PatrickPretty.com

Tag: James Merrill

  • BULLETIN: Judge Issues Order That Directs Justice Department’s Bankruptcy Watchdog To Appoint Trustee Over TelexFree Case

    breakingnews72BULLETIN: U.S. Bankruptcy Judge Melvin S. Hoffman of the Massachusetts Central Division in Worcester has ordered the appointment of a trustee in the TelexFree Chapter 11 bankruptcy case.

    The U.S. Trustee, the U.S. Department of Justice’s watchdog arm in bankruptcy cases, pressed for the appointment last month.

    “There are reasonable grounds to suspect that the members of the governing board who selected the Debtors’ new executives participated in actual fraud, dishonesty and criminal conduct in the management of TelexFree,” the U.S. Trustee argued last month.

    Notice of  Hoffman’s order appeared this morning on the TelexFree bankruptcy website. (Court Docket: #0234.)

    Based on the order, Jordan Maglich of PonziTracker.com is reporting that “TelexFree’s vision of emerging from bankruptcy with new products and revenue streams appears dismal at best.”

    For days, some TelexFree affiliates have been planting the false seed in various web reports that the appointment of a trustee means that TelexFree had been cleared of pyramid- and Ponzi charges. That simply is not the case.

    From PonziTracker (italics added):

    Now that an independent trustee will be appointed, he/she will follow Section 1106, which includes the filing of a statement of investigation, as soon as practicable, that includes “any fact ascertained pertaining to fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity in the management of the affairs of the debtor…”  Additionally, the trustee may recommend the conversion of the case to another Chapter under the Bankruptcy Code, including a liquidation under Chapter 7.

    See April 23 PP Blog story: BULLETIN: U.S. Trustee Says ‘Compelling Evidence Of Fraud’ And ‘Reasonable Grounds’ To Believe ‘Criminal Conduct’ Occurred On Road To TelexFree Bankruptcy Filing

    See May 1 PP Blog story: BULLETIN: Trustee: ‘It Appears That [TelexFree’s] Merrill, Wanzeler, And Craft Have All Fallen Down The Rabbit Hole And Are Now Expecting The [Bankruptcy] Court To Follow’

    James Merrill, one of TelexFree’s co-owners, was jailed in the United States May 9 on criminal charges of wire-fraud conspiracy. Carlos Wanzeler, another co-owner, allegedly fled to Brazil through Canada after U.S. federal agents raided TelexFree’s headquarters and seized computer equipment elsewhere on April 15.

    Like Merrill, Wanzeler was charged with wire-fraud conspiracy. The U.S. Justice Department has deemed him a fugitive.

    Joe Craft, TelexFree’s CFO, was appointed by Merrill and Wanzeler to that post on April 13, the same day TelexFree declared bankruptcy. On April 15, the SEC accused Craft of securities fraud. Court records show Merrill and Wanzeler are under criminal investigation for securities fraud and money laundering.

    The SEC has alleged that Craft was in possession of nearly $38 million in cashier’s checks on April 15, the date of the federal raid. One of the checks alegedly was for more than $2 million and was made out to Katia Wanzeler, the wife of Carlos Wanzeler.

    See May 20 PP Blog report: Realty Firm Linked To Carlos And Katia Wanzeler Also Linked To Former TelexFree CFO Joe Craft

    Earlier this week, the SEC linked Carlos Wanzeler to millions of dollars in real-estate acquisitions allegedly made with TelexFree investors’ money. The agency, in turn, linked Wanzeler, his wife or Merrill to companies external to TelexFree, including at least three firms allegedly formed by Craft.

    “[Carlos Wanzeler] made most of the acquisitions using companies under his control including: (i) JC Real Estate Management Company LLC, a Nevada limited liability company that was formed in July 2012 with Wanzeler and [James] Merrill as managers; (ii) Above & Beyond the Limit, LLC (“Above & Beyond”), a New Mexico limited liability company that [Joe] Craft formed for Wanzeler in September 2012, (iii) CNW Realty State, LLC, a Nevis corporation that was formed in October 2012 with Above & Beyond as manager; (iv) KC Realty State LLC, a Florida limited liability company that Craft formed in October 2012 with Katia Wanzeler as manager; (v) Acceris Realty Estate, LLC, a Massachusetts limited liability company that Craft formed in February 2013 with Katia Wanzeler as manager; and (vi) Makeover Investments LLC, a Florida limited liability company that was formed in July 2013 with Marilza Wanzeler, Wanzeler’s 65-year-old mother, as a manager.”

    In April, the SEC linked Craft to other TelexFree-related entities.

  • Effort To Fete Two-Time SEC Pyramid Defendant And Alleged Racketeer Sann Rodrigues In Brazilian Senate Hall Reportedly Thwarted

    Sann Rodrigues. From a promo for a March TelexFree event in Spain at which Sann Rodrigues was feted.
    Sann Rodrigues. From a promo for a March TelexFree event in Spain at which Sann Rodrigues was feted.

    Politicians appear to have spared themselves some embarrassment, but MLM had another La-La Land PR train wreck today.

    iG (Brazil) is reporting that an effort to honor accused TelexFree pitchman and two-time SEC defendant Sann Rodrigues in a Brazilian Senate hall today was thwarted. The effort to fete Rodrigues appears to have been staged by a Brazilian MLM cheerleader, who reportedly also wanted Rodrigues named to the Multilevel Marketing Regulatory Agency of Brazil, which is not a government arm despite its name.

    The effort collapsed when iG contacted a Senate member, iG reported.

    From a translation from Portuguese to English by Google translate (italics added):

    The event was canceled after the iG contacting the office of Senator Cicero Lucena (PSDB-PB), which had made the reservation request the auditorium Petronio Portella Senate at the request of Regino Barros.

    An assessor’s office reported that such requests are common and that senators do not participate in drawing up the list.

    Earlier this month Rodrigues was accused of racketeering by TelexFree members suing the enterprise and several individuals, including accused TelexFree Ponzi schemers James Merrill and Carlos Wanzeler and MLM attorney Gerald Nehra.

    TelexFree staged a March 1 and March 2 awards ceremony in Madrid, Spain, at which Rodrigues was feted. Nehra also was feted, but appears not to have shown up to accept the award.

    Merrill, Wanzeler and Steve Labriola, another TelexFree SEC defendant, also were feted at the Madrid event. Merrill was jailed in the United States two months later, and Wanzeler allegedly fled to Brazil and became a fugitive.

    The massive TelexFree pyramid- and Ponzi scheme began to collapse on March 9, just a week after the Madrid event, according to court filings and other documents.

    “Rodrigues used investor funds to buy expensive automobiles, including a Lamborghini, a Ferrari, and two Mercedes Benz,” the SEC charged in an amended TelexFree complaint earlier this week. (See May 27, 2014, PP Blog story.)

    In 2006, Rodrigues was named an SEC defendant in a complaint that charged he operated a pyramid scheme involving phone cards. The phone-card scheme was targeted at the Brazilian community, the SEC said at the time.

    In April 2014, he was named one of eight individual defendants in the SEC’s TelexFree action.

    TelexFree also offered a communications product and, like the 2006 Rodrigues scheme, was targeted at the Brazilian community. TelexFree also targeted Latinos, according to records.

     

     

     

  • BULLETIN: SEC: Carlos Wanzeler Built ‘Small Real Estate Empire’ Consisting Of 34 Properties Mostly Acquired With Cash; Alleged Fugitive Also Acquired Yacht, 2 Ferraris, A Porsche And 3 Bimmers — And Put New Mexico Firm Set Up By Joe Craft In Charge Of Nevis Company

    Carlos Wanzeler. From You Tube.
    Carlos Wanzeler. From You Tube.

    BULLETIN: (8th update 9:10 p.m. EDT U.S.A.) In an amended complaint in the SEC’s pyramid- and Ponzi case against TelexFree, the agency says alleged TelexFree fugitive Carlos Wanzeler was using investors’ money to build a “small real estate empire” that consisted of 34 properties in Massachusetts and Florida.

    Wanzeler, 45, also allegedly acquired a 40-foot yacht for “$273,878 in cash,” along with two other boats and “a fleet of fancy automobiles.”

    “He paid $192,868 for two Ferrari F340 Spiders in March 2013 and $56,610 for a Porsche in February 2013. He also bought three BMW’s and a Toyota Highlander,” the SEC charged.

    TelexFree purported to be a VOIP firm branching out into apps, cell phones and credit repair.

    On the real-estate front, the SEC charged, Wanzeler went through at least $6.3 million — mostly in cash — to acquire the 34 properties, including $950,000 for the home he shared with his wife in Massachusetts and $450,000 for a home for his son in Florida.

    From the SEC’s complaint (italics added)

    “He made most of the acquisitions using companies under his control including: (i) JC Real Estate Management Company LLC, a Nevada limited liability company that was formed in July 2012 with Wanzeler and [James] Merrill as managers; (ii) Above & Beyond the Limit, LLC (“Above & Beyond”), a New Mexico limited liability company that [Joe] Craft formed for Wanzeler in September 2012, (iii) CNW Realty State, LLC, a Nevis corporation that was formed in October 2012 with Above & Beyond as manager; (iv) KC Realty State LLC, a Florida limited liability company that Craft formed in October 2012 with Katia Wanzeler as manager; (v) Acceris Realty Estate, LLC, a Massachusetts limited liability company that Craft formed in February 2013 with Katia Wanzeler as manager; and (vi) Makeover Investments LLC, a Florida limited liability company that was formed in July 2013 with Marilza Wanzeler, Wanzeler’s 65-year-old mother, as a manager.”

    James Merrill is TelexFree’s alleged co-owner with Carlos Wanzeler. Joe Craft is TelexFree’s former CFO. All three men are accused of fraud at TelexFree and receiving millions of dollars from the company.

    Nevis is an island in the Caribbean.

    Steve Labriola, another TelexFree executive accused of fraud, received $46,600 through the New Mexico entity in 2013 and only $8,500 from TelexFree, according to a preliminary analysis by the SEC.

    TelexFree filed for bankruptcy protection in the United States on April 13, with Wanzeler and Merrill effectively appointing Craft to the TelexFree CFO post, according to court filings. It’s almost certainly the case that TelexFree members at large did not know about the network of other companies associated in one way or another with the Wanzeler family, Merrill and Craft.

    In its bankruptcy filing, TelexFree sought to reject its contracts with members. The SEC has described the TelexFree “program” as a massive pyramid- and Ponzi swindle. A U.S. Bankruptcy Judge intends to appoint a trustee in the TelexFree case, the Wall Street Journal reported late this afternoon.

    “The information available to date indicates that, between November 2012 and February 2014, Wanzeler and members of his family received almost $13.7 million from TelexFree,” the SEC charged.

    Investor funds were used to make the real-estate acquisitions and to purchase the cars, yacht and boats, the SEC charged.

    Today’s amended complaint also alleges that TelexFree promoter Santiago De La Rosa used investor cash to support his lifestyle, including “$501,000 in cash for a house in Lynn, Massachusetts” and money spent on a BMW and Mercedes-Benz.

    Accused promoter Randy Crosby, meanwhile, “paid $70,000 in cash for a Porsche in September 2013 and $99,000 in cash for another Porsche in December 2013, the SEC charged, citing information available to date.

    At the same time, the SEC charged while citing information available to date, accused promoter Faith Sloan “received more than $160,400 from TelexFree investors and $51,000 from TelexFree itself.”

    Accused promoter Sanderley Rodrigues (a/k/a Sann Rodrigues) received $317,220 from TelexFree between September 2012 and March 2013 through entities known as WWW Global Business Inc. and VICSS Inc., the SEC charged, again citing information available to date.

    The SEC further alleged that Rodrigues had claimed to have made $3 million through TelexFree.

    “Rodrigues used investor funds to buy expensive automobiles, including a Lamborghini, a Ferrari, and two Mercedes Benz,” the SEC charged.

    NOTE: Our thanks to the ASD Updates Blog.

  • TelexFree Faces Prospect Of Regulatory Probe In Oregon; [UPDATE: Judge To Appoint Bankruptcy Trustee, WSJ Reports]

    Redactions by PP Blog.
    Redactions by PP Blog.

    UPDATED 5:06 P.M. EDT U.S.A. See Comments thread below for breaking news that the judge overseeing the TelexFree bankruptcy case in Massachusetts will appoint a trustee. First reported by the Wall Street Journal. Original story on separate TelexFree matter in Oregon is below . . .

    ** ______________________________ **

    The staff of the Oregon Public Utilities Commission has recommended that the agency open an investigation into TelexFree, citing the MLM “program’s” bankruptcy filing, civil actions against it by the Massachusetts Securities Division and the U.S. Securities and Exchange Commission and the criminal charges against alleged TelexFree co-owners James Merrill and Carlos Wanzeler.

    Should TelexFree not respond appropriately in Oregon, the PUC staff said, the commission should strip it of its telecom license.

    TelexFree faces similar regulatory encounters in Nevada and Minnesota.  On May 23 in Minnesota, the state Department of Commerce added to its TelexFree file by pointing the Public Utilities Commission to a May 20 Boston Globe story with a headline of “TelexFree co-owner to stay in custody until trial.”

    It was a story about a U.S. Magistrate Judge’s decision not to grant Merrill bail. The Globe story notes Wanzeler is considered a fugitive by the U.S. Department of Justice.

    TelexFree’s licensing in Alabama also is at risk, and there could be trouble brewing in other states even as TelexFree continues to pursue Chapter 11 bankruptcy protection.

    In addition, TelexFree faces multiple prospective class-action lawsuits, including at least two that allege violations of the federal racketeering statute. A report in Peruvian media last week suggests that racketeering at TelexFree cut both ways.

    With U.S.-based litigants asserting TelexFree was a racketeering enterprise, La Republica in Peru published a report that suggested a TelexFree promoter in the country  was kidnapped by fellow members last week and ordered to go to a bank to withdraw funds to make them whole. The extortion plan reportedly failed.

    TelexFree has asserted in bankruptcy-court filings that its future business prospects involving VOIP and app products are exciting. A U.S. Bankruptcy Trustee argued that TelexFree was advancing a “rabbit hole” narrative and expecting the judiciary to follow it.

    From the Oregon filing by the PUC staff (italics added):

    The allegations facing the Company raise serious issues as to whether or not the Company should be permitted to retain its certificate of authority. Staff has been unable to reach anyone from the Company to obtain further information. Staff stated in its communications that the Company may request that the Commission cancel its certificate under the current circumstances. It is unlikely that any services will be offered in Oregon as the Company’s assets are frozen, it is in bankruptcy proceedings, and its offices are the target of federal government activity. Nevertheless, cancelling the Company’s certificate to provide services in Oregon would foreclose the possibility.

    TelexFree asserts on its website that it has “suspended all business activity.”

  • BULLETIN: Nevada Public Utilities Commission Staff Recommends Denial Of TelexFree’s Telecom Application; ‘Financial Statements . . . Cannot Be Relied Upon At This Time’

    newtelexfreelogoBULLETIN: The staff of the Nevada Public Utilities Commission has recommended that TelexFree’s telecom application be denied, saying the firm filed the application and then almost immediately filed for bankruptcy protection.

    Based on the bankruptcy filing, the financial information provided by TelexFree during the application process “cannot be relied upon at this time,” the PUC staff said.

    Records in the state show that TelexFree applied to be a Nevada telecom provider on April 1, but filed for bankruptcy only 12 days later. Class-action litigants who’ve alleged racketeering at TelexFree have said “massive discrepancies” exist in the firm’s accounting.

    Meanwhile, the Nevada PUC staff said it was aware TelexFree had been charged civilly with fraud by the U.S. Securities and Exchange Commission and that its assets had been frozen. At the same time, the staff said it was aware TelexFree also is the subject of state-level civil action by the Massachusetts Securities Division.

    Moreover, TelexFree did not provide the required “biographies for its company officers or other relevant information” to verify assertions that it possesses the necessary technical capability to provide interexchange services in Nevada, the staff said.

    When the staff tried to call a toll-free number provided by TelexFree to verify the company had a working customer-service operation, “the call did not go through and Staff was unable to reach a company representative.”

    Among other things, TelexFree says this on its website (italics added):

    TelexFREE has suspended all business activity while we address certain issues in the Bankruptcy Court and address pending proceedings by the SEC and other government agencies. Since we are not currently in a position to support our network, it is likely Customers will experience either interruption or discontinuation of service. Independent Associates and Promoters should not be representing TelexFree on a going forward basis absent approval of a new compensation plan by the Bankruptcy Court.

    TelexFree also may face licensing challenges in Minnesota, Alabama and other states.

    MSD has alleged TelexFree was a combined pyramid- and Ponzi scheme that gathered more than $1.2 billion. The firm’s bankruptcy petition initially was filed in Nevada, but a judge there transferred the case to Massachusetts, which the SEC described as the company’s nerve center.

    Alleged TelexFree co-owners James Merrill and Carlos Wanzeler have been charged criminally in federal court in Massachusetts with wire-fraud conspiracy.

    See April 21, 2014, PP Blog story.

     

     

     

     

  • FBI, Homeland Security Establish Site, Questionnaire For TelexFree Victims

    In this TelexFree promo, former President James Merrill posed with a giant SUV.
    In this TelexFree promo, former President James Merrill posed with a giant SUV.

    The FBI and the U.S. Department of Homeland Security have established a website for individuals who believe they were defrauded by TelexFree, an alleged pyramid- and Ponzi scheme the Massachusetts Securities Division says gathered more than $1.2 billion.

    Here is a link to a statement by the FBI and DHS. The page includes a link to a questionnaire.

    Alleged TelexFree co-owners James Merrill and Carlos Wanzeler have been charged criminally with wire-fraud conspiracy. Merrill, 53, of Ashland, Mass., is jailed in the United States. Wanzeler, 45, of Northborough, Mass., is alleged to have fled to Brazil. The U.S. Department of Justice describes him as a fugitive.

    TelexFree, Merrill, Wanzeler and six other alleged TelexFree managers, executives or promoters also are defendants in a major civil prosecution by the U.S. Securities and Exchange Commission.

    By some accounts, TelexFree had between 700,000 and 1.5 million participants.

    From the FBI/DHS statement (italics added):

    The large number of possible victims necessitates that we ask for your assistance by completing the secure questionnaire online. Your responses are voluntary, but would be useful in the federal investigation and to identify you as a victim.

    The office of U.S. Attorney Carmen Ortiz of the District of Massachusetts is prosecuting the criminal cases against Merrill and Wanzeler.

  • UPDATE: TelexFree Figure James Merrill Will Remain Jailed; [MAY 21 DEVELOPMENT: Merrill’s Brother Subpoenaed In State Probe, Boston Globe Reports]

    breakingnews72(UPDATED 11:30 A.M. EDT MAY 21 U.S.A. See Update at bottom of this brief, originally published May 20.)

    TelexFree figure James Merrill was unable to persuade a federal magistrate judge to free him, the PP Blog has learned.

    Judge David Hennessy declined Merrill’s bail application today, the office of U.S. Attorney Carmen Ortiz said moments ago.

    Merrill, 53, was arrested and detained May 9 on wire-fraud conspiracy charges. TelexFree co-owner Carlos Wanzeler, 45, has been labeled a fugitive. Wanzeler’s wife Katia, meanwhile, was arrested last week and detained as a material witness.

    See May 16 PP Blog story. See related story dated today.

    May 21 update: The Boston Globe is reporting (see Globe Tweet in Comments thread below) that John F. Merrill, the brother of James Merrill, has been subpoenaed by the Massachusetts Securities Division led by Commonwealth Secretary William Galvin. John Merrill is a banker at Fidelity Bank.

    See March 9, 2014, PP Blog report. The report references a February 2014 document on file at the Washington State Utilities and Transportation Commission that purported to be a TelexFree LLC “Balance Sheet.” The document lists two accounts at Fidelity Bank and outlines purported TelexFree loans to other TelexFree-related enterprises, including TelexElectric LLLP, Telexfree Financial Inc., TelexMobile and Ympactus.

    When the Massachusetts Securities Division filed an action against TelexFree last month, the state alleged that TelexFree financial filings with the Washington State Utilities and Transportation Commission were at odds with information TelexFree had provided the investigators in Massachusetts.

  • 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.

  • UPDATE: TelexFree’s James Merrill Remains In Custody

    UPDATED 8:14 p.m. EDT U.S.A. James Merrill, the onetime president of TelexFree arrested and detained May 9 on wire-fraud conspiracy charges, was not freed at a bail hearing today and will remain in custody.

    “The judge took the matter under advisement,” the office of U.S. Attorney Carmen Ortiz of the District of Massachusetts said early this evening. “Merrill remains in custody until such time” the judge rules on his bail application.

    Precisely when the judge intended to rule was not immediately clear. It is believed the ruling will come next week.

    Merrill proposed to surrender his passport and to sign over the equity in his Ashland (Mass.) home to secure his appearance at further court proceedings. The Merrill property equity was estimated at $300,000, and Merrill contended he was not a flight risk.

    His TelexFree business partner — Carlos Wanzeler — has been labeled a fugitive by the U.S. Department of Justice. An affidavit says Wanzeler ducked into Canada after dark on April 15, the day TelexFree’s offices were raided in Marlborough, Mass. Two days after that, Wanzeler boarded a plane in Toronto and flew to Brazil.

    Through his attorney Beverly B. Chorbajian, Merrill said he would not flee.

    “Here, the government recites that Merrill is a risk merely because he ‘might’ flee,” Chorbajian argued. “There is absolutely no evidence of any indication that this is the case.”

    Merrill’s wife, Chorbajian advised the judge, described him a loving family man with an interest in the community. Merrill, his wife said, has been a youth-baseball coach, a fine son to his mother and a friend who comforted a childhood friend dying of Lou Gehrig’s disease.

    “His [C]atholic faith is important to him and has sustained him these past few months through this ordeal,” Merrill’s wife said, according to a defense memo to the judge.

    From the remarks of Merrill’s wife as presented the judge (italics added):

    He only took more interest in TelexFree because he saw a future with this business in spite of all his frustrations with the way it was being run. He spent countless hours working to make it better – finding consultants to help, consulting attorneys, and so forth. He was so vested in seeing it on the right path. Conspiracy to commit fraud is so far from his intentions and actions.

    Repeating a contention in the TelexFree bankruptcy case, Chorbajian argued that Merrill was not part of a plot to hide money. Bankruptcy attorneys argued that cashier’s checks were destined to be placed in a safe-deposit box when found in the possession of former TelexFree CFO Joe Craft.

    Nearly $38 million in cashier’s checks were discovered during the April 15 raid of TelexFree’s headquarters. TelexFree had declared bankruptcy two days earlier.

    Wanzeler, according to a government affidavit, spent all or parts of three days in Canada prior to flying to Brazil. What he did there remains a mystery.

    Maps estimate that it’s a four and a half-hour drive from Northborough, Mass. (where Wanzeler resided) to the Lacolle border crossing through which Wanzeler allegedly entered Canada at roughly 11 p.m. on the date of the TelexFree raid. If the government’s timeline is accurate, it may mean Wanzeler was in Canada for at least an hour on April 15, all day on April 16 and part of the day on April 17. Assuming Wanzeler chose an efficient route, he would have passed through New Hampshire and Vermont prior to arriving at Lacolle.

    What he did with time on his hands in Canada is unclear, potentially leading to questions about whether he retrieved TelexFree cash that might have been stockpiled north of the U.S. border. Also unclear is why Wanzeler allegedly chose to fly out of Toronto, roughly six hours from the Lacolle crossing in Quebec. Montreal is much closer to Lacolle.

    Toronto is about 281 miles from Lacolle, according to maps. Montreal is only about 41 miles.

    TelexFree is alleged to be a combined pyramid- and Ponzi scheme that may have gathered $1.2 billion.

    NOTE: Thanks to the ASD Updates Blog.

  • BULLETIN: Feds Say Carlos Wanzeler Left U.S. For Canada On Same Day Homeland Security Raided TelexFree Offices; Alleged Fugitive Then Flew To Brazil On Date His Home Was Raided; Wanzeler’s Wife Arrested As Material Witness After Telling Agents Husband Was Staying In Hotel

    ponzinews1(10th Update 10:53 p.m. EDT U.S.A.) Federal agents arrested Massachusetts resident Katia Wanzeler at John F. Kennedy International Airport in New York yesterday after “someone in Brazil” purchased her a “one-way ticket” two days ago and paid cash, the U.S. Department of Homeland Security alleges in an affidavit.

    Katia, the wife of alleged TelexFree fugitive Carlos Wanzeler, was arrested as a material witness. She was born in 1965, according to the affidavit.

    Late in the evening of April 15 — the same day federal agents raided TelexFree headquarters in Marlborough, Mass. — Carlos Wanzeler and his daughter Lyvia “drove to the US/Canada border crossing at Lacolle, PQ (Provence de Quebec) in a BMW,” according to the affidavit.

    The vehicle bore Massachusetts plates registered to Acceris Realty Estate LLC, a company for which Katia Wanzeler is the registered agent, according to the affidavit.

    Two days later — on April 17, the same day federal agents raided the Wanzeler home in Northborough, Mass. — Carlos Wanzeler and his daughter “boarded Air Canada flight number 90 From Toronto to Sao Paulo, Brazil. Carlos Wanzeler entered Brazil using his Brazilian passport,” according to the affidavit.

    On April 26, according to the affidavit, Lyvia flew back to the United States from Brazil on a round-trip ticket paid for with her father’s frequent-flyer miles. But on May 1, according to the affidavit, Lyvia left the United States, flying from Boston to Italy.

    Prior to the April 15 and April 17 raids, according to the affidavit, “Katia Wanzeler traveled with James Merrill to retrieve over $27 million dollars in ca[s]hiers checks from a Wells Fargo bank in Connecticut. The majority of the checks were payable to TelexFree entities but one of the checks, in the amount of $2,000,634.76, was payable to ‘Katia B Wanzeler.’”

    James Merrill is Carlos Wanzeler’s co-defendant in a criminal case filed last week that alleges wire-fraud conspiracy. The travel by Katia Wanzeler with James Merrill occurred on April 11, according to the affidavit.

    When agents raided the Wanzeler home on April 17, according to the affidavit, Katia Wanzeler “informed agents that her husband had been staying in a hotel ‘on the advice of counsel.’ In reality Carlos Wanzeler had fled the country after driving into Canada and then flying to Brazil . . .”

    The affidavit also notes that Carlos Wanzeler and James Merrill are under investigation for crimes beyond wire fraud, including securities fraud and money laundering.

    Katia Wanzeler is a material witness, according to the affidavit, because “significant sums of money were moved from TelexFree bank accounts into a Wells Fargo account in the name of Katia Wanzeler.

    “On February 28, 2014,” the affidavit continues, “two transfers from TelexFree account XXXX8498 at Wells Fargo were initiated into Katia Wanzeler’s Wells Fargo account XXXX3716, one in the amount of $1,000,000 and another in the amount of $2,500,000. Subsequently, $1,500,000 of those funds were transferred into a Wells Fargo brokerage account in the name Katia Wanzeler.”

    TelexFree declared bankruptcy late on the evening of April 13, a Sunday. Two days after that, according to the affidavit, Carlos Wanzeler entered Canada at 11 p.m. And two days after that — on April 17 — he was on a plane for Brazil.

    On May 13, someone in Brazil paid cash to buy Katia Wanzeler a one-way ticket to Brazil, according to the affidavit.

  • BULLETIN: REPORT: Wanzeler’s Wife Arrested; [UPDATE: U.S. Attorney’s Office Confirms Arrest]

    breakingnews72BULLETIN: (6th update 6:10 p.m. EDT U.S.A.) There are reports on Twitter, citing a Boston Globe story, that the wife of accused TelexFree figure Carlos Wanzeler has been arrested at an airport.

    The office of U.S. Attorney Carmen Ortiz of the District of Massachusetts confirmed the arrest to the PP Blog at 11:46 a.m., saying “Katia Wanzeler was arrested last evening at JFK Airport [in New York] as she attempted to board a flight to Brazil.”

    Katia Wanzeler, Oritiz’ office said, “will appear in federal court in [New York] today for an initial appearance.”

    Carlos Wanzeler was charged criminally last week, as was TelexFree figure James Merrill. Court records show that federal undercover agents conducted a probe into TelexFree’s operations. The probe began at least by October 2013.

    TelexFree has been described as a combined pyramid- and Ponzi scheme that gathered more than $1.2 billion. The U.S. Department of Justice has labeled Carlos Wanzeler a fugitive.

    PP Blog story continued here.