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.
URGENT >> 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.
BULLETIN: In a blistering response to TelexFree’s bid to continue its business and move forward with its Chapter 11 bankruptcy case, the United States’ trustee said the embattled firm has not engaged “in full and fair disclosure.”
“The former CFO and board members have disappeared with no explanation,” U.S. Trustee Tracy Hope Davis alleged. “The only declarations in support of the Debtors’ requests for relief have been signed by individuals that have been on the job for less than 3 weeks. Yet, Debtors are pressing forward with their motions for ’emergency’ relief so they can continue business ‘as usual.’ It appears that [James] Merrill, [Carlos] Wanzeler, and [Joe] Craft have all fallen down the rabbit hole and are now expecting the Court to follow.”
“At the hearing on April 17, 2014, Craft was not present in the Courtroom,” Davis argued. “Counsel for Debtors informed the Court during the hearing that Craft was no longer an officer, director, or authorized signatory of the Debtor. No explanation was offered to the Court for the sudden change of management and the short duration (3 days) of Craft’s tenure.”
And, Davis continued, MacMillan has provided “no explanation for why he felt it necessary to terminate Debtors’ entire former management team.”
Among the trustee’s witnesses is Julio J. Defigueiredo Jr., a sheriff’s deputy from Bristol County, Mass. In a declaration to the bankruptcy court, Defigueiredo said he was present at an April 15 raid of TelexFree’s Massachusetts office by the U.S. Department of Homeland Security.
Defigueiredo, according to the declaration, observed Craft “entering an office and attempting to grab a laptop and bag.”
Craft, according to the deputy, claimed the items were “personal.”
But nearly $38 million in TelexFree-related cashier’s checks were discovered in the bag, the deputy said.
Davis described the situation as a series of “extraordinary changes of circumstances” and part of a confluence of events that makes it “unfathomable” that TelexFree is “still going forward on their cash management motions . . . as if business were proceeding as usual.”
“Currently,” Davis argued, “Debtors have no operating business. Due to the TRO [in the TelexFree fraud case filed by the SEC on April 15], their accounts have been frozen and remain frozen for the foreseeable future. MacMillan admits their offices in Massachusetts have been shut down since the Federal raid and all remaining employees have been laid off.”
MacMillan contended earlier this week that he did not believe that “Mr. Craft was attempting to divert any of the Debtors’ cash or other resources.”
Davis appears not to be buying that assertion, alleging that “Craft was apprehended attempting to walk out the back door of Debtors’ offices with $38 million in negotiable cashier’s checks.”
She further asserted that William Runge, a turnaround specialist hired to “to safeguard existing cash” by TelexFree three days before its bankruptcy filing, “[a]pparently . . . wasn’t able to perform his new job duties very well” given the circumstances surrounding Craft.
MacMillan contended earlier this week that Craft “was acting at the direction of Mr. Runge and me to secure the cashier’s checks in a safe and reliable location for the benefit of the Debtors’ constituencies.”
Key bankruptcy hearings for TelexFree are scheduled tomorrow.
But emergency motions filed by the firm “have not been amended to reflect any change of circumstances in Debtors’ business operations such as the raid on their offices by Special Agents from Homeland Security, or the freezing of all their banks accounts and sources of revenue, or the fact that Craft, their former accountant, Chief Financial Officer, Board Member and signatory is no longer associated with the Debtors in any capacity,” Davis asserted.
(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.
Screen shot: Part of a letter from the Minnesota Department of Commerce to the state Public Utilities Commission.
BULLETIN: The Minnesota Department of Commerce has asked the state Public Utilities Commission to deny TelexFree’s authorization to provide long-distance service in the state.
Minnesota regulators now are questioning whether TelexFree financial and background information submitted to the state to gain telecom authority was accurate. The PUC granted the authority on April 18, after the Department of Commerce recommended approval of the application.
But a Department of Commerce letter and attachment to the PUC dated yesterday asks the agency to mothball TelexFree “until it demonstrates that the information provided in its application is accurate.”
The move comes on the heels of TelexFree’s April 13 bankruptcy filing in Nevada and fraud charges filed against the firm on April 15 by the Massachusetts Securities Division and the U.S. Securities and Exchange Commission.
In the letter and attachment from the Department of Commerce, the agency asked the PUC to question whether TelexFree was in any financial position to provide service in Minnesota and whether “any other factors” exisited that could be relevant in determining its suitability to operate in the state.
Among the considerations in granting a telecom license is “the extent to which the applicant has had any civil, criminal, or administrative action taken against it in connection with the applicant’s provision of telecommunications services,” the Department advised the PUC.
“A certificate to provide local facilities-based service must not be granted unless the applicant establishes that it has the financial, technical, and managerial capability to provide the services described in its petition consistent with the public interest,” the Department said.
In asking the PUC to deny TelexFree’s authority, the Department pointed to an April 18 email from “TELEX FREE’s former [telecom-registration] representative, Joseph Isaacs.”
The Isaacs’ email, the Department said, “indicates that TELEXFREE provided false and misleading information to the Department in its application for certification to provide long distance service.”
From the Department’s assertions to the PUC (italics added):
The allegedly misleading information provided in TELEX FREE’s application relate to the basic filing requirements of Minn. Rules pts. 7812.0300, subpt. 2 (E, F, and N): civil and administrative action pending, financial statements, and information relating to the technical, managerial and financial capabilities of TELEX FREE in support of its application for certification. The allegedly misleading information in the TELEX FREE’s application relate to the decision criteria in Minn. Rules pt. 7812.0300, subpt. 2 (C, D, and H).
If the Department had known this information, it would not have recommended approval of the application for certification to provide long distance service, without further investigation.
TelexFree operates as an MLM. Some of its members now are asking a federal bankruptcy judge to “bail out” the “program.”
Beyond that, the U.S. Trustee for the region in which TelexFree filed its bankruptcy petition (Nevada) said in court filings that “[t]here is compelling evidence of fraud, dishonesty and gross mismanagement of the affairs of the TelexFree debtor entities, TelexFree, LLC, TelexFree, Inc. and TelexFree Financial, Inc.”
TelexFree LLC was the entity granted authority to operate in Minnesota on April 18.
Tracy Hope Davis, the trustee, also alleged there are “reasonable grounds” to believe that “criminal conduct” occurred at TelexFree.
Challenges to its authority to provide telecom services could affect TelexFree’s ability to persuade a bankruptcy judge that it could continue as a going concern. Litigation against TelexFree is occurring at both the state and federal levels, and the firm also might face the prospect of class-action lawsuits from its distributors.
The Massachusetts Securities Division alleged on April 15 that information provided investigators in that state did not agree with information provided the Washington State Utilities and Transportation Commission.
Records in Nevada show that TelexFree’s pending telecom application in the state potentially could be denied for failure to advertise its application in newspapers as required by the state.
Although ads did appear in two newspapers, they did not appear as required in three others, records show.
The office of Nevada Attorney General Catherine Cortez Masto intends to intervene in TelexFree-related matters before the state Public Utilities Commission, according to this filing. Source: Nevada Public Utilities Commission. Red highlight by PP Blog.
BULLETIN: (Updated 8:56 p.m. EDT U.S.A.) The Consumer Protection Bureau of Nevada Attorney General Catherine Cortez Masto says in regulatory filings that it intends to intervene in TelexFree-related licensing matters before the Nevada Public Utilities Commission.
TelexFree, accused of conducting a Ponzi scheme that gathered $1.2 billion, has Nevada telecom applications pending for TelexFree LLC and TelexMobile. TelexFree filed for bankruptcy in Nevada last week.
Beatriz Aguirre, a spokeswoman for Masto, had no immediate comment on why the attorney general intended to intervene. More information may become available later, she said.
[** Update 8:56 p.m. In a letter dated March 31, according to Nevada records, TelexFree asked for telecom authorization. An application with 2013 financial information for TelexFree was submitted with the letter. TelexFree, according to the application, wanted the information “FILED AS CONFIDENTIAL — UNDER SEAL.” In a separate letter dated March 4, according to Nevada filings, TelexFree referred to a “Refiling of the Confidential Financials of Applicant,” saying “these financials contain trade secrets and should remain Confidential for as long as possible under Nevada Administrative Code.”
In an email to the PP Blog this evening, Aguirre referenced TelexFree’s request for confidentiality. The attorney general’s office filed its notice to intervene, according to a document provided by Aguirre, to represent “the public interest” with respect to TelexFree’s applications before the state PUC. Original story continues below. End of update **.]
Trouble with licensing could affect TelexFree’s ability to persuade a bankruptcy judge that it could continue as a going concern.
The SEC says TelexFree may owe $1.1 billion to promoters of its MLM scheme.
The agency further alleged that records suggest TelexFree co-owners James Merrill and Carlos Wanzeler “have caused more than $30 million to be transferred from TelexFree operating accounts to themselves and to affiliated companies in the past few months.”
Separately, the PP Blog has learned that Joe Craft, an accountant and TelexFree’s alleged CFO, is associated with a New Hampshire payment-processing business known as BWFC Processing Center LLC. A company by the same name operates in Nevada as a registered-agent service.
Craft was listed as “manager” of the New Hampshire entity in a filing in that state on Feb. 27, 2014. His role in the Nevada entity is unclear.
Regardless, documents exist that instruct customers looking to set up a “Nevada Mailing Address” to fax payments to an Indiana number associated with Craft. The service charges a “onetime” fee of $125 to “set up” a “Nevada Post Office box,” and an additional $180 as an “annual fee.” An additional fee of 3 percent for “merchant processing” is charged, bringing the first-year charges for the mailbox service to $314.15.
“**Payments will be made to the Indiana BWFC office**,” the instructions note. “**Post office box service will be performed by the Nevada BWFC office**” (Asterisks appear in the original document.)
Like Merrill and Wanzeler of TelexFree, Craft was accused by the SEC of securities fraud.
Two of the issues surrounding TelexFree concern precisely when Craft became CFO and his precise role in TelexFree prior to becoming CFO.
Regulatory filings to obtain a telecom license in Alabama identify Craft as TelexFree’s CFO during the opening week of March 2014. Page 19 of the 99-page Alabama filing shows an image of a March 8, 2014, document from the office of Alabama Secretary of State Jim Bennett. The document notes that the name TelexFree LLC was “reserved as available” in the state.
“This name reservation is for the exclusive use of BWFC Processing Center, LLC, 825 East Main St, Boonville, IN 47601 for a period of one year beginning March 08, 2014 and expiring March 08, 2015,” the document reads in part.
The East Main Street address is the address of both Craft’s accounting firm and the address of BWFC Processing Center LLC, the company listed in New Hampshire as a payment processor. As noted above, a company with the same name operates in Nevada and provides registered-agent services.
“Joe Craft” is listed on Page 3 of the March Alabama TelexFree filing as holding the “Official Title” of “CFO” of TelexFree LLC. Page 15 includes an oath recorded March 5, 2014, before a Massachusetts notary public. The oath bears the name and signature of Jim Merrill, who is listed as “President” of TelexFree LLC. The oath attests that the information in the Alabama document — an “Application for a Certificate of Public Convenience and Necessity to provide interexchange telecommunications services in Alabama” — is true to the best of Merrill’s knowledge and belief.
The document appears accidentally to have identified Merrill as a woman, given that the certification line actually reads “the statements made herein are true to the best of her [emphasis added by PP Blog] knowledge and belief. Merrill appears not to have noticed when signing the document.
Despite the sworn oath of Merrill that Craft was the “Official” TelexFree “CFO” on March 5, 2014, however, TelexFree’s board appears not to have named Craft CFO until sometime after 8:11 p.m. on April 13, 2014, the same day TelexFree and related entities filed for bankruptcy in Nevada.
According to TelexFree’s bankruptcy filing, “Joe H. Craft” of “Joe H. Craft, CPA” was present at the meeting, which was called to order by Carlos Wanzeler.
During the meeting, the board and other attendees, including CPA Craft, “considered the Company’s liabilities, the strategic alternatives available to it, and the impact of each of the foregoing on the Company’s businesses,” according to the bankruptcy filing.
During the meeting, the board decided to file for bankruptcy. It then was resolved that “Joe H. Craft” would become one of TelexFree’s “authorized persons.” After this resolution, it then was resolved that “the Authorized Persons be, and they hereby are, authorized and directed to employ the accounting firm of Joe H. Craft, CPA to provide Joe H. Craft to serve as Chief Financial Officer of the Company while the Chapter 11 case is pending and to assist the Company in carrying out its duties under the Bankruptcy Code.”
Another resolution resolved that “Joe H. Craft be, and he hereby is, elected to serve as Chief Financial Officer of the Company.”
Three TelexFree related firms filed bankruptcy: TelexFree LLC of Nevada, TelexFree Inc. of Massachusetts and TelexFree Financial Inc. of Florida.
TelexFree Financial Inc., one of the companies included in the filing, was was “incorporated by Craft on December 26, 2013,” with Wanzeler and Merrill as its directors, according to the SEC.
TelexFree has pushed back on reports last week that Craft attempted to leave TelexFree’s Massachusetts office with a laptop computer and nearly $38 million in cashier’s checks while a search warrant was being executed by federal agents..
“The cashier’s checks were in Mr. Craft’s possession because the Company’s bank accounts had been closed, which necessitated the Company obtaining the funds in the form of cashier’s checks,” TelexFree said in a statement. “Upon the filing of the Chapter 11 cases, the Company determined to marshal all of the Company’s funds for the benefit of the Chapter 11 bankruptcy estate. Mr. Craft had taken possession of the cashier’s checks at the request of the Company’s counsel and advisors in order to assure that the estate funds were protected. Mr. Craft was holding the checks until they could be deposited in either a newly-established Company safe deposit box or an escrow account that the Company was in the process of establishing. The laptop was Mr. Craft’s personal property.”
