If Brazil’s Federal Police wish to ask him about TelexFree’s involvement in wire fraud and an underlying conspiracy, James Merrill is required to provide a “complete and truthful proffer,” according to the terms of his plea agreement with U.S. prosecutors in Massachusetts.
Merrill, 55, of Ashland, Mass., also is required to cooperate with U.S. agencies that have questions about the fraud, according to the agreement. The agreement ultimately may pit Merrill against Carlos Wanzeler, a TelexFree co-founder charged with wire fraud and conspiracy in the United States.
U.S. prosecutors say Wanzeler fled to Brazil after TelexFree’s massive Ponzi- and pyramid scheme was exposed in April 2014. Brazil’s Federal Police continue to investigate TelexFree and an affiliate known as Ympactus in that country. The Brazilian probe also involves TelexFree figure Carlos Costa.
U.S. prosecutors said yesterday that Brazilian Federal Police had provided “valuable assistance” in the U.S. probe. The office of U.S. Attorney Carmen Ortiz also lauded U.S. agencies and the Massachusetts Securities Division, the state-level regulator.
Under the plea agreement, Merrill would receive prison time of no more than 10 years. Eight counts of money-laundering would be dismissed.
“Merrill also agreed to forfeit approximately $140 million, numerous real estate properties, luxury vehicles and boats,” U.S. prosecutors said.
In the agreement, Merrill said the deal was in his best interests and that “I am guilty of the offenses to which I am pleading guilty.”
The agreement noted Merrill had rejected plea offers made earlier. Merrill, who potentially could have faced decades in prison, was defended by Robert M. Goldstein.
Merrill pleaded guilty yesterday to eight counts of wire fraud and one count of conspiracy. U.S. District Judge Timothy S. Hillman scheduled sentencing for Feb. 2.
EDITOR’S NOTE: This story, which easily could be titled “What NOT To Do In MLM,” summarizes a few of the witnesses and exhibits the U.S. government may use against TelexFree’s James Merrill when his trial gets under way Oct. 24 in Massachusetts. The background provided below is based on research by the PP Blog. Prosecutors filed their witness/exhibit lists on Sept. 26 in U.S. District Court. For our Brazilian readers, we’ll note here that the United States is expected to call at least one member of the Brazilian Federal Police to testify. U.S. District Judge Timothy S. Hillman is presiding. In total, dozens of witnesses may testify, including some who have been sued by the SEC, TelexFree Trustee Stephen B. Darr or private attorneys. There are hundreds of government exhibits, some collected by the Massachusetts Securities Division and the U.S. Department of Homeland Security.
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EXHIBIT: The government may introduce a document filed by TelexFree with the Alabama Public Service Commission in March 2014.
BACKGROUND: This document potentially could be used to demonstrate Merrill lied to regulators and business consultants. It was filed on March 20, 2014, and asserts TelexFree was “financially qualified” to operate in the state as a telecom company and that its “current financials Show considerable net worth.”
Less than a month later, however, TelexFree filed for bankruptcy, raising questions about the truthfulness of its telecom applications in various states. The document, which the PP Blog published before TelexFree’s bankruptcy filing, also ties Merrill to Indiana MLM accountant Joe Craft, a former interim TelexFree executive listed Sept. 26 by the government as a witness. Craft was sued alongside Merrill and others by the SEC in April 2014. He later filed a pleading in which he said he had concluded TelexFree was a Ponzi scheme selling unregistered securities and that he had been misled by TelexFree insiders.
Joseph Isaacs, a Florida-based consultant for TelexFree, helped prepare TelexFree’s telecom filing in Alabama and other states. Isaacs also now is listed as a government witness. Filings in Missouri say Isaacs told regulators there that Merrill had not been truthful when submitting an affidavit.
EXHIBIT: The government may introduce a photo of Merrill posing with a Hummer vehicle in TelexFree promos.
BACKGROUND: Ponzi/pyramid schemes and flashy rides are virtually inseparable.
In 2014, a federal judge ordered TelexFree pitchman Santiago De La Rosa — an SEC defendant — to sell two BMWs and a Land Rover Range Rover. De La Rosa now is listed as a government witness.
EXHIBIT: The government may introduce a September 2013 email that shows Merrill was aware of a criminal indictment and prison term imposed against AdSurfDaily President Andy Bowdoin in a Ponzi case with remarkable similarities to TelexFree.
BACKGROUND: The email described above allegedly was sent to Merrill by MLM attorney Jeffrey Babener. Babener now is listed as a government witness. Darr, the bankruptcy trustee, has said Babener informed TelexFree in August 2013 that it was operating a pyramid scheme, but TelexFree nevertheless continued to gather money.
EXHIBIT: A video by Thomas More of Newport Beach, Calif.
BACKGROUND: The SEC has warned for years that scams spread on social media. More, now listed as a government witness, was a TelexFree pitchman who was listed as a “winner” in the Zeek Rewards Ponzi- and pyramid scheme. Nehra once was a speaker at a TelexFree event in Newport Beach.
EXHIBIT: Records from various banks and financial vendors for Merrill or TelexFree.
Back in February 2015, the SEC brought a Ponzi- and pyramid action against the alleged operators of “Wings Network,” alleging a cross-border MLM fraud that had gathered tens of millions of dollars.
The SEC announced today that it had obtained final judgments by default against alleged operators Tropikgadget FZE and Tropikgadget Unipessoal LDA, collectively Tropikgadget, both of Portugal. A federal judge “ordered Tropikgadget to pay disgorgement of $25,213,990, representing profits gained as a result of the conduct alleged by the Commission, plus prejudgment interest of $961,742, and a third-tier civil penalty of $725,000,” the SEC said.
At the same time, the agency said, relief defendants who’d received ill-gotten gains from the fraud were assessed liability of more than $9 million. These include Portugal-based entities known as “Compasswinner” ($8,125,235) and Happy SGPS SA ($1,102,711).
Litigation against individual operators and promoters continues, the agency said.
Like many securities-fraud schemes, Wings Network used social media to lure in the masses, the agency said.
“After establishing a network of lead promoters, recruitment of new members surged through the use of social media such as Facebook and YouTube,” the SEC said earlier this year. “The promoters used Facebook to publicize ‘business meetings’ that took place at hotels and other locations in Connecticut, California, Florida, Massachusetts, Pennsylvania, Texas, Georgia, and Utah. The promoters also set up storefronts or ‘training centers’ to lure investors into attending Wings Network presentations. For example, one promoter used a storefront in downtown Philadelphia to make presentations to prospective investors, and another promoter rented office space in Pompano Beach, Fla., and spread the word in the local Latino community to attract prospective investors to come in and hear presentations.”
EDITOR’S NOTE: Officials in the Philippines not only are using securities laws in the EmGoldEx prosecution, but also a relatively new law against cybercrime in that nation. This potentially could stiffen penalties. As noted below, EmGoldEx also caused trouble in the United States.
UPDATED 10:43 A.M. ET U.S.A. EmGoldEx was a Ponzi scheme that morphed into entities known as Global Intergold (GIG) and Prosperous Infinite Philippines Holdings, Corp. (PIPHC), the Securities and Exchange Commission of the Philippines is alleging.
Among the victim-investors and recruiters were two “officials” of the Philippines National Police, the SEC said. One of the individuals allegedly joined “in desperation after his house burned down early this year.”
The allegations appeared today, in advance of an EmGoldEx-related event scheduled for Sunday at the SMX Convention Center at 5 p.m. Officials issued a warning about the event, saying that 2,000 people were expected to attend.
“Suspects” identified by the SEC include Kevin Miranda, Ryan Manuit, Charles Juiz Padilla, Rabel Ymas, John Rafael Calicdan and Paul Alviar. Their places of residence were not listed.
Lalaine Monserate, assistant director of the SEC’s Enforcement and Investor Protection Department, said the entities operated “a classic Ponzi scheme of getting cash investments and giving high return payouts [through] the recruitment of people. As more people are recruited into the scheme, it eventually reaches a point wherein it can no longer sustain its payouts, and payments will stop thereby leaving investors penniless.”
As for EmGoldEx operations in the Philippines, officials there have issued a cease-and-desist order and made a criminal referral to the nation’s Department of Justice. Among the allegations are selling or offering for sale or distribution unregistered securities to the public and and doing so without a license.
Each violation of the [Securities and Regulation Code] is punishable, upon conviction, with a fine of not more than Php 5 Million or imprisonment of 7-21 years, or both,” the SEC said.
Officials are treating the matter not only as a securities fraud, but also as a cybercrime, the SEC noted.
“The selling and marketing of unregistered securities by EmGoldex, GIG, and PIPHC are largely done online,” the SEC said. “Crimes committed in cyberspace and through the use of Information and Communication Technologies (ICT) carry a higher penalty as provided under the Cybercrime Prevention Act of 2012.”
From the SEC (italics added):
Originally, the entity which employed the Ponzi scheme was EmGoldex. However, in response to SEC’s Advisories warning investors against EmGoldex, the original entity renamed itself to GIG. PIPHC was then incorporated sometime on August 2015 to aid and assist GIG investors who were unable to obtain a return on their investment. Currently, EmGoldex is already banned in other countries based on international media reports.
About 14,000 TelexFree members in Massachusetts have received a payout from a $3.5 million fund set up last year as a result of a settlement between the state Securities Division and Fidelity Co-Operative Bank, the office of Commonwealth Secretary William Galvin said today.
“While this money does not make the TelexFREE victims whole, the distribution does provide the first real monetary relief received by Massachusetts victims of this international pyramid scheme,” Galvin said. “I am very pleased that my office was able to get some money back for these victims.”
The first distribution consisted of $2.9 million from the fund. Each recipient of the first distribution will receive $205.52, Galvin’s office said.
From the news release dated today (italics added):
Under the terms of the consent order, the bank established a Massachusetts Victim Relief Fund and retained Grant Thornton LLP as independent claims administrator. The amount of the fund was set at $3.5 million.
This first group of claimants was assembled by Grant Thornton based on information provided to the administrator by the Securities Division. These Massachusetts victims were derived from records subpoenaed by the Division from TelexFREE as well as victims who contacted the Division.
A second group eligible for distribution will be those claimants who submitted claims to the Division but for whom additional information is needed to validate their claim. A third group are those claimants who file a valid claim to the independent claims administrator after July 3, the date the distribution plan was submitted.
TelexFree and IFreeX promoter Sann Rodrigues has been released on “conditions,” including “the surrender of his passport and the passports belonging to his family members, a $200,000 secured bond, 24-hour electronic monitoring, and home confinement.”
A U.S. Magistrate Judge in the District of New Jersey imposed the conditions on Rodrigues, according to a statement today by the office of U.S. Attorney Carmen Ortiz of the District of Massachusetts. Here’s the headline of the release: “Pyramid Scheme Promoter Arrested on Visa Fraud Charges.”
At the same time, the release noted that Rodrigues had been charged by the SEC in 2006 with “owning and operating Universo Fone Club and defrauding investors of millions of dollars.” The SEC alleged that Universo Fone Club was a pyramid scheme.
Rodrigues, of Davenport, Fla., was arrested earlier this month at Newark International Airport on visa-fraud charges after returning from Israel, prosecutors said.
A citizen of Brazil, according to court filings, Rodrigues presented his U.S. “green card to Customs and Border Protection Officers on May 3, 2015, at Logan Airport [in Boston], knowing that he obtained that document based upon false statements to immigration officials,” prosecutors said.
TelexFree operated from Massachusetts. A court-appointed bankruptcy trustee has said TelexFree gathered on the order of $1.8 billion in about two years.
“Many investors gave cash to the company and to their leaders (or upline sponsors) who then deposited the cash along with other investor funds.” — Krista L. Freitag, court-appointed receiver in the WCM777 pyramid- and Ponzi case, Feb. 27, 2015
EDITOR’S NOTE: Tens of millions of dollars allegedly flowed through WCM777 and related entities. At the bottom of this column, you’re going to read that an apparent apologist for accused Ponzi schemer Ming Xu is claiming the U.S. Securities and Exchange Commission is violating his human rights. Fair warning: You might want to have your vomit bucket at the ready . . .
UPDATED 10:31 A.M. ET U.S.A. Here’s how you rob the Christians in an offering fraud that involves the sale of tens of millions of dollars in unregistered securities across state and national borders: You start an MLM “program,” get it in the churches and on YouTube, permit “leaders” to gather money from their enraptured audiences and put out the word that $1,999 returns $3,200 in 100 days.
It might help if you have a storefront in, say, Peru. It also might help if you have, say, promoters willing to tout the “program” in webinars and from a “function room in a hotel in Massachusetts.” At the same time, it might help if you have promoters willing to steal the intellectual property of the “Rocky” movie franchise to drive dollars into any of the “77 domestic and 23 foreign bank accounts” you’re using. (The bank-account information is sourced from a forensic accounting by Krista L. Freitag, the court-appointed receiver in the WCM777 case. It was filed Feb. 27 in U.S. District Court for the Central District of California and is the basis for part of this PP Blog column. Links to exhibits are provided near the bottom of the column.)
Along the way, it might help if you follow the standard blueprint from one MLM scam after another that calls for you to disarm skeptics by dropping the names of plenty of famous businesses, perhaps with the aim of hoping your “leaders” will follow your lead and do the same thing. Damn! Wouldn’t you know it! They did exactly that! (See link in first paragraph of this story.)
It might be particularly helpful if you make a calculation that a bank such as HSBC in Hong Kong might frown upon a subpoena issued in the United States and clam up when it comes to assisting the receiver appointed to your case after the SEC moves in.
“To date, HSBC-Hong Kong has not responded to the Receiver’s requests/subpoena,” Freitag advised U.S. District Judge John F. Walter in her forensic accounting.
Or maybe HSBC doesn’t want to open a new can of worms after it settled with the Justice Department in December 2012 by forfeiting $1.256 billion and entering into a deferred-prosecution agreement after it was accused of “willfully failing to maintain an effective anti-money laundering (AML) program, willfully failing to conduct due diligence on its foreign correspondent affiliates, violating [the International Emergency Economic Powers Act] and violating [the Trading with the Enemy Act].”
“Vincent,” the alleged Ming Xu email to Messina began. “We have lots of members for our social capital company, WCM777 in Brazil. They paid us in Brazil. How to move the money legally from Brazil to USA or Hong Kong?”
Whether Messina provided guidance on how to get money out of Brazil and move it to the United States and Hong Kong is unclear. Ming Xu’s email, however, suggests that WCM affiliates in Brazil, like their U.S. counterparts, also were collecting money directly from MLM recruits and that Ming Xu needed to find a way to get the cash under his control.
Freitag says she has traced $5 million in Ming Xu proceeds to Messina, and Walter ordered Messina to return it. Only $2.133 million has been returned, Freitag says.
Messina wasn’t just a lawyer; he was a WCM777 “insider,” the receiver alleges.
Because Freitag has access to certain WCM777 banking records, she has been able to determine that “$29,404,996” went to HSBC in Hong Kong “for 7 Receivership Entities and 1 individual.”
Ming Xu used numerous companies as part of his overall money-moving scheme, the receiver contends.
Here’s how she describes one transaction that occurred after WCM777 got in trouble with the Massachusetts Securities Division in late 2013 and agreed to return money to the fleeced investors in that state (italics added):
“ . . . rescission payments were made to WCM777 investors in accordance with the Consent Order issued by the Massachusetts Securities Division. Bank records show that funds from ToPacific bank accounts were used to make payments to the Massachusetts WCM777 investors.”
“ToPacific” was a company in the WCM777 fold.
How circuitous were things within WCM777 (italics added):
“the payment methods with which investors payments were made varied from third-party electronic disbursement (primarily Global Payout) to physical checks written directly on Receivership Entity bank accounts. There does not appear to be any consistency in the bank accounts from which investor checkswere written. Rather, bank records indicate payments were made to investors from whichever accounts happen[ed] to have funds available at the time the payments were made.”
The FBI has been warning about shell companies involved in crime and how banks and payment processors can get caught up in it since at least 2010. Even so, the WCM777 entities somehow managed to open at least 100 bank accounts while also gaining access to bank wires and at least one payment processor.
Here’s how Freitag describes the overall scheme (italics added/light editing performed):
“The Receivership Entities’ primary source of income was investor deposits, which was also the primary source of virtually all funds distributed to the investors; [t]he vast majority of the Receivership Entities’ business activities revolved around raising and distributing investor funds; [i]nvestor funds were so materially commingled between and among the Receivership Entities that the entities operated as a unitary enterprise, rather than as separate entities.”
And while WCM777 recruits thought they were joining an MLM “program,” their money financed the purchases of two golf courses in California, several pieces of real estate, including one with live koi, and a series of purported investments elsewhere. These allegedly included jewelry or gold, oil and gas — and even piles of “jeans, shorts, pants and leggings” stored by Ming Xu’s sister.
Ming Xu’s Mom allegedly got a new house, but not until after the cash to purchase the home had passed through bank accounts linked to Ming Xu and his sister.
The Ming Xu Twitter account, which once claimed all would become known when “blood moons” appeared in the sky and published a picture of Apple co-founder Steve Wozniak, whom Ming Xu had corralled at a networking event in California, now includes a link to a website that claims (italics added):
U.S. Securities and Exchange Commission was wrong to close down the company and confiscate about $43M cash asset and oil reserve asset of $50M. It has violated the company’s legal interests and human rights of Ming Xu.
Read the exhibits from Freitag’s forensic accounting. (Here’s one; here’s the other.)
As noted above, you might want to have a vomit bucket handy if you’re contemplating how certain MLM “programs” are operating these days in the era of epic white-collar fraud and while terrorism, beheadings and attacks on police are occurring.
EDITOR’S NOTE: The MLM “program” known as Wings Network is alleged to have operated through two business entities that used the name “Tropikgadget.” The SEC’s case, announced Friday, is filed in U.S. District Court for the District of Massachusetts. That’s the same venue in which the agency’s epic TelexFree case was filed last year.
There can be no doubt — zero, none — that vulnerable immigrant populations in Massachusetts are being targeted in one MLM scheme after another. Speakers of Spanish or Portuguese may be particularly at risk. It’s also apparent that Asian, Haitian and African population groups are being targeted and that the risk is not unique to Massachusetts residents. The WCM777 “program,” for example, brushed through Massachusetts, where it was aimed at speakers of Portuguese and was stopped by the Massachusetts Securities Division in late 2013.
MSD also has squared off against a “program” known as EmGoldEx. In this scam, investors were promised returns of up to 1,105% and photos of children “getting paid” were used as lures to drive dollars.
One of the Tropikgadget entities — Tropikgadget Unipessoal LDA — allegedly was set up in the Madeira Free Trade Zone in November 2013 and later abandoned. Madeira, whose largest city is Funchal, is a North Atlantic Portuguese archipelago slightly closer to continental Africa than continental Europe. It is worth pointing out that the SEC publicly thanked both Portugal’s securities regulator (Comissão do Mercado de Valores Mobiliários) and the office of Portugal’s Attorney General (Procuradoria-Geral da República of Portugal) for assistance in the American probe.
The other Tropikgadget entity — Tropikgadget FZE — appears to have been set up in Sharjah, United Arab Emirates, also in November 2013. Sharjah, on the Persian Gulf, is the UAE’s third most populous city, behind Dubai and Abu Dhabi, according to WikiPedia. The paper presence of these companies at geographic points on the North Atlantic and the Persian Gulf more than 4,300 miles away from each other and how they enlisted Massachusetts residents to do their bidding probably is a story unto itself, but it is a story for another day. What’s news today is that Wings Network was operating in Massachusetts at Ground Zero for TelexFree after the TelexFree action and, like TelexFree, is accused of fleecing vulnerable immigrant populations.
At least seven of the 12 charged Wings Network promoters had addresses in Marlborough, Mass. This is potentially important because TelexFree’s U.S. operations were based in Marlborough. TelexFree operated through various U.S. entities and a Brazilian entity known as Ympactus. Brazil-based TelexFree/Ympactus figure Carlos Costa has TelexFree business partners in Massachusetts, waved the flags of Madeira and Portugal in a 2013 TelexFree promo and invoked God in appeals to support TelexFree. Sann Rodrigues, a charged TelexFree promoter associated with an MLM entity known as iFreeX that also operated in Massachusetts and has come under scrutiny, has claimed “God” invented MLM and “binary.” Rodrigues, according to the SEC, is a recidivist pyramid-schemer.
There’s also evidence that the Zeek Rewards “program” taken down by the SEC in 2012 targeted vulnerable people.
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Funchal, Madeira, to Sharjah, UAE. Source: Google Maps.
UPDATED 11:32 A.M. ET U.S.A. The SEC’s “Wings Network” case announced Friday is the latest example of the MLM world’s intolerable capacity to deceive. Though the facts alleged by the SEC are alarming, the action against two companies, three officers and 12 promoters is not an indictment of the trade. Indeed, the agency worked with the Direct Selling Association to expose one of the most mind-numbing lies.
But you still have to wonder if MLM and network marketing in general are on the road to perdition. This is because the horrifying abuses and thematic lies that propped up Wings Network are so common across the larger MLM trade that one can be forgiven for wondering if targeting vulnerable population groups and institutionalizing prevarication is Rule No. 1.
How DSA Got Involved In The Wings Network Case
Adolfo Franco, the trade association’s executive vice president and chief operating officer, sits at the intersection of commerce and government affairs. He’s an old political hand and has worked as a Republican strategist and assistant administrator for Latin America and the Caribbean for the U.S. Agency for International Development (USAID). Franco wants the MLM industry to prosper, and he wants to make sure he has a wholesome story to tell in government corridors.
Wings Network didn’t give him one, to be sure.
You see, Wings Network is accused by the SEC of using the DSA’s name to sugarcoat a creeping, cross-border fraud scheme that ultimately gathered at least $23.5 million. What actually happened, according to the SEC and an affidavit prepared by Franco, is that DSA received an “e-mailed request” for a DSA membership “application.” It then sent out the application, which was never returned. Not only was the application not returned, according to the affidavit, DSA never even heard back from Wings Network.
What allegedly happened next will surprise no one who follows the bizarre dramas MLM has been serving up for the past several years. This simple request for a membership application was conflated by Wings Network and affiliates as an endorsement by DSA of Wings Network.
By April 2014, according to the SEC, DSA became aware of this ribald deception. The association reacted by sending Wings Network a cease-and-desist letter, directing Wings Network and affiliates to stop claiming membership in DSA and stating point-blank that “any indication that Wings Network is a member of the DSA is fraudulent.”
Multiple Layers Of Deception
Could it get worse? Sure. Wings Network hucksters also are accused of duping participants into believing the “program,” which advertised guaranteed income, had the additional benefit of insuring them against loss.
Anyone who’s been following the unbelievably noxious example of TelexFree can tell you that the same thing allegedly happened there. The same thing currently is happening in a “program” known as “MooreFund,” and it previously happened in the AdSurfDaily Ponzi scheme in 2008 broken up by the U.S. Secret Service.
The MLM scammers look for a tiny kernel of truth and then wrap a lie around it: A “program” may have a bank account, for example. Money in the account may be insured by the FDIC in the event of a bank collapse.
From this, the “programs” themselves and affiliates conflate a fantastically malignant construction by which no one can lose money because of the “insurance.” It is just a contemptible lie. It’s also one that has been bettered by new versions of the lie. These versions — as is the case with Wings Network, TelexFree and MooreFund — hold that private insurers or even software companies such as Symantec have the companies’ backs and that these private insurers never would do business with a fraud scheme.
Supplementing this lie are companion lies — advanced by Wings Network, TelexFree and others — that a business registration with a Secretary of State or equivalent agency domestically or overseas is proof that there is no underlying scam. (One need only to look at Bernard L. Madoff Investment Securities LLC to understand just how preposterous this type of lie is.)
Here’s the thing: The type of lies advanced by Wings Network are not unusual for “opportunities” using an MLM or network-marketing business model. DSA happened to be the victim of brand-leeching and runaway disingenuousness in this case, but other cases show it’s hardly alone. Even the names of the U.S. government and various U.S. agencies have been dropped in this fashion.
Not even the “brands” of God and Jesus Christ are off-limits in the MLM sphere. Sometimes an asserted endorsement by a deity is supplemented by suggestions that living legends of entertainment and business have piled aboard a “program” train.
This is a short summary of these tactics as employed by recent MLM or network-marketing schemes that either cratered on their own or collapsed after regulatory intervention. (Note: Some background information also appears in the summary):
WCM777. Operated by Ming Xu. Targeted people who spoke Spanish, Portuguese, English and Asian languages. Dropped names of God, “Yahweh,” Jesus Christ, Al Gore, Steve Wozniak, Sylvester Stallone, “Rocky,” Eric Garcetti, Siemens, Goldman Sachs, the Denny’s restaurant chain and many, many more famous companies. (As many as 700.) Basic sales message: Send us money. Get rich. Estimated haul: $80 million in less than a year. Estimated number of victims: tens to hundreds of thousands.
TelexFree. Operated by James Merrill, Carlos Wanzeler and Carlos Costa. Largely targeted people in the United States and internationally who spoke Spanish, Portuguese and English. Global penetration at an almost unfathomable level. Appears to have created black market and back-alley economy in Massachusetts. Became subject of undercover investigation by the U.S. Department of Homeland Security. Dropped names of God, Jesus Christ, MLM Attorney Gerald Nehra, President Obama, Massachusetts Commonwealth Secretary William Galvin, the SEC, the U.S. Attorney General. Basic sales message: Send us money. Get rich. Estimated haul: $1.82 billion in about two years. Estimated number of victims: hundreds of thousands to more than 1.8 million.
Zeek Rewards. Operated by Paul R. Burks. Targeted people who spoke Spanish, Portuguese, English and Asian languages. Global penetration at an almost unfathomable level. Affiliates targeted Christians. Dropped names of the Association of Network Marketing Professionals, MLM attorneys Gerald Nehra and Kevin Grimes, plus MLM consultants Keith Laggos and Troy Dooly. Basic sales message: Send us money. Get rich. Estimated haul: $897 million in less than two years. Estimated number of victims: hundreds of thousands. “Clawback” cases to return alleged ill-gotten gains may affect 10,000 or more affiliates.
eAdGear. Operated by Charles Wang and Francis Yuen. “Primarily” targeted “investors in the U.S., China, and Taiwan,” according to the SEC. Dropped names of Google, Yahoo, Target Corp., Lbrands (Victoria’s Secret), Avon, Sears, Nordstrom, eBay, QVC, HSN, J.C. Penney, Banana Republic, Dillard’s, Kohl’s, Macy’s, Amazon.com, Men’s Wearhouse, Kmart, New York magazine and many, many more. (As many as 253 brands were abused.) Basic sales message: Send us money. Get rich. Estimated haul: $129 million. Estimated number of victims: tens of thousands.)
Wings Network now stands accused of targeting “many members of the Brazilian and Dominican immigrant communities in Massachusetts” in a combined pyramid- and Ponzi scheme that raised at least $23.5 million.
If that sounds familiar, perhaps it is because the TelexFree “program” was accused last year by the SEC of doing the same thing in the same place. Like Wings Network, TelexFree reached across national borders to plunder investors. Recent filings by the court-appointed trustee in the TelexFree bankruptcy case — and these filings are subject to amendment in part because there are more than 1 trillion disparate data points involved in the reverse-engineering of TelexFree — list the “nature” of the company’s business as “pyramid scheme.”
Other filings by Stephen B. Darr, the trustee, suggest that TelexFree gathered more than $1.8 billion in about two years of operation through a series of entities in the United States and an affiliate in Brazil known as Ympactus. The dollar volume alone is simply mind-boggling, more so when one considers the records so far denote “1,894,940 Participant names, spanning 35,110 pages.”
Some readers who sift through the TelexFree material will need a name-pronunciation guide and a world atlas. TelexFree didn’t just mow down Americans. The records suggest, for example, that the “Embassy Of Nigeria P O Box 1019 Addis Ababa Ethiopia” has contacted Darr. One document lists “Baker Island,” which WikiPedia says is an uninhabited Pacific atoll tended to by the U.S. Fish and Wildlife Service, as the “country” of an investor.
It is clear that TelexFree had investors (at least) in Argentina, Australia, Belarus, Belgium, Bolivia, Cambodia, Canada, Chile, China, Colombia, Croatia, Cyprus, Dominican Republic, Ecuador, Egypt, El Salvador, France, French Polynesia, Germany, Ghana, Guatemala, Honduras, Hong Kong, Hungary, India, Indonesia, Ireland, Italy, Japan, Jordan, Kenya, Lebanon, Luxembourg, Malaysia, Mexico, Moldova, Netherlands, New Zealand, Nigeria, Norway, Paraguay, Peru, Philippines, Poland, Portugal, Puerto Rico, Qatar, Romania, Russia, Rwanda, San Marino, Serbia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Tanzania, Thailand, Togo, Turks and Caicos, U.S. Virgin Islands, Uganda, Ukraine, United Arab Emirates, United Kingdom, United States, “Unknown” country, Uruguay, Uzbekistan and Venezuela.
MLM in this form is “fraud creep” running wild. It is posing dangers to individual participants, including those who can ill afford to take a financial hit. Beyond that, it is posing a danger to the U.S. financial infrastructure.
Economic security is national security, friends. These MLM HYIP “programs” pose an untenable security threat. Many of them are shrouded in multiple layers of mystery.
DSA Needs To Do More
It is good to see that the DSA worked with the SEC on the Wings Network case. It would be better yet if the organization studied why so many MLM HYIPers appear to move from fraud scheme to fraud scheme to fraud scheme.
Where did these people start their “MLM journeys?” Did they start at, say, Herbalife or Amway after buying into the dream and the attendant hype? And did they get churned by those “traditional” MLMs, only to become shark bait for the HYIPs?
With so many of the scams selling the message that it’s nearly impossible to make money in “traditional” MLMs and that 97 percent of people who latch onto the MLM dream of riches emerge as losers or highly vulnerable treaders of water in rough seas, isn’t it time for those traditional MLMs to question whether they are creating the refugees and providing the training for the targeting?
Herbalife is not an HYIP. But it sells a dream and has a high burn rate. The most recent scheme to sell against traditional MLM is “Achieve Community,” taken down by the SEC last month.
Whether or not “the 97 percent” claim is precisely true is immaterial. What’s material is the ready availability of vulnerable population groups and refugees from “traditional” MLMs.
TelexFree even may have channeled Herbalife, calling its cheerleading sessions “extravaganzas” and latching onto the sport of soccer.
Stemming this hurtful tide should be a top priority at DSA. The wave of scams is not docile. It very well might be eroding protective shores in violent fashion and creeping up on the road to perdition.
URGENT >> BULLETIN >> MOVING: (14th update 3:19 p.m. ET U.S.A.) The U.S. Securities and Exchange Commission has gone to federal court in Massachusetts, alleging the “Wings Network” MLM “program” is a Ponzi and pyramid scheme that gathered at least $23.5 million.
Wings Network purported to offer “digital and mobile solutions to customers, including apps and cloud storage.”
“However, Wings Network’s revenues actually came solely from selling memberships to investors, not from the sale of any products,” the SEC said.
Company operators and at least 12 promoters have been charged, the SEC said. A federal judge has ordered an asset freeze. Some of the SEC employees involved in the prosecution of the Wings Network action also are involved in the TelexFree Ponzi- and pyramid case filed last year in Massachusetts federal court.
“Although Wings Network purported to use a multi-level distribution network to sell products and services, it had little or no revenue from the sale of those products or services,” the SEC charged. “Instead, to the extent that it and its members obtained revenue, that revenue was derived from the recruitment of new members. In fact, its own procedures made it clear that members were not required to sell products to receive promised profits – simply recruiting other members to purchase membership packs was enough.”
The SEC also charged that Wings Network last year falsely implied that it had a “relationship” with the Direct Selling Association, a trade association for MLM firms. But when the DSA “compliance monitoring team became aware that Wings Network was claiming membership, the DSA sent Wings Network a cease and desist letter to stop representing that DSA had any connection with Wings Network.”
Charged Wings Network entities include Tropikgadget Unipessoal LDA and Tropikgadget FZE. The LDA entity was incorporated in the Madeira Free Trade Zone in November 2013 with its principal place of business in Lisbon, Portugal, the SEC said.
“It withdrew its license from the Madeira Free Trade Zone in April 2014,” the SEC said.
The FZE entity “incorporated in the United Arab Emirates in November 2013 with its principal place of business in Lisbon, Portugal,” the SEC said. “Tropikgadget FZE holds the rights to Wings Network marketing and brand services, which includes but is not limited to, the names Wings Network, Wingsnetwork, and WingsNetwork.Com.”
Charged executives and/or operators include Sergio Henrique Tanaka, 40, of Sao Paulo, Brazil, and Davie, Fla.; Carlos Luis da Silveira Barbosa of Lisbon, Portugal; and Claudio de Oliveira Pereira Campos, also of Lisbon. No ages were given for Barbosa and Campos.
Meanwhile, the charged promoters include Yinicius Romulo Aguiar, 42, of Marlborough, Mass.; Thais Aguiar, 34, the wife of Yinicius and also of Marlborough; Andrew Elliot Arrambide, 47, of Sandy, Utah; Julio G. Cruz, 34, of Duluth, Ga.; Wesley Brandao Rodrigues, 28, of Marlborough; Dennis Arthur Somaio, 35, of Marlborough; Elaine Amaral Somaio, 35, of Marlborough; Pablo Andres Garcia, 38, of Waco, Texas; Viviane Amaral Rodrigues, 37, of Clinton, Mass.; Simonia De Cassia Silva, 43, who sometimes operated from Massachusetts and Florida; Geovani Nascimento Bento, 41, of Marlborough; and Priscila Bento, 36, of Marlborough.
Named relief defendants as the alleged recipients of ill-gotten gains from the scam were Uninvest Financial Services Corp. of Deerfield Beach, Fla.; Compasswinner LDA of Setubal, Portugal; and Happy SGPS SA of Santa Cruz, Madeira, Portugal.
“After establishing a network of lead promoters, recruitment of new members surged through the use of social media such as Facebook and YouTube,” the SEC said. “The promoters used Facebook to publicize ‘business meetings’ that took place at hotels and other locations in Connecticut, California, Florida, Massachusetts, Pennsylvania, Texas, Georgia, and Utah. The promoters also set up storefronts or ‘training centers’ to lure investors into attending Wings Network presentations. For example, one promoter used a storefront in downtown Philadelphia to make presentations to prospective investors, and another promoter rented office space in Pompano Beach, Fla., and spread the word in the local Latino community to attract prospective investors to come in and hear presentations.”
The scheme raised at least $23.5 million and targeted “many members of the Brazilian and Dominican immigrant communities in Massachusetts,” the SEC said.
Massachusetts Commonwealth Secretary William Galvin, head of the Massachusetts Securities Division, charged Wings Network and some individuals last year. Both Galvin and the SEC have squared off against TelexFree, a massive scheme targeting immigrant communities.
In a statment today, the SEC thanked MSD and Comissão do Mercado de Valores Mobiliários of Portugal and the Procuradoria-Geral da República of Portugal.
Here are the alleged hauls or alleged qualifying criteria in the pay plan for some of the charged promoters, according to the SEC:
Yinicius Romulo Aguiar, “at least $1 ,302,880.”
Andrew Elliot Arrambide allegedly reached the “Director” rank, “indicating that he had accumulated at least $6 million from investors.”
Julio G. Cruz also achieved the Director rank, “indicating that he had accumulated at least $6 million from investors.”
Wesley Brandao Rodrigues allegedly achieved the “Senior Manager rank, “indicating that he had accumulated at least $1.5 million from investors. According to Tropikgadget records, Wesley Rodrigues generated commissions of $791,745 from the sale of Wings Network membership packages.”
Elaine Amaral Somaio. “According to Tropikgadget records, Elaine Somaio generated commissions of $557,240 from the sale of Wings Network membership packs.”
Pablo Andres Garcia. “According to Tropikgadget records, Garcia generated commissions of
$550,135 from the sale of Wings Network membership packs.”
Viviane Amaral Rodrigues. Allegedly reached the Director rank, “indicating that she had accumulated at least $6 million from investors. According to Tropikgadget records, Viviane Rodrigues generated commissions of at least $434,150 from the sale of Wings Network membership packs.”
Simonia De Cassia Silva. “According to Tropikgadget records, Silva generated commissions of $419,900
from the sale of Wings Network membership packs. She temporarily moved and used an office space in Pompano Beach, Florida where she and Vinicius Aguiar promoted Wings Network locally.”
Geovani Nascimento Bento. “According to Tropikgadget records, Geovani Bento generated commissions of $163,845 from the sale of Wings Network membership packs.”
False Claims Of Insurance Coverage
Perhaps mirroring a TelexFree trick in Brazil, Wings Network hucksters also are accused of duping members into believing their payments were insured. From the SEC complaint (italics/carriage returns added):
Campos, Viviane Rodrigues, Vinicius Aguiar, and other promoters represented to prospective investors that their initial investments in the Member Packs would be 100% guaranteed through insurance issued by Porto Seguro, the fourth-largest insurance company in Brazil.
In making these claims, Campos, Viviane Rodrigues and Vinicius Aguiar pointed to the existence of Porto Seguro S.A. insurance associated with the Wings Card, a debit card issued to Wings Network members for payment processing.
In a You Tube video that solicited investors to purchase Wings Network memberships, Campos guaranteed that everything purchased by the investors would be insured for a year by Porto Seguro. In their presentations to investors, Rodrigues and Aguiar emphasized that the investments were guaranteed while juxtaposing the Porto Seguro logo. Viviane Rodrigues and Vinicius Aguiar also included a slide purportedly of a Porto Seguro insurance policy.
URGENT >> 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.
“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.
Racing legend Emerson Fittipaldi somehow ended up in a car with TelexFree figure Sann Rodrigues. Source: Video on DailyMotion.
UPDATED 2:14 P.M. ET U.S.A. It is not unusual for financial fraudsters to seek to rub elbows with famous people or to imply ties to them as a means of sanitizing purported “opportunities” or accenting their own bona fides. Recent examples of this include Florida-based Ponzi-schemer/racketeer Scott Rothstein, who mixed with the elite as his epic fraud scheme spiraled out of control.
Florida-based AdSurfDaily Ponzi schemer Andy Bowdoin (and any number of his promoters) falsely implied that then-President George W. Bush was on ASD’s train. The Mantria Corp. Ponzi scheme in Colorado traded on images of former President Bill Clinton and famous politicians or business executives.
The WCM777 scam traded on purported ties to Siemens and scores of famous companies. Siemens publicy refuted the WCM777 claims.
TelexFree, alleged to have gathered hundreds of millions of dollars in a combined Ponzi- and pyramid scheme targeted in no small measure at Brazilians and people who speak Portuguese or Spanish, aligned itself with the Botafogo soccer club in Brazil. The PR results were disastrous.
Now comes word that Sann Rodrigues, a figure in both the TelexFree and iFreeX schemes, is seen in a video in which he is driving a car. That in itself wouldn’t be unusual, in that Rodrigues previously has recorded one or more videos that put him behind the wheel of a flashy ride.
But in this case the passenger in the car is Emerson Fittipaldi, the Brazilian racing legend who won the Formula One World Championship twice and also is a two-time winner of the Indianapolis 500.
The PP Blog has sought comment from Fittipaldi through multiple channels and hopes to hear back from the legend. If Fittipaldi or his organization responds, we’ll make sure you see that response.
In September 2014, Galvin issued a warning about iFreeX, another “program” associated with Rodrigues. T-Mobile, the famous phone company, later said it was checking to see if its branding material was being misused by iFreeX.
Precisely how Fittipaldi ended up in a car with Rodrigues is unclear. Early research suggests Fittipaldi made an appearance at a hotel in the area of Orlando, Fla., on or around Jan. 6 of this year. Rodrigues may reside in the Orlando area.
The Orlando event appears to have been arranged by a venture known as DFRF. The asserted operator of that venture is Daniel Fernandez Rojo Filho. (The Ferdandez name also has been spelled with a trailing “s,” as opposed to a “z.”) His name surfaced as part of the Evolution Market Group/Finanzas Forex case in 2010.
It is clear that some Brazilians interested in the TelexFree case are closely following the appearance of Fittipaldi alongside Rodrigues, wondering if the racing legend is being duped by an alleged recidivist swindler.
EXHIBIT: The government may introduce a photo of Merrill posing with a Hummer vehicle in TelexFree promos.
