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Tag: HSI

  • BRIEF: Feds Tweet Photo Of $20 Million Allegedly Found In Box Spring And Tied To TelexFree

    Federal prosecutors have Tweeted a photo of $20 million allegedly found stuffed in a box spring and linked to the massive TelexFree Ponzi- and pyramid caper.

    The cash was found Jan. 4 by the Homeland Security Investigations branch of U.S. Immigration and Customs Enforcement, an arm of the U.S. Department of Homeland Security.

    Agents seized the cash and arrested Cleber Rene Rizerio Rocha, 28, of Brazil. He remains jailed.

    In other HYIP news, apparent supporters of the Traffic Monsoon “program” have been using Twitter in the past 24 hours to ask President Trump to intervene in the SEC’s fraud case brought in July 2016.

    Traffic Monsoon was pitched as an “advertising” program. The SEC alleged the program operated as a Ponzi scheme.




  • James Merrill, TelexFree’s President, Pleads Guilty

    James Merrill.
    James Merrill.

    3RD UPDATE 2:56 P.M. EDT OCT 25 U.S.A. James Merrill, the president of TelexFree, has pleaded guilty to eight counts of wire fraud and one count of conspiracy in Massachusetts federal court.

    Merrill, 55, of Ashland, Mass., is scheduled to be sentenced in February.

    “The significance of a guilty plea in a case of this magnitude cannot be overstated,” said special agent in charge Matthew Etre of Homeland Security Investigations, Boston. “James Merrill is finally facing justice for his role in bilking more than $3 billion from innocent investors, in more than 240 countries around the world, for what amounted to little more than greed. HSI special agents will continue to aggressively investigate those who seek to profit by taking advantage of others.”

    Records show Merrill formalized a plea agreement Friday with the office of U.S. Attorney Carmen Ortiz. The agreement calls for a maximum prison term of 10 years, plus forfeiture of criminal proceeds, including about $140 million, real estate, cars and boats, prosecutors said.

    The Telegram & Gazette, via Twitter and its own website, was first with the news of the formal guilty plea. The Boston Globe also was in the Worcester courtroom of U.S. District Judge Timothy S. Hillman this afternoon.

    More . . .

    NOTE: Our thanks to the ASD Updates Blog.

  • Sept. 26 Deadline Set For Filing TelexFree Claims; Claims Portal Opens As James Merrill Fights Evidence In Criminal Case

    newtelexfreelogoUPDATED 11:53 A.M. EDT U.S.A. Sept. 23, 2016: The claims deadline has been extended until Dec. 31, 2016, at 4:30 p.m. Prevailing Eastern Time. Claims must be filed through TelexFreeClaims.com. Our earlier story is below . . .

    **____________**

    TelexFree participants and others who may have a claim against the estate should read this important notice from bankruptcy Trustee Stephen B. Darr. It is styled “Notice of Deadline for Filing Electronic Proofs of Claim and Claims Procedures” and appeared on the docket yesterday.

    The electronic claims portal has been established at TelexFreeClaims.com and is operational, according to Darr’s notice. The deadline to file claims is Sept. 26, 2016, at 4:30 p.m. prevailing Eastern time.

    BMC Group Inc. is administering the electronic proof of claim (ePOC) form and its name appears on the TelexFree claims portal.

    Chief Bankruptcy Judge Melvin S. Hoffman of the District of Massachusetts has ruled TelexFree a Ponzi- and pyramid scheme.

    In a separate case, TelexFree principals James Merrill and Carlos Wanzeler were indicted in 2014 on charges of wire fraud and wire-fraud conspiracy. Wanzeler allegedly became an international fugitive by fleeing the United States for Brazil.

    Merrill this month sought to suppress evidence obtained as a result of a search of TelexFree headquarters in Marlborough, Mass., on April 15, 2014, two days after TelexFree’s bankruptcy filing, according to defense court filings in the criminal case.

    Through attorney Robert Goldstein, Merrill argued that the search by the U.S. Department of Homeland Security was “unconstitutionally overbroad and unparticularized” in that it targeted “all computers” and “all records.”

    Among other things, agents seized a laptop computer that day from TelexFree “consultant” Joseph Craft, according to the defense. Merrill argues that Craft’s laptop and all other evidence seized that day should be excluded.

    In 2014, the SEC alleged that Craft was TelexFree’s CFO and was in possession of nearly $38 million in TelexFree-related cashier’s checks on the date of the search.

    As the PP Blog reported on April 17, 2014 (italics added):

    “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.

    NOTE: Our thanks to the ASD Updates Blog.




  • URGENT >> BULLETIN >>MOVING: Criminal Investigation Involving Obopay And Payza, A Ponzi-Forum Darling

    breakingnews725URGENT >> BULLETIN >>MOVING: (Updated 3:03 p.m. EDT U.S.A.) The United States has opened a criminal investigation involving Obopay and Payza, a Ponzi-forum darling.

    Details of the probe are unclear. But the office of U.S. Attorney Channing D. Phillips of the District of Columbia confirms on its website that the U.S. Department of Homeland Security through Homeland Security Investigations (HSI) is involved in the investigation. So is the Washington, D.C. Financial Crimes Task Force.

    The PP Blog first reported in December 2013 that matters pertaining to Obopay and Payza were under investigation. At the time, however, authorities did not say it was a criminal probe.

    In an Oct. 15 update, the U.S. Attorney’s office says a criminal probe is under way and that prosecutors successfully asked a judge to stay civil litigation until early next year.

    From the Oct. 15 update by prosecutors under a headline of Obopay/Payza (italics added):

    “The United States government, including Homeland Security Investigations and the Washington, D.C. F[i]nancial Crimes Task Force, is currently conducting a criminal investigation.  As part of that investigation, the United States Attorney’s Office for the District of Columbia has requested a United States District Judge to pause curr[en]t civil litigation relating to Payza and Obopay.  The Judge has paused the litigation until January 22, 2016.  Shortly after that date, additional information will be made available on this website about the status of this investigation.”

    Prosecutors’ update includes an email link and phone number.

    Also see Nov. 28, 2013, PP Blog story: Conflicting Reports Over Status Of U.S. Payza Funds: Frozen? Withheld By Vendor? Seized By Department Of Homeland Security?




  • TelexFree Figure Sann Rodrigues Reportedly Detained Again; MLM Huckster Is World Traveler, Documents Say

    From a TelexFree promo in 2014.
    Sann Rodrigues is on the right in this TelexFree promo from 2014. Indicted TelexFree figures James Merrill and Carlos Wanzeler are on the left.

    UPDATED 12:55 P.M. EDT JUNE 24 U.S.A. Once alleged by a class-action plaintiff to be part of an international racketeering enterprise, TelexFree and IFreeX figure Sann Rodrigues, on May 3, 2015, allegedly told U.S. Customs and Border Protection officers at Boston’s Logan International Airport that he was about to travel to Israel.

    Rodrigues, charged civilly by the SEC with securities fraud 13 months earlier in a case that alleged TelexFree had targeted affinity populations, “stated that he was embarking on a trip to the holy land with a church group for a week visit,” according to a May 7, 2015, affidavit by Homeland Security Investigations (HSI). HSI is an arm of the U.S. Department of Homeland Security.

    The asserted church group was not identified in the affidavit. Also unclear is whether Rodrigues conducted business in Israel while there. What is clear is that Rodrigues had been conducting business in the United States for years. On at least one occasion, he allegedly failed to disclose to U.S. immigration officials that the SEC had brought a fraud action against him.

    “Aliens” is a term under U.S. immigration law to describe foreign nationals. Rodrigues is a citizen of Brazil. Under U.S. law, aliens who’ve engaged in acts of terrorism, narcotics trafficking or seek to engage in “commercial vice” are ineligible to enter or reside in the United States, according to the affidavit.

    Commercial vice typically covers crimes such as prostitution, but immigration law also addresses a “serious criminal offense” such as “any felony.” If Rodrigues is charged criminally with any Ponzi-related or other felony, it almost certainly will further cloud his immigration status. Since Rodrigues was arrested last month in the United States on a charge of visa fraud, that status already is under the U.S. microscope.

    Among the allegations against Rodrigues, whose full name is Sanderley Rodrigues De Vasconcelos,  was that he had obtained his U.S. green card fraudulently, the office of U.S. Attorney Carmen M. Ortiz said on May 26. Green cards provide for lawful, permanent U.S. residency.

    Prior to receiving his green card in 2011, Rodrigues, in 2009, lied to the U.S. Consulate in Rio de Janiero to obtain a “B2” tourist visa with the stated purpose of visiting Las Vegas for eight days, according to the affidavit.

    Upon his May 16 return to the United States from Israel, Rodrigues was arrested at a New Jersey airport (Newark International). He initially was jailed, but later was released on tight conditions.

    But Rodrigues now has been detained again, BehindMLM.com reported today. The issue? Rodrigues, now an alleged visa fraudster in addition to being an alleged cross-border securities fraudster, reportedly has not met his bail conditions.

    From BehindMLM (italics added):

    [An] 8th of June hearing saw Rodrigues ordered to remain in the custody of the [U.S. Marshals Service], ‘until an SEC accounting or alternate funds are made available for bail‘.

    Put another way, Rodrigues may not have enough clean money to comply with bail conditions.

    U.S. federal court filings link Rodrigues to the alleged $1.8 billion TelexFree cross-border pyramid- and Ponzi scheme broken up by HSI and the SEC last year and to a 2006 pyramid scheme known as Universo Fone Club. Massachusetts investigators, meanwhile, have linked him to the IFreeX scheme.

    Court records suggest Rodrigues has been in the United States at least on and off since at least 2003. And, according to the records, Rodrigues claimed in the 2009 B2 U.S. visa application for the trip to Las Vegas that he previously had traveled to Brazil, Spain, Italy, France, Germany, Austria and Switzerland. The TelexFree huckster allegedly failed to disclose that he’d also traveled to the United States, had lived in the United States for years and was deposed in the United States by the SEC in the 2006 Universo Fone Club case.

    In fact, according to court filings, Rodrigues claimed in 2009 never to have been in the United States — this allegedly despite the SEC deposition and his own claim that he had lived in the United States between 2003 and 2006.

    Cross-Border Scamming MLM-Style

    Precisely how long Rodrigues has been involved in MLM/network marketing is unclear. The SEC says it’s been since at least 2006, potentially meaning the huckster who reaches across borders via the Internet and allegedly claims to be a world traveler has been scamming recruits for at least nine years.

    While pitching prospects, Rodrigues publicly claimed he hauled at least $3 million out of TelexFree. The SEC said that the Universo Fone Club enterprise gathered more than $3 million. (See June 2007 story in Forbes.)

    TelexFree, in 2014, advertised Rodrigues as its “TOP PROMOTER IN THE WORLD” and as a headliner at its purported international convention in Spain on March 1 and 2. He later was charged civilly by the SEC with securities fraud.

    Rodrigues was among TelexFree’s purported honorees at the Madrid confab. Whether he had a large TelexFree organization in Spain remains an open question. It has been reported that 50,000 Spaniards had become involved in the “program.”

    Affinity fraud in the form of schemes targeted at people who have something in common — from common nationality and common religion to common financial problems and common political beliefs — is a growing menace.  The Internet in large part drives the schemes across national borders. But cross-border travel also plays a role. Pitchfests are performed in grand hotels and in budget properties. Ships at sea also have been used.

    If the visa and securities charges against Rodrigues are proven, it will mean that you can add immigration fraud to the mix of ways modern network marketers are duping the public.

    NOTE: Our thanks to the ASD Updates Blog.

     

     

     

     

  • IFreeX Site Offline; At Least 2 U.S. Officials Involved In TelexFree Ponzi Prosecution Also Involved In Sann Rodrigues Prosecution On Immigration Charge

    From a 2014 YouTube promo for iFreeX. Masking by PP Blog. In 2014, T-Mobile told the PP Blog that it was XX
    From a 2014 YouTube promo for iFreeX. Masking by PP Blog. In 2014, T-Mobile told the PP Blog that it was seeking to determine if IFreeX was misusing T-Mobile’s intellectual property.

    The website of IFreeX.com is offline. The PP Blog could not immediately determine why. Visitors are seeing a GoDaddy.com page.

    A PP Blog reader reported the outage at 6:49 p.m. EDT today. The outage occurred one week to the day after TelexFree and IFreeX figure Sann Rodrigues was arrested at a New Jersey airport on allegations related to visa fraud.

    Google cache suggests IFreeX.com was online earlier today.

    As part of its reporting, the PP Blog has reviewed certain documents pertaining to the criminal prosecution of TelexFree figures James Merrill and Carlos Wanzeler and documents pertaining to the immigration arrest of Rodrigues. The documents show that the same U.S. federal prosecutor is involved in both the Merrill/Wanzeler case and the immigration case involving Rodrigues.

    At the same time, the documents show that the same Homeland Security Investigations (HSI) agent also is involved in both prosecutions. In addition to filing paperwork against Rodrigues in the immigration case, the agent filed paperwork that led to the 2014 arrest on a TelexFree-related material-witness warrant at JFK Airport in New York of Katia Wanzeler.

    Katia is the wife of Carlos Wanzeler, who has been described by the United States as an international fugitive. Katia later was released. HSI, which conducted a TelexFree-related undercover operation beginning in 2013, is an arm of the U.S. Department of Homeland Security.

    Merrill and Carlos Wanzeler were indicted in July 2014 on eight criminal counts of wire fraud and one criminal count of wire-fraud conspiracy. Earlier, in April 2014, Merrill, Carlos Wanzeler, Rodrigues and five others were charged civilly with fraud by the U.S. Securities and Exchange Commission.

    TelexFree, which hawked a VOIP service, has been described in Bankruptcy Court filings by a court-appointed trustee as a cross-border pyramid scheme that gathered $1.8 billion in about two years.

    Separately, BehindMLM.com is reporting in a story dated May 26 that a website known as 2PayNet also is offline. The site may be connected in some way with IFreeX.

    In September 2014, Massachusetts Commonwealth Secretary William Galvin described IFreeX as something that appeared “to be nothing more than a rebranded TelexFREE fraud for mobile phones.”

    On Oct. 1, 2014, T-Mobile told the PP Blog that it was seeking to determine if IFreeX was misusing T-Mobile’s intellectual property in online promos for IFreeX.

    The Department of Homeland Security also is involved in intellectual-property cases. It is unclear if the agency investigated IFreeX for abuse of intellectual property.

    Says DHS on its website (italics added):

    Intellectual property rights theft is not a victimless crime. It threatens U.S. businesses and robs hard-working Americans of their jobs, which negatively impacts the economy. It can also pose serious health and safety risks to consumers, and oftentimes, it fuels global organized crime.

    NOTE: In an affidavit accompanying the immigration complaint against Rodrigues, a footnote leads to a report on Rodrigues by the PP Blog. The story was published on Feb. 6, 2014. It is titled, “MORE FROM MLM LA-LA LAND: Former SEC Defendant In Pyramid-Scheme And Affinity-Fraud Case To Headline TelexFree Event In Spain.”

    NOTE: Our thanks to the ASD Updates Blog.

  • In Response To Search Warrant In TelexFree Case, YouTube Delivers 45GB Of Data

    newtelexfreelogo2ND UPDATE 9:18 A.M. ET FEB. 13 U.S.A. On Oct. 16, 2014, Google was served a search warrant in the TelexFree criminal case against accused operators James Merrill and Carlos Wanzeler, according to joint court filings by federal prosecutors in the office of U.S. Attorney Carmen M. Ortiz of the District of Massachusetts and Robert M. Goldstein, a defense attorney for Merrill.

    Merrill and Wanzeler are charged with wire fraud and wire-fraud conspiracy. U.S. prosecutors have called Wanzeler a fugitive now likely living in Brazil. With discovery involving incredible amounts of data and an avalanche of documents under way that both sides must sift though, no trial date has been set.

    The search warrant sought “a substantial amount of video content held by [Google’s] subsidiary, YouTube,” according to the joint interim status report by prosecutors and Goldstein docketed on Dec. 17. The lawyers noted that “Google reports that compliance will take several more weeks.”

    Precisely why the government sought the material is unclear, but promoters of MLM or network-marketing HYIP schemes frequently pitch their offerings on YouTube. Filings last week by Stephen B. Darr, the court-appointed trustee in the TelexFree bankruptcy case, assert that TelexFree had gathered as much as $1.8 billion in about two years and that the cross-border “program” may have involved 1 million or more people.

    Darr flat out called TelexFree a pyramid scheme.

    In another joint interim report docketed Monday, prosecutors said they recently received 45GB of material from Google under the search warrant. The corresponding number of hours of video contained within the production wasn’t specified.

    Prosecutors also said in the report that they’d received an unspecified amount of data from Hotmail and Apple that had been sought in a search warrant.

    This data involved email accounts, prosecutors said in the interim report. The names of the account-holders and the content of the emails were not revealed in the report.

    HYIP schemes often get pitched in emails from promoters. The government did not say why it had sought the material.

    Prosecutors did note that “[p]roduction of this material has been delayed by errors in the data as produced by the email providers.”

    Darr, the trustee, has turned over 75GB of data, according to the Feb. 9 report.

    Getting to the heart of an HYIP scheme that operated over the Internet is an exceptionally time-consuming task. Delays are almost inevitable and even can be caused by external events that affect resources. In the Feb. 9 filing, prosecutors noted that “paralegals and litigation technical support staff” in Ortiz’s office also are participating in the prosecution of the Boston Marathon bombing case, a mammoth undertaking.

    Absences or delays, however, are not unique to the prosecution side of the argument. A TelexFree defense attorney who has to sift through discovery material is involved in a trial in another state and could not attend a status conference that had been scheduled for today, according to the joint interim report.

    U.S. Magistrate Judge David H. Hennessy canceled today’s conference, setting April 13 as the next date the parties would meet. In his own report, Hennessy noted that discovery was proceeding in the case despite the enormous volume of material.

    And that volume only will grow, he wrote, pointing to a TelexFree criminal investigation in Brazil and assertions by U.S. prosecutors that they expect to receive “a large amount of material, both hardcopy and electronic, from the Brazilian government” in March.

    News of the conference delay was received on the same day publications in Brazil reported that an accounting firm (Ernst & Young) in that country had reported to the judiciary in Acre state that TelexFree (as Ympactus) had the characteristic of a pyramid scheme.

    TelexFree is the subject of both state and federal probes in Brazil.

    The Feb. 9 joint interim report in the United States notes that “the government anticipates receiving [data] in response to a search warrant submitted to the Court this week.”

    What was targeted in that search warrant was not revealed. Nor was the identity of the person or entity served with the warrant.

    The interim report also notes that the U.S. government is in possession of “[v]arious recordings made by undercover [Homeland Security Investigations] agents at TelexFree conference and in conversations with a TelexFree promoter.”

    Brazil-based TelexFree figure Carlos Costa appears to be the subject of a veiled reference in the Feb. 9 report, which describes an unnamed person in Brazil as “the third owner of TelexFree.”

    Authorities in Brazil have served “about nine” TelexFree-related search warrants in that country and have seized on the order of $450 million, according to the Feb. 9 report.

    NOTE: Our thanks to the ASD Updates Blog.

  • URGENT >> BULLETIN >> MOVING: Bankruptcy Trustee Says TelexFree Was ‘Pyramid Scheme’ That Gathered As Much As $1.8 Billion

    breakingnews72URGENT >> BULLETIN >> MOVING: (10th Update 8:53 p.m. ET U.S.A.) In his first formal report to the Massachusetts bankruptcy court, TelexFree Trustee Stephen B. Darr calls the company a “pyramid scheme” that may have involved 1 million or more participants globally and gathered as much as $1.8 billion through arms in the United States and Brazil.

    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 hauling about $897 million. Zeek was shut down by the SEC in August 2012.

    The SEC and the Massachusetts Securities Division brought actions against TelexFree in April 2014.

    Darr also revealed that 13 private lawsuits have been filed against TelexFree and/or related principals, including former executives James Merrill and Carlos Wanzeler.

    TelexFree’s Brazilian arm was known as Ympactus and “grew much more quickly than the Debtors and its shutdown by Brazilian authorities in the summer of 2013 was the first of many red flags that the Debtors were operating an unsustainable pyramid scheme,” Darr advised U.S. Bankruptcy Judge Melvin S. Hoffman.

    Darr also strongly implied that a black market existed both internally at TelexFree and externally to the cross-border enterprise. It is known that the U.S. Department of Homeland Security, through its Homeland Security Investigations arm, is deeply involved in the TelexFree probe.

    Today’s report by Darr may — at least in part — explain why. From the report (italics added/minor editing performed):

    The Debtors’ business plan was complicated in and of itself. The scheme’s complexity was expanded further, however, through a web of inter-Participant transactions that permeated the scheme.

    First, a new Participant could purchase a membership plan by making payment directly to the Debtors . . . or by redeeming accumulated credits.

    In lieu of paying funds directly to the Debtors, it appears that many Participants became involved in the scheme by paying their membership fee directly to a recruiting Participant who often did not remit the payment from the new Participant to the Debtors. Rather, the recruiting Participant frequently retained the payment from the new Participant in return for a reduction, or redemption, of their accumulated credits. The mechanics of this transaction were as follows:

    a) After an invoice was issued to the new Participant and marked as pending, the new Participant would forward the invoice through the system to the recruiting Participant for payment;

    b) The recruiting Participant would then pay the invoice using the recruiting Participant’s credits. The Debtors’ database would charge the recruiting Participant’s credits for the invoice and mark the invoice as paid.

    In this manner, new Participants often joined the Debtors’ scheme without any money actually being paid to the Debtors.

    In addition to the two scenarios outlined above, there appears to have been a third type of transaction that did not involve the Debtors at all. This type of transaction involved the transfer of credits by one Participant to another Participant in exchange for cash or other consideration. The motivation for the transfer of credits is not always clear, although in some instances recruiting Participants may have purchased credits so that such recruiting Participant had sufficient credits to be redeemed after receiving payment from a new Participant.

    Growth at the Ympactus arm in Brazil accelerated “in the fall of 2012 through the early summer of 2013,” Darr asserted.

    “The Debtors’ records indicate that by the spring of 2013, Ympactus had cash receipts of more than $100,000,000 per month,” he continued. “These receipts do not reflect inter-Participant transactions that did not involve direct payment to Ympactus.”

    After Brazilian authorities intervened in June 2013, freezing as much as $300 million in that country, the U.S. TelexFree arms — previously underperformers compared to Ympactus — began to surge, Darr alleged.

    “Following the shutdown of Ympactus, the Debtors’ revenues increased dramatically such that by the end of 2013 and early 2014, the Debtors were generating cash of as much as $50,000,000 per month, without regard to inter-Participant transactions for which consideration did not pass to the Debtors,” Darr said.

    TelexFree banking relationships crumbled, Darr said in the report.

    “Multiple banks closed the Debtors’ operating accounts apparently based upon suspicious activity in those accounts,” Darr said.

    A lawyer advised TelexFree in mid-2013 that its business plan constituted a pyramid scheme, Darr said.

    “Although the Debtors were apprised in mid-2013 by counsel that the business plan was a pyramid scheme, they continued to operate using that plan until March 2014. At that time, the Debtors introduced a new business plan, even though the Debtors were apparently advised that the new plan did not rectify the problem. The new plan was unanimously rejected by the Participants, which appears to have precipitated a ‘run on the bank’ inasmuch as $58,000,000 or more was paid out to certain Participants in the several weeks leading up to the filing of the petitions. An additional $100,000,000 was requested by Participants but was not paid.”

    In September 2014, Darr identified MLM lawyer Jeffrey Babener as an attorney who advised TelexFree it was operating a pyramid scheme.  Babener isn’t named in today’s filing, so it is not immediately clear if a second attorney also advised TelexFree that its platform was a pyramid.

    Darr also said in the report that TelexFree “wrote off” a receivable “in the approximate amount of $180,000,000” due from Ympactus. The write-off appears to have occurred in late 2013, after the action in Brazil.

    “Upon information and belief, the Debtors advanced the costs for the voice over internet protocol, or ‘VOIP’, service for both the Debtors and Ympactus,” Darr said. “Ympactus contracted to pay a portion of its revenues to the Debtors as a commission, but it is unclear the extent to which these payments were ever made. In December 2013, six months after the seizure of Ympactus’ assets by the Brazilian authorities, the Debtors established, and then subsequently wrote off, a receivable due from Ympactus in the approximate amount of $180,000,000, purportedly for unpaid commissions and related services.”

    Darr also identified a number of TelexFree subsidiaries or affiliates, noting there could be more. These are among the entities and ownership information listed in the report. (Please note that not all location information is listed):

    • TelexFree International LLC:: Ownership: Wanzeler, Carlos Costa, Merrill:: Location:: Nevis.
    • TelexFree Mobile Holdings Inc.:: Ownership:: Wanzeler and Merrill.
    • Graham Bell Telex LLC:: Ownership:: TelexFree Mobile Holdings LLC and Costa.
    • TelexFree Mobile LLC:: Ownership:: Graham Bell Telex LLC and Infinium Wireless.
    • TelexElectric LLLP: Ownership:: Wanzeler, Costa and Merrill.
    • Bright Lite Future LLC:: Ownership: Wanzeler, Costa and Merrill.
    • Brazilian Help Inc.:: Ownership: Wanzeler.
    • Sunwind Energy Group LLLP: Ownership: 1127 Enterprises LLC and Merchant Enterprises Inc.
    • Sunwind Energy Solutions:: Ownership:: 1127 Enterprises Inc., ACE.
    • LLLP: Ownership:: LLP, Executive Marketing Inc. and Sunwind Energy Group LLLP.
    • Sunwind Energy Doyle North LLC:: Ownership: Sunwind Energy Southern LLLP, ACE LLP, Adams Craft Ewing LLLP, Guasti LLC.
    • ACE LLP:: Ownership:: Undetermined.
    • Executive Marketing Inc.:: Ownership:: Undetermined.
    • 1127 Solutions LLC:: Ownership: Undetermined.
    • Merchant Enterprises Inc.:: Ownership: Undetermined.

    “There may have been other entities formed by the Debtors’ principals to conduct similar operations in other jurisdictions, including TelexFree Ecuador, TelexFree Columbia, TelexFree Dominican Republic, TelexFree Canada, and TelexFree International, Ltd. (Cayman Islands),” Darr alleged.

    And, he noted, “In addition, other entities appear to have been formed by the Debtors’ principals for related or unrelated purposes, including JC Real Estate Investments LLC; JC Real Estate Management Co., LLC; Above and Beyond the Limit LLC; CNW Real Estate LLC; CNW Realty State LLC; Acceris Realty Estate LLC; KC Realty State LLC; Makeover Investments LLC; Eagleview Realty Estate LLC; and Grandview Realty Estate LLC.

    With forensics well under way and with Darr in communication with investigators in the United States and Brazil, how big is the job ahead? (Bolding added):

    “The database identifies more than 2,100,000 electronic mail addresses for Participants in the operations of both the Debtors and Ympactus,” Darr said. “Of this amount, approximately 1,000,000 appear to be provided by Participants of the Debtors, with the balance related to the Ympactus Participants. The database identifies more than 17,000,000 different accounts, of which approximately 12,000,000 are those of Participants and 5,000,000 are those of Ympactus Participants. As referenced earlier, an individual Participant could maintain multiple accounts using a single electronic mail address, and an individual Participant could also maintain more than one electronic mail address. During the period February 2012 to April 2014, the total combined cash receipts for the Debtors and Ympactus were in excess of $1,800,000,000 and combined noncash revenue was approximately $4,200,000,000.

    Oddities abound, according to the report.

    ” . . . the Debtors’ computer system does not link all accounts for an individual Participant, and the Participant name field enabled Participants to use different variations of their name in the input process,” Darr said.

    “Certain accounts do not contain electronic mail address information. Of those accounts that do contain electronic mail address information, in some instances, the information is facially inaccurate, such as the Participant’s use of the Debtors’ electronic mail address as a placeholder such as [deleted by PP Blog]. In other instances, a Participant may have used the same electronic mail address as other Participants, including the sharing of electronic mail addresses with family members. Unlike the computer systems of similar type enterprises, the Debtors’ system did not require confirmation of an electronic mail address.

    “Similarly,” Darr said, “certain accounts do not contain physical address information. Some other accounts contain physical address information that is facially inaccurate, such as the use of a country code that is inconsistent with the address, e.g., ‘San Paulo, USA.’”

    From the report (italics/bolding added):

    Manual credits were credits assigned to a Participant’s account balance on account of money paid to the Debtors for one of several reasons, as distinguished from credits “earned” from the placement of advertisements or other components of the compensation scheme. The Debtors’ records reflect approximately $151,000,000 of manual credits issued to certain Participants. The issuance of manual credits appears to be a fraud within the larger fraud of the pyramid scheme with the Debtors’ insiders adding large amounts of credits to certain accounts whereby the credits could then be sold to other Participants. There appears to be no corresponding payment supporting many of these large manual credits.

  • PONZITRACKER.COM: New Ponzi Scheme Uncovered Every 118 Hours; Alleged TelexFree Fraud Heads 2014 List

    recommendedreading1If you’re a student or educator or employee or boss with a traditional M-F schedule, chances are you’ll be hearing about a new Ponzi scheme before the final bell rings or the final whistle blows on Friday.

    During the first six months of 2014, a Ponzi scheme was discovered every 4.9 days (or every 118 hours), according to an eye-popping report today by Jordan Maglich at PonziTracker.com.

    From PonziTracker (italics added):

    . . . Ponzi schemes remain rampant in the United States and worldwide despite mounting government and regulatory efforts. Indeed, the 37 schemes discovered during the first half of 2014 suggest that at least 74 schemes will be discovered in 2014 — approximately 10% more than the 67 schemes unearthed in 2013.

    The largest alleged scheme discovered in 2014 so far is TelexFree, PonziTracker reports.

    Read the report on PonziTracker, which also notes Ponzi prison sentences handed down this year are on pace to top last year’s cumulative sentencing total.

    The PP Blog’s research shows that MLM HYIP Ponzi schemes that spread through commission-based salespeople are the most insidious because they create victims in numbers America’s largest sports stadiums cannot accommodate.

    Both Zeek Rewards (2012) and TelexFree (2014) may have created hundreds of thousands of victims each. The combined schemes could fill the Rose Bowl to capacity with victims 15+ times over and have led to requests by prosecutors or receivers to ask courts to approve special victim-notification procedures because of the overwhelming numbers.

    Zeek receiver and special master Kenneth D. Bell has compared Zeek to Enron and the Bernard Madoff and Allen Stanford Ponzi schemes.

    Just this week, prosecutors in the TelexFree case have asked for special victim-notification procedures — while contending that travel to Brazil and potentially other countries might be required.

    WickedLocalHudson, which publishes news from the Hudson Sun and Metrowest Daily News, reported today that the Massachusetts Securities Division had received (to date) 8,847 complaint forms about TelexFree.

    MSD posted the complaint form in late April.

    The FBI and Homeland Security Investigations (HSI), an arm of the U.S. Department of Homeland Security, also are soliciting information from potential TelexFree victims.

  • Missouri Raised ‘Grave Concerns’ Over TelexFree

    newtelexfreelogoThe staff of the Missouri Public Service Commission raised “grave concerns” that permitting TelexFree’s telecom registration to remain intact in the state could “assist in the perpetuation of a fraud on investors,” records show.

    Missouri approved the registration in March 2014. TelexFree applied for it the previous month, according to records.

    Those records included a notarized TelexFree affidavit dated Feb. 14 — Valentine’s Day — and signed by “Jim Merrill,” who held the title “Managing Member.” The name and seal of a Massachusetts notary public appear on the document.

    Among other things, the document attests that TelexFree is “ready, willing, able, and will comply with all applicable state and federal laws and regulations imposed upon providers of interconnected voice over Internet protocol services.” It also attests that “the Applicant is legally, financially, and technically qualified to provide interconnected voice over Internet protocol services.”

    But on April 13, 2014, just weeks after “Jim Merrill” had advised Missouri that TelexFree was “financially” qualified to operate in the state, TelexFree filed for bankruptcy protection in Nevada. (The case since has been moved to Massachusetts.)

    In May, Missouri moved to revoke TelexFree’s registration, citing information it had received April 18 from Joseph Isaacs, a TelexFree telecom consultant.

    “Mr. Isaacs indicated the affidavit signed by Jim Merrill is not truthful,” a Public Service Commission staffer wrote to the full commission. The staffer recommended revocation of TelexFree’s registration.

    Isaacs, according to the staffer’s affidavit, pointed the commission to civil fraud actions against TelexFree filed by the Massachusetts Securities Division and the U.S. Securities and Exchange Commission on April 15, two days after the bankruptcy filing.

    By May 9, federal prosecutors had announced the criminal prosecution of TelexFree figures James Merrill and Carlos Wanzeler. The Missouri staffer pointed the commission to a news release by the office of U.S. Attorney Carmen Ortiz on the Merrill/Wanzeler prosecutions for wire-fraud conspiracy.

    The Missouri staffer also advised the commission that the FBI and Homeland Security Investigations (HSI), an arm the U.S. Department of Homeland Security, were involved in the TelexFree probe. He also noted that TelexFree itself had acknowledged on its website that service interruptions or discontinuation were possible because “we are not currently in position to support our network.”

    The staffer recommended that TelexFree be stripped of its telecom registration. On May 27, the commission gave TelexFree until June 24 to respond to a motion to revoke the registration.

    “TELEXFREE did not respond,” the commission said in a July 2 revocation order. The order became effective Aug. 1.

    Records in other states show that TelexFree filed a flurry of telecom-registration applications in the weeks leading up to its bankruptcy filing and the exposure of its alleged pyramid- and Ponzi scheme.

     

  • Purported ‘Sovereign Citizen’ Who Bizarrely Claimed His Authority Came From ‘The Vatican’ Convicted Of Issuing Bogus Diplomatic Credentials

    From ABC report on James McBride and "Divine Province."
    From ABC News report on James McBride and “Divine Province.”

    EDITOR’S NOTE: U.S. Immigration and Customs Enforcement (ICE) and Homeland Security Investigations (HSI) are referenced in the story about purported “sovereign citizen” James T. McBride below. ICE/HSI also are involved in the investigation of the alleged TelexFree Ponzi- and pyramid scheme. Whether TelexFree had any “sovereign citizens” in its ranks is unclear. “Sovereign citizens,” however, have been linked to other HYIP schemes. Wild narratives may accompany such schemes both before and after a government intervention.

    ** __________________________________ **

    James T. McBride first came to our attention in January 2013, after a reader alerted us to a story in the Sun Sentinel about a bizarre incident that occurred during a bankruptcy hearing for a Florida business known as RoboVault.

    As the Sun Sentinel reported at the time (italics added):

    McBride, who claims to derive his authority from the Vatican, sent letters to the judge and trustee demanding the bankruptcy case be dropped. He previously has been profiled in media accounts as a “sovereign separatist,” someone who believes he is not subject to state and federal laws.

    McBride’s name next surfaced in February 2013, as part of a story concerning the arrest near Columbus, Ohio, of a purported “sovereign citizen.” A police officer and police canine reportedly were injured. (See Comments thread below story, which references an entity known as “Divine Province.”)

    So-called “sovereign citizens” — jailed AdSurfDaily figure Kenneth Wayne Leaming is one of them — have an irrational belief that laws do not apply to them.  Leaming became the target of an FBI investigation after filing false liens against various public officials involved in the ASD Ponzi case. Investigators found bogus police credentials in Leaming’s possession.

    Prosecutors said Leaming was a member of the “County Rangers,” the armed-enforcement wing of a group of “sovereign citizens.”

    By May 2014, prosecutors had formally connected McBride, 60, of Columbus, Ohio, to “Divine Province.” He has now been convicted in the Eastern District of Virginia on charges of conspiracy, causing the impersonation of a diplomat and producing false identification documents.

    Yes. You read that right: causing the impersonation of a diplomat.

    Here’s part of what ICE/HSI and federal prosecutors in the office of U.S. Attorney Dana J. Boente of the Eastern District of Virginia had to say about the McBride case (italics added):

    McBride was indicted on May 14, 2014, by a federal grand jury of one count of conspiracy, one count of causing the impersonation of a diplomat and four counts of producing false identification documents. According to the evidence at trial, McBride was the leader of a sovereign citizen group called “Divine Province,” whose members claimed the U.S. government was a “municipal corporation” that did not have authority over them. McBride produced and distributed false diplomatic identification cards to his group’s members, and he encouraged them to make claims of diplomatic immunity to avoid arrest, debts or taxes. None of the group’s members were in fact accredited diplomats.

    McBride started selling the identification cards in September 2012 at a seminar he organized in Herndon, Virginia. Afterwards, he started selling the IDs from a website and shipping them around the country.

    McBride sold the IDs in pairs, one that identified the holder as a “Universal Post Office Diplomat” and another that purported to be an “International Diplomatic Driver Permit,” for approximately $200. The defendant also encouraged his members to send copies of the IDs to governmental agencies to notify them of a member’s “status” as a diplomat. The defendant claimed that his authority to issue the IDs came from the Vatican. The defendant also gave a televised interview on ABC News prior to the filing of charges in the case, in which he reiterated such claims. During the course of the charged conduct, the defendant’s organization earned close to $500,000.

    Watch segment of ABC News video in which McBride bizarrely calls himself the “primary trustee of the world.”

    McBride potentially faces two decades in prison, prosecutors said.