URGENT >> 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.
Fifteen TelexFree figures have been linked to a money-laundering scheme in Brazil, according to the Federal Public Ministry of Espírito Santo (MPF/ES).