TelexFree executives or managers: Carlos Wanzeler, now described as an international fugitive who’d engaged in a criminal wire-fraud conspiracy with Merrill, and Steve Labriola, another defendant in the SEC’s fraud case.

    Here is part of what Merrill said from the stage in Madrid, as reported by the PP Blog on March 3, 2014 (italics added):

    Carlos Wanzeler was up here talking about Carlos Costa . . . two of the greatest leaders that I’ve met in my life,” Merrill said. “They’re very strong. They’re courageous, and they’re fighting for you. And I want you all to know that they didn’t join my team, I joined their team. OK. They’re great leaders.”

    Racketeering allegations later would surface in the United States, questioning the greatness of all three men. MLM attorney Gerald Nehra, billed as an honoree at the Madrid convention, is another defendant named in the RICO actions, which were brought as prospective class-action lawsuits by TelexFree members.

    Despite the fact Nehra had been billed as a star attraction of the Madrid confab, he appears not to have shown.

    Instead, Labriola, who suggested from the Madrid stage that TelexFree was suited for the impoverished people of Haiti, strolled out to accept Nehra’s award.

    “I was asked to come up and receive this for Jerry,” Labriola told the crowd.

    Labriola did not say who asked him to accept the award for Nehra. Precisely how long TelexFree had been operating in Spain remains unclear. But only in MLM La-La Land does the juxtaposition of the images of a recidivist securities violator-in-waiting (Rodrigues) and an MLM lawyer (Nehra) make sense in marketing materials, especially since TelexFree promoters were claiming $15,125 sent to the firm returned $57,200 in a year without the need for members to sell a single product.

    Rodrigues later appeared in a YouTube video in which he recorded himself tooling around in a Ferrari. He also allegedly claimed “God” started MLM and “binary.”

    Now, El Pais, Spain’s largest newspaper, is reporting that TelexFree might have fleeced 50,000 Spanish investors.

    Read the El Pais story. (Use the Chrome browser for a translation from Spanish to English or another language or access Google’s translation tool here.)

    NOTE: Our thanks to a longtime PP Blog reader who provided the El Pais link.

    ALSO: Coming soon on the PP Blog: a Special Report titled “How TelexFree’s ‘Big Revolution’ Dragged The MLM Trade, Lawyers, Payment Vendors And Service-Providers Into A La-La Land Rabbithole.”

    Here’s a snippet (italics added):

    On at least one occasion — in March 2014 — undercover [Homeland Security Investigations] agents were in the same conference room as TelexFree “speakers,” including alleged owners James Merrill and Carlos Wanzeler, both of whom were charged criminally in May with wire-fraud conspiracy. The room was part of the Marriott Copley Place Hotel in Boston, according to an affidavit. It turned out that, on the same date agents were in the room, a TelexFree speaker claimed from the stage that certain affiliates had been provided a private jet and that the jet had flown between the Dominican Republic and Haiti. Passengers on the jet were said to have been greeted by “the Prime Minister of Haiti’s motorcade.” The rep was pitching a TelexFree-related credit-repair “program.” Just two days earlier, on March 7, a TelexFree-related Blog falsely claimed that the TelexFree “program” at large had gained “SEC Approval from USA.”

  • Plaintiff To TelexFree Crew: You’re All Crooks And Racketeers — And Carlos Costa Is The ‘Mastermind’

    Carlos Costa
    Carlos Costa

    UPDATED 10:48 P.M. EDT U.S.A. A plaintiff bringing a prospective class-action lawsuit in Massachusetts federal court has accused 10 TelexFree figures of committing crimes and — as a group — committing racketeering violations through an “association-in-fact enterprise.”

    Unlike other prospective TelexFree-related class-actions, this one names neither attorneys nor banks nor TelexFree itself defendants. Rather, it pins the onus of the conduct exclusively on James Merrill, Carlos Wanzeler, Steve Labriola, Joe Craft, Fabio Wanzeler, Sann Rodrigues, Santiago De La Rosa, Randy Crosby, Faith Sloan and Carlos Costa.

    Costa, a Brazil-based TelexFree figure, is described in the complaint as the “mastermind of the TelexFree pyramid scheme of fraud.” The complaint further asserts Costa conducted business in Massachusetts, where TelexFree operated an entity known as TelexFree Inc.

    Olavo F. Magalhaes of Milford, Mass., is the plaintiff. The complaint says Magalhaes invested more than $209,000 in TelexFree LLC, the Las Vegas-based TelexFree business that operated in a Massachusetts office suite.

    The crimes alleged against the defendants include fraud, securities fraud, wire fraud and conspiracy. Violations of civil law also are alleged.

    On the racketeering front, the complaint alleged, the members of the “association-in-fact enterprise” associated together between January 2012 and April 15, 2014, “for the purpose of conducting an illegal pyramid scheme and wrongfully enriched themselves” at the expense of Magalhaes and others.

    “Each member of the enterprise played a role in the targeting of victims, advertising and working together to make the TelexFree enterprise work,” the complaint alleged.

    Fabio Wanzeler is the brother of Carlos Wanzeler, an alleged international fugitive accused criminally by federal prosecutors of wire-fraud conspiracy in the United States. Carlos Wanzeler is believed to be in Brazil.

    Fabio Wanzeler, formerly of Worcester, Mass., is believed also to be in Brazil, according to the Magalhaes complaint.

    In other TelexFree news, a federal judge has denied a motion by Faith Sloan to make more than $15,000 available to her.

    The SEC has accused Sloan of violating the asset freeze imposed against her in the case.

    NOTE: Our thanks to the ASD Updates Blog.

     

  • MLM Attorney Gerald Nehra Now Lawyered Up In TelexFree Bankruptcy Case

    newtelexfreelogoMLM attorney Gerald Nehra, his law partner Richard Waak and their law firm are now lawyered up in the TelexFree bankruptcy case.

    Groups of TelexFree members have sued them in bankruptcy court, alleging violations of the federal racketeering (RICO) statute and violations of federal securities laws. TelexFree filed for Chapter 11 bankruptcy protection on a Sunday evening in April, just prior to fraud actions filed by securities regulators.

    Attorneys Christopher F. Robertson and William J. Hanlon, partners in the Boston office of Seyfarth Shaw LLP, entered appearance notices for Nehra, Waak and the firm yesterday.

    Also named defendants in some or all of the actions are TelexFree, alleged officers or executives James Merrill, Carlos Wanzeler, Carlos Costa, Steve Labriola and Joe Craft, alleged promoters Sann Rodrigues, Randy Crosby, Santiago De La Rosa and Faith Sloan, and several alleged financial vendors or service-providers.

    In a complaint filed May 3, 2014, plaintiffs accused Nehra of counseling 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.”

    He further was accused of encouraging unknowing TelexFree members to “participate in the evasion of federal and state securities laws.”

    Sloan, in response to fraud allegations against her filed by the U.S. Securities and Exchange Commission, said she “believed what [SEC Co-] Defendants Carlos Wanzeler, James Merrill, Steve Labriola and their attorney, Gerald Nehra, had told her, until TelexFree continued to miss the deadlines for the launch of its new products.”

    Nehra, Waak and the law firm are not defendants in the SEC action. Nor are they defendants in a TelexFree-related securities action by the Massachusetts Securities Division. Sloan, who later was accused by the SEC of violating the asset freeze against her in the SEC case by sending thousands of dollars to another “program” and transferring her interest in a real-estate trust to her mother, is a longtime HYIP huckster.

    In a separate criminal case that alleges wire-fraud conspiracy against Merrill and Wanzeler, Merrill has signaled that he intends to use a defense of reliance on Nehra’s lawyering. The Massachusetts Securities Division has described TelexFree as a “financial pariah” and a combined pyramid- and Ponzi scheme that had gathered more than $1.2 billion. The SEC likewise has accused TelexFree of hatching a billion-dollar pyramid-and Ponzi scheme, saying it was aimed largely at Brazilians and Dominicans.

    Nehra, according to plaintiffs suing him in in at least one of the TelexFree-related actions in bankruptcy court, advised at least two other “programs” regulators accused of operating massive pyramid or Ponzi schemes: Zeek Rewards (2012/$850 million) and AdSurfDaily (2008/$119 million).

    Sloan is known to have promoted Zeek Rewards. Some HYIP promoters move from scheme to scheme to scheme, piling up purported “earnings” alleged to be fraudulent along the way.

    “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,” plaintiffs alleged.  “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.”

    Zeek-related actions still are winding their way through the courts. The Zeek “program” was back in the news yesterday, with the court-appointed receiver alleging that an affiliate who appears to have invested $10 filed a claim for $30 million and that a vendor alleged to have aided Zeek wanted nearly $15 million.

  • Realty Firm Linked To Carlos And Katia Wanzeler Also Linked To Former TelexFree CFO Joe Craft

    (2nd Update 2:12 P.M. EDT U.S.A.) Acceris Realty Estate LLC, a Massachusetts company that listed Katia Wanzeler as its registered agent, was formed by Joe H. Craft in February 2013, according to corporation records in Massachusetts.

    Craft, accused by the SEC last month of securities fraud at TelexFree, is TelexFree’s former CFO. The appearance of Craft’s name in the Acceris document raises new questions about the length and breadth of his ties to TelexFree. It also raises questions about his knowledge of ancillary businesses with ties to TelexFree and his objectivity when appointed TelexFree CFO on April 13 in what effectively was a board meeting conducted by  co-owners Carlos Wanzeler and James Merrill.

    Both Carlos Wanzeler and Merrill now are accused of felonies in the operation of TelexFree, with federal prosecutors alleging they engaged in a wire-fraud conspiracy. Merrill was arrested and jailed on May 9. Carlos Wanzeler has been labeled a fugitive. Records show both men also are under criminal investigation for securities fraud and money laundering.

    Massachusetts resident Katia Wanzeler, the wife of Carlos Wanzeler, was arrested last week on a material-witness warrant at John F. Kennedy International Airport in New York by the U.S. Department of Homeland Security. Court papers link her name to Acceris and say she sought to board a plane bound for Brazil.

    The extent of her knowledge about TelexFree, Acceris and her husband’s business activities is unclear. A court document in the material-witness case signed by Katia Wanzeler asserts her husband “owns [a] real estate company” and that “some houses” may be in the name of Katia Wanzeler.

    The document further asserts that Katia Wanzeler received an “unknown” amount of compensation from a real-estate business and had $3,000 in cash on her person when arrested in New York. The source of the cash and how she had traveled to JFK Airport are unclear in court filings.

    Carlos Wanzeler ducked into Canada and flew to Brazil after raids on TelexFree’s office in Marlborough (Mass.) and his home in Northborough (Mass.) in April, according to prosecution filings.

    Records in Worcester, Mass., link Acceris to at least four properties: two on Coburn Avenue, and one each on Barnard Road and Mount Avenue. The $162,600 Barnard Road property lists “WANZEIER, CARLOS” as the assessed owner, apparently misspelling the TelexFree co-owner’s last name. “WANZELER, CARLOS” is listed as the assessed owner of the $120,300 property on Mount Avenue. The two Coburn Avenue properties list Aurora Loan Services LLC, a Colorado firm in the mortgage-lending and servicing business, as the assessed owner. The properties have an estimated combined value of $337,100. Aurora appears to have no ties to TelexFree.

    The Craft link to Acceris may suggest that TelexFree money was diverted to acquire real estate, not for operational purposes at TelexFree, which says it is a VOIP company. A TelexFree-related entity in Brazil (Ympactus) linked to Carlos Wanzeler and TelexFree figure Carlos Costa also purportedly was in the real-estate development business, perhaps using funds from TelexFree members to fund a purported project involving Best Western Hotels.

    “The representation and other suggestions that TelexFree has a business relationship with Best Western is false,” the SEC alleged last month.

    It is somewhat common in the HYIP sphere for “programs” to plant the seed they have ties to major companies as a means of leeching off famous brands and sanitizing purported opportunities. It also is common for “programs” quietly to divert resources and plow them into investments or acquisitions external to the “opportunities.”

    Much to the surprise of members of the AdSurfDaily “advertising program” taken down by the U.S. Secret Service, now-jailed ASD operator Andy Bowdoin suddenly announced at a 2008 “rally” in Florida that ASD had a real-estate division. ASD later was alleged to have peeled off money from members to retire the mortgage on a Florida home occupied by Bowdoin’s stepson and the stepson’s wife, both of whom later emerged as alleged players in an ASD reload scheme known as AdViewGlobal.

    Other ASD money allegedly was peeled off to purchase a building and a lakefront property in Florida equipped with a Cabana boat, jet skis and other marine equipment. The Feds seized the properties and equipment as fraudulent proceeds of ASD’s $119 million scam.

    It is believed that AdViewGlobal’s start-up capital consisted at least in part of money not seized in the Secret Service probe of ASD because Bowdoin and others had hidden it to avoid capture by law enforcement. AdViewGlobal, for instance, appears to have had at least one bank account in Switzerland, along with access to cash held by offshore processors such as AlertPay and SolidTrustPay. Both AlertPay and SolidTrustPay later were linked to the $850 million Zeek Rewards Ponzi- and pyramid scheme.

    Acceris marks at least the second possible TelexFree offshoot linked to Craft. In April, the SEC said Craft incorporated an entity known as TelexFree Financial Inc. of Coconut Creek, Fla. TelexFree Financial, TelexFree Inc. of Massachusetts and TelexFree LLC of Nevada filed for bankruptcy two days before the SEC brought its fraud action.

    When federal agents raided TelexFree’s Marlborough (Mass.) headquarters on April 15, they allegedly found Craft in possession of 10 TelexFree-related cashier’s checks, including one made out to Katia Wanzeler for more than $2 million.

    New TelexFree CEO Stuart MacMillan said in bankruptcy court that he did not believe that “Mr. Craft was attempting to divert any of the Debtors’ cash or other resources.”

    Both MacMillan (as CEO) and Craft (as CFO) were appointed to their TelexFree positions by Carlos Wanzeler and James Merrill during what effectively was an emergency board meeting in the hours immediately before TelexFree’s April 13 bankruptcy filing.

    The Acceris corporation record in Massachusetts that identifies both Katia Wanzeler and Craft was filed 14 months before Craft was appointed TelexFree CFO and raises questions not only about his objectivity when appointed, but also whether he knew TelexFree had planned to divert resources into real estate.

    Under certain conditions, such diversions can constitute securities fraud and embezzlement.

    MacMillan said during the bankruptcy proceeding earlier this month that Craft resigned as CFO on April 17.

    NOTE: Thanks to the ASD Updates Blog.

  • Katia Wanzeler, Wife Of Alleged TelexFree Fugitive, Remains In Federal Custody As Couple’s 22nd Wedding Anniversary Nears

    newtelexfreelogoUPDATED 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.

  • BULLETIN: Botafogo Soccer Club Dumps TelexFree

    Brazil-based TelexFree figure Carlos Costa harrumphed for both TelexFree and Botafogo.
    Brazil-based TelexFree figure Carlos Costa harrumphed for both TelexFree and Botafogo.

    BULLETIN: (2nd update 5:10 p.m. EDT U.S.A.) The Botafogo professional soccer club in Rio de Janeiro has canceled its sponsorship contract with TelexFree and will strip the TelexFree logo from team jerseys, according to an announcement on the team website.

    TelexFree figure James Merrill was jailed in the United States last week. Fellow TelexFree figure Carlos Wanzeler was labeled a fugitive by the U.S. Department of Justice. The company is alleged to have operated a massive Ponzi- and pyramid fraud that gathered more than $1.2 billion.

    News that Botafogo had dumped TelexFree came on the same day it was learned that some TelexFree promoters sought to explain to a U.S. federal judge that TelexFree provided a valuable “branding” opportunity.

    Botafogo’s stripping of TelexFree’s name from its jerseys appears to show that the soccer club now believes differently. Some Brazilians expressed concerns months ago that any association with TelexFree by the team could backfire.

    TelexFree already was under investigation in Brazil when the company and Botafogo announced the sponsorship in January. Court records in the United States now show that TelexFree became the subject of an undercover probe in America months before the purported opportunity and team announced the deal in a video that showed a limousine, a press event and Merrrill and Wanzeler wearing team jerseys.

    Some TelexFree promoters had pointed to the Botafogo sponsorship as supposed proof that TelexFree was legitimate.

    See earlier PP Blog stories that reference the Botafogo deal:

    Jan. 9, 2014: With Carlos Costa Gesticulating Wildly, TelexFree, An Alleged Pyramid Scheme, Says It’s Now A Soccer Benefactor

    Jan. 11, 2014: REPORT: Flap Over TelexFree Soccer Club Deal Deepens; Botafogo’s Main Sponsor Reportedly Does Not Want Its Name Associated With Alleged Pyramid Scheme

    Jan. 15, 2014: SporTV Video Shows That TelexFree, An Alleged Pyramid Scheme, Is Using A Shared Office Facility In Massachusetts With At Least 25 Other Firms

    Aoril 4, 2014: EDITORIAL: Uproar In TelexFree’s Billion-Dollar Broom Closet

  • EDITORIAL: TelexFree’s La-La Land Leaves Trail Of Missed Signals, Willful Blindness And MLM Arson

    MLM attorney Gerald Nehra at a TelexFree rah-rah event in California last year.
    MLM attorney Gerald Nehra at a TelexFree rah-rah event in California last year. Source: YouTube.

    In case you missed the big news yesterday, TelexFree figures James Merrill and Carlos Wanzeler were charged criminally.

    Unofficially this brings the number of charged MLM HYIP “programs” (or clients) with links to MLM attorney Gerald Nehra to three in recent years. Nehra was an “expert witness” for AdSurfDaily in 2008. He testified that ASD, a 1-percent-a-day “program,” was a legitimate business and not a Ponzi scheme.

    ASD operator Andy Bowdoin, who compared the men and women who guard the President of the United States to “Satan” and the 9/11 terrorists and clucked that “God” * was on his side, later was charged criminally and sentenced to a lengthy term in federal prison.

    Nehra was brought in for marquee value and as an adviser to Zeek Rewards, Zeek operator Paul Burks said in late 2011 or early 2012.  Zeek executives Dawn Wright-Olivares and Daniel Olivares later were charged criminally.  Zeek was a 1.5-percent-a-day “program.”

    At some point in 2012 or 2013, Nehra began to advise TelexFree. TelexFree executive Steve Labriola, like Zeek’s Burks before him, also saw marquee value in Nehra, according to Labriola’s comments in a TelexFree promo on YouTube. Now, Merrill and Wanzeler face the prospect of jail. Because the investigation is ongoing, others may, too.

    TelexFree’s bogus returns were not tied to sales of its VOIP product and computed to more than 200 percent a year, making the “program” a classic Ponzi- and pyramid swindle, according to court filings. Some promoters claimed $15,125 returned $57,200. One promoter allegedly told an undercover federal agent that he’d scored $1.6 million in TelexFree “without selling a TelexFree product.”

    News of the TelexFree criminal charges broke on an otherwise ordinary day in MLM La-La Land. Some “supporters” of TelexFree were petitioning the federal judge overseeing the SEC’s major civil action filed last month to “bail out” the “program,” for example. This occurred after TelexFree “supporters” earlier had petitioned a U.S. Bankruptcy Judge for a similar “bail out,” despite the fact TelexFree was trying to “reject” its contracts with promoters.

    This is a column about willful blindness and feigned obtuseness. (Think Faith Sloan.) It’s also a column about missed signals, whether they’re missed purposely or otherwise. (Think: Why would TelexFree hire Nehra after ASD and Zeek — and why would Nehra ever accept the work, which was bound to lead to racketeering allegations? Put another way, if you’re at the scene of too many highly suspicious fires, you shouldn’t be surprised if serious people start to believe you’re the arsonist or the arsonist’s helper. Even assuming Nehra is no MLM arsonist or racketeer, accepting the TelexFree work potentially put him in the position of being extorted or otherwise abused by the trade’s arsonists and racketeers.)

    Spot any common themes or information roadmaps in the quoted material below?

    AdSurfDaily “is not” a Ponzi scheme. “It is a legally structured, direct selling business model with multilevel compensation.” — Gerald Nehra, MLM attorney, Aug. 18, 2008. (Context: Nehra’s submitted testimony as defense witness in civil forfeiture action in the $119 million AdSurfDaily MLM HYIP Ponzi case. **)

    “[AdViewGlobal] is the next iteration of the Ponzi scheme auto-surf programs, which [are] staffed with former [AdSurfDaily] executives and Bowdoin disciples.” — Class-action attorneys suing AdSurfDaily operator Andy Bowdoin and AdSurfDaily attorney Robert Garner of North Carolina, June 30, 2009. (Context: Motion in member-filed lawsuit against Bowdoin and Garner that alleged RICO (racketeering) violations.)

    “With all of our efforts to punish and deter this criminal enterprise, the rights of innocent parties are protected and will subsequently be returned.” — A.T. Smith, assistant director, U.S. Secret Service Office of Investigations, Sept. 26, 2011. (Context: Successful forfeiture actions and remission (restitution) in AdSurfDaily MLM HYIP Ponzi case.)

    “We will continue to use every tool at our disposal to bring justice to the citizens defrauded by these insidious schemes.” — Assistant Attorney General Lanny A. Breuer, U.S. Department of Justice, Criminal Division, Sept. 26, 2011. (Context: Successful forfeiture actions and remission (restitution) in AdSurfDaily MLM HYIP Ponzi case.)

    “Just having him on retainer and having him on our team, it goes a long way from keeping anybody from launching an attack. Because generally when Gerry Nehra is involved, the Feds know that he’s cleaned up the act really well.” — Paul Burks, Zeek Rewards operator, c. December 2011. (Context: Burks’ remarks to early Zeek members that MLM attorney Nehra was on board.)

    “I am pleading guilty because I am in fact guilty of the offense(s) identified in this Plea Agreement.” — Andy Bowdoin, AdSurfDaily operator, May 2012. (Context: Plea agreement to wire fraud in which Bowdoin disagreed with MLM attorney Nehra and acknowledged AdSurfDaily was a Ponzi scheme.)

    “Capitalizing on the strength of our financial task force partnerships, we aggressively pursue criminals using computer experts, forensic specialists, investigative experts and intelligence analysts.” — Dennis Ramos Martinez, special agent in charge, U.S. Secret Service Orlando Office, Aug. 29, 2012. (Context: Prison sentence imposed on AdSurfDaily operator Andy Bowdoin.)

    “While [Gregory] McKnight himself referred to Legisi as a “loan” program, and demanded that “members” not refer to their “loan” and an “investment,” Legisi was, in reality, an investment contract, which is considered a security and therefore regulated by the Securities and Exchange Commission. This semantic obfuscation was quite obviously an attempt to sidestep the securities laws.” — Office of U.S. Attorney Barbara L. McQuade, Eastern District of Michigan, September 2012. (Context: Sentencing memo against Gregory McKnight in Legisi $72 million HYIP swindle.)

    “I’m not sure how many of you have heard the name ‘Gerry Nehra.’ But it is a very big name in this industry.” — Steve Labriola, TelexFree executive, Newport Beach, Calif., July 2013. (Context: Labriola introducing Nehra to TelexFree members at “Super Weekend” MLM rah-rah fest.)

    “ZeekRewards used the enormous power of the Internet to rip off $850 million from hundreds of thousands of victims in less than two years. We will continue to work with our law enforcement partners to take down greedy scam artists who think nothing of stealing the savings of hard working people.” — U.S. Attorney Anne M. Tompkins, Western District of North Carolina, Dec. 20, 2013. (Context: The filing of criminal charges in the Zeek Rewards MLM/HYIP case.)

    “The Massachusetts Securities Division charged TelexFREE Inc., with running a Ponzi scheme targeting Brazilian-Americans that has raised over $90 million from Massachusetts residents and around $1 billion globally.” — U.S. Department of Homeland Security, April 17, 2014. (Context: U.S. financial infrastructure protection. Sourced from DHS Daily Open Source Infrastructure Report.)

    “At this [TelexFree] ‘super weekend’ event, Attorney Nehra spoke at length to attending investors, assuring them of the legality of TelexFree’s operation stating: ‘It is legally designed . . . you are on very solid legal ground.’” — Class-action attorneys, May 3, 2014. (Context: The filing of a prospective class-action against TelexFree and Nehra that alleged RICO (racketeering) violations.)

    “Attorney Nehra’s extensive experience in multi-level marketing, and particularly his involvement with the Ponzi schemes involving AdSurfDaily 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.” — Class-action attorneys, May 3, 2014. (Context: The filing of a prospective class-action against TelexFree and Nehra that alleged RICO (racketeering) violations.)

    “Investigating the flow of illicit money across U.S. borders and the criminal enterprises behind that money is one of our top priorities.” — Bruce Foucart, special agent in charge, Homeland Security Investigations, May 9, 2014. (Context: Comment on the filing of criminal charges in the TelexFree Ponzi- and pyramid case.)

    “As alleged, these defendants devised a scheme which reaped hundreds of millions of dollars from hard working people around the globe.” — U.S. Attorney Carmen Ortiz, District of Massachusetts, May 9, 2014. (Context: Comment on the filing of criminal charges in the TelexFree Ponzi- and pyramid case.)

    SOURCES USED IN THIS COLUMN:

    • U.S. government filings and statements.
    • Court filings from private RICO actions.
    • Original reporting at ASD Updates.
    • Original reporting at BehindMLM.com.
    • Original reporting at the PP Blog.

    * Like jailed AdSurfDaily operator Andy Bowdoin, TelexFree figure Carlos Costa contends God is on his side. While Bowdoin talked of “Satan,” one TelexFree promoter has called a prosecutor in Brazil a “blonde she-devil.”

    ** Two members of AdSurfDaily who went on to become members of Zeek Rewards liked Nehra’s opinion so much they used it in a failed lawsuit (2011) against the U.S. government. The members, Todd Disner and Dwight Owen Schweitzer, both are listed as “winners” in the $850 million Zeek Rewards’ scheme. Disner’s Zeek haul was alleged to be more than $1.875 million.

  • 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.

  • SEC: TelexFree’s Sann Rodrigues On YouTube: God Started MLM And Made ‘Binary’; ‘I Am Never Going To Stop This’

    Screen shot from section of SEC filing.
    Screen shot from section of SEC filing.

    (UPDATED 8:21 P.M. EDT U.S.A.) The U.S. Securities and Exchange Commission says in new court filings that accused TelexFree promoter and securities fraudster Sann Rodrigues appeared in an April 16 YouTube video and asserted that “God” made MLM and “binary” and that Rodrigues claims he’s “never going to stop this.”

    Rodrigues is now a two-time SEC defendant. He settled charges in 2007 that he was operating a pyramid scheme targeted at the Brazilian community through the purported sale of phone cards.

    TelexFree is a combined Ponzi and pyramid scheme with a phone product that masked a massive, underlying fraud that gathered more than $1.2 billion, the Massachusetts Securities Division alleged on April 15. The SEC said the TelexFree scam mainly was targeted at Brazilian and Dominican immigrants.

    Fellow TelexFree defendant Faith Sloan, meanwhile, appears to have removed certain videos but nevertheless has invoked “divine authority” elsewhere, according to SEC filings.

    On March 15, the SEC alleged, 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.”

    Sloan, a former promoter of the Profitable Sunrise and Zeek Rewards securities swindles,  earlier claimed that the SEC was “picking on” her.

    Separately, the agency alleged that TelexFree may be violating a temporary restraining order by putting its website back online.

    “It appears that TelexFree and/or one or more of the individual defendants may be improperly using investor funds for that purpose,” the SEC alleged.

    Moreover, the SEC said, none of the defendants has submitted the written accounting required under the order.

    Sloan and Rodrigues are among four promoters charged by the SEC. TelexFree executives or co-owners James Merrill, Carlos Wanzeler, Joe Craft and Steve Labriola also were charged. The firm and related entities filed for bankruptcy protection in Nevada April 13.

    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.

    Bowdoin, who also fraudulently traded on the name of then-President George W. Bush to sanitize the ASD scam, had experience as a securities swindler prior to ASD, according to court records. He is now serving a 78-month term in federal prison for his role in the $119 million ASD swindle. One of his business partners, according to federal records, was implicated by the SEC in the 1990s in three prime-bank swindles, including one that touted a return of 10,000 percent.

    Brazil-based TelexFree figure Carlos Costa also routinely invokes God over TelexFree-related issues.

    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.

    Images of Jesus Christ also were used in the alleged Profitable Sunrise and WCM777 HYIP swindles.

    NOTE: Thanks to the ASD Updates Blog.

  • UPDATE: In SEC’s TelexFree Case, Agency Says Department Of Homeland Security And Sheriff’s Deputy Stopped Nearly $38 Million From Leaving Firm’s Massachusetts Office During Execution Of Search Warrant; Money Is Now Frozen

    This check for more than $10 million is dated April 3, 2014, and is made out to XXX, according to an SEC exhibit. Redactions by PP Blog.
    This check for nearly $10.4 million is dated April 3, 2014, and is made out to TelexFree Dominicana SRL, according to an SEC exhibit. Redactions by PP Blog.

    EDITOR’S NOTE: See story from earlier today on the SEC’s complaint and fraud allegations against the TelexFree “program,” executives and key promoters.

    ** ______________________________ **

    A Bristol County Deputy Sheriff at the scene of a Tuesday raid by the Department of Homeland Security at TelexFree headquarters in Marlborough, Mass., stopped nearly $38 million in cashier’s checks from leaving the premises in a “bag,” the SEC says in court filings.

    On Wednesday, a federal judge froze the money, securing “millions of dollars of funds” and preventing “the potential dissipation of investor assets,” the SEC said.

    Joseph H. Craft, TelexFree’s chief financial officer, was at the scene Tuesday and attempted to grab “a laptop and bag,” asserting that he was a TelexFree “consultant” assisting with the firm’s bankruptcy and that the items were “personal items,” the SEC said in an affidavit.

    Craft, 50, of Boonville, Ind., is a defendant in the SEC’s TelexFree action announced earlier today. He and several other defendants are accused of fraudulent or deceptive conduct in connection with the purchase or sale of securities, fraud in the offer or sale of securities and the offer or sale of unregistered securities.

    He is a certified public accountant, has prepared financial statements for TelexFree and has worked for other MLM companies, the SEC said.

    TelexFree, the SEC said, was a massive pyramid scheme that may have more than $1.1 billion in liabilities.

    “The Deputy Sheriff told Craft he could not take the laptop and bag and that these items would be subject to the search,” the SEC said in the affidavit. “[Homeland Security Investigations] Agents searched the bag and identified ten Wells Fargo Bank, N.A. cashier’s checks totaling $37,948,296.”

    Nine of the checks were dated April 11, 2014, just two days before TelexFree petitioned for bankruptcy in Nevada, according to the SEC affidavit and other court filings.

    The nine checks were “remitted to” James M. Merrill, TelexFree’s co-owner and former president. Of the nine, five were made out to TelexFree LLC “totaling $25,548,809, and one was made out to Katia B. Wanzeler,” believed to be the wife of TelexFree co-owner and treasurer Carlos Wanzeler,” the SEC asserted in the affidavit.

    The Katia Wanzeler check was for the sum of $2,000,635, the SEC alleged.

    A check dated April 3 was “remitted to” Carlos Wanzeler and made out to “TelexFree Dominicana SRL in the amount of $10,398,000,” the SEC alleged in the affidavit.

    TelexFree Dominicana SRL’s relationship to TelexFree was not immediately clear.

    On April 15, two days after the TelexFree bankruptcy filing and apparently just hours before the raid, Merrill “submitted an unsolicited order to sell $1,150,000 of his mutual fund holdings” and to have the money transferred to a bank in Massachusetts, the SEC said in the affidavit.

    “Bank statements show that two companies controlled by Craft received more than $2,010,000 between November 19, 2013 and March 14, 2014,” the SEC said in its complaint.

    The SEC complaint also references American MLM attorney Gerald Nehra, though not as a defendant.

    Nehra, the SEC said, said in a TelexFree video posted online in August 2013 that “[t]he special ingredient is that you have a real product.”

    The product, the SEC said today, was a VOIP system used to mask a massive pyramid scheme that collapsed.

    And the video appeared after a TelexFree-related probe in Brazil had begun, according to the SEC complaint.

    Carlos Costa, another TelexFree figure not named a defendant in the SEC action, also was referenced in the SEC complaint. Costa is based in Brazil, where an arm of TelexFree has been under investigation amid pyramid-scheme allegations since at least June 2013.

    In a video posted online weeks after the Brazilian pyramid probe began, “Costa stated that TelexFree ‘never was, never will be an illegal pyramid because of the sales of the VoiP service,’” the SEC said. “He asserted, ‘We do not depend on everyone coming in in order to pay the people who are already in.’”

    The reality, the SEC said, “is quite different.”

    NOTE: Our thanks to the ASD Updates Blog.

     

  • URGENT >> BULLETIN >> MOVING: Massachusetts Securities Division Says TelexFree Is Billion-Dollar Ponzi And Pyramid Scheme That Targeted Brazilian Community

    breakingnews72URGENT >> BULLETIN >> MOVING: (11th update 3:03 p.m. EDT U.S.A.) The state of Massachusetts has alleged that TelexFree is a “massive” Ponzi- and pyramid scheme that gathered more than $1.2 billion and targeted the Brazilian community.

    In alleged dollar volume, TelexFree appears to be at approximately the same level of the epic Scott Rothstein Ponzi and racketeering scheme in Florida in 2009. Rothstein is serving a 50-year prison sentence.

    TelexFree, the office of Massachusetts Commonwealth Secretary William Galvin alleged in an action, raised $90 million in Massachusetts alone. The scheme, according to the filing, is “untenable without a continuous influx of new capital.”

    The 46-page complaint paints a picture of an incredibly elaborate domestic and international fraud scheme featuring interconnected companies and operated by individuals who told tales of incredible riches — at one time supplementing the story by plunking down more than $100,000 at a Mercedes-Benz dealership in Orlando, Fla., to acquire what effectively were stage props to lure the masses.

    A check uncovered by Massachusetts investigators, according to the complaint, had a memo line that read, “Cars for Extravaganza . . .”

    Despite stage props, “lavish meetings,” sea cruises and suggestions TelexFree somehow was affiliated with jewels of American business, TelexFree was racking up liabilities in the billions of dollars and encountering serious problems from its financial vendors, the complaint alleged.

    “The financial activities of TelexFREE have raised red flags in many United States[‘] financial institutions where it maintains accounts,” the complaint alleges.

    One of those vendors was a Massachusetts bank that booted TelexFree “after only 2 months,” the state alleged.

    Another vendor — a processor of credit cards — dumped TelexFree “after less than 6 months,” the state alleged.

    Meanwhile, the state alleged, TelexFree financial filings with the Washington State Utilities and Transportation Commission were at odds with information TelexFree had provided the investigators in Massachusetts.

    At the same time, Massachusetts alleged, TelexFree was turning a blind eye to an investigation in Brazil and effectively evading an asset freeze imposed there on an arm known as Ympactus.

    “TelexFREE fails to verify investor residency information — information manipulated to circumvent legal issues TelexFREE faces elsewhere,” the state alleged.

    In fact, the state further alleged, one witness testified that he’d recruited affiliates in Brazil after Ympactus’ assets were frozen and its recruitment activities were enjoined.

    Cash payments to Brazilian affiliates were made despite the action in Brazil, the state alleged, further alleging that affiliates in Brazil appear to have posed as residents of the United States or England.

    Moreover, the state alleged, TelexFree members had set up side businesses in which their recruits paid them directly, rather than paying TelexFree. (Editor’s note: This situation exists in many HYIP scams.)

    “These participants received uncontrolled cash deposits outside of the TelexFree system,” the state alleged.

    The state also expressed concerns about a black-market economy popping up around TelexFree.

    One Massachusetts entity asserted that it bought “TelexFree packages, and all sorts of real estate within the U.S.A. or foreign countries,” the state alleged, further alleging that the enterprise asserted it was backed by “Dubai investors.”

    On Feb. 14 — Valentine’s Day — an ad appeared “seeking to sell an automobile in the Commonwealth in return for [TelexFree] AdCentral Packages and AdCentral Family Packages,” the state alleged.

    TelexFree also featured Sann Rodrigues as its top pitchman, the state alleged.

    Rodrigues “had operated a similar multi-level marketing phone card fraud shuttered by the SEC in 2006,” the state alleged.

    Named respondents in the Massachusetts action were TelexFree Inc. of Massachusetts and TelexFree LLC of Nevada.

    “Related Parties” were identified as Carlos Nataniel Wanzeler of Northborough, Mass.; James Matthew Merrill of Ashland Mass.; Steven M. Labriole (also known as Steve Labriola) of Upton, Mass.; Carlos Roberto Costa of Brazil; Fabio N. Wanzeler of Coral Springs, Fla.; Ympactus Comercial LTDA-ME of Brazil; Lyvia Mara Campista Wanzeler (no residency listed); Disk A Vontade Telefonia Ltda (also known as Diskavontade and Disk) of Brazil and Massachusetts; Brazilian Help Inc. of Massachusetts;  Sanderley R. De Vasconcelos (also known as Sann Rogrigues) of Orlando, Fla.; and TelexFree Financial Inc. of Florida.

    TelexFree Inc., TelexFree LLC and TelexFree Financial Inc. all filed bankruptcy petitions in Nevada on April 13, a Sunday.

    Among the assertions by Galvin’s investigators is that TelexFree is a combined Ponzi- and pyramid scheme that engaged in the sale of fraudulent and unregistered securities and allowed and encouraged “participants to structure deposits in order to avoid heightened bank scrutiny.”

    Structuring transactions is a somewhat common element in Ponzi schemes.

    Read the Massachusetts complaint.