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Tag: Robert Goldstein

  • BULLETIN: James Merrill of TelexFree Sentenced To 6 Years In Federal Prison

    James Merrill

    BULLETIN: (8TH UPDATE 3:57 P.M. EDT U.S.A.) James Merrill, the former president of the TelexFree Ponzi- and pyramid scheme, has been sentenced to six years in federal prison.

    U.S. District Judge Timothy S. Hillman ordered the sentence, which was four years less than what prosecutors in the office of Acting U.S. Attorney William D. Weinreb of the District of Massachusetts sought.

    Robert Goldstein, Merrill’s lawyer, argued that his client deserved no more than a year.

    The PP Blog is awaiting comment from prosecutors. (See below.) Also see the Boston Globe’s early story on Merrill’s sentence.

    Merrill, 55, of Ashland, Mass., also was sentenced to three years’ supervised release after he completes his sentence and agreed to forfeit about $140 million and other assets, Weinreb’s office said. He was given until May 15 to report to prison. The former TelexFree officer pleaded guilty in October 2016 to eight counts of wire fraud and one count of conspiracy.

    “Despite knowing that Telexfree was a pyramid scheme, Mr. Merrill profited for years at the expense of the hard-working individuals who invested in the fraudulent company,” Weinreb said in a statement. “For the hundreds of thousands of investors, here and around the world, who were taken in by the lies promoted by Mr. Merrill and Telexfree, today’s sentence provides a measure of justice. Mr. Merrill’s greed damaged the livelihoods of thousands of people who were simply struggling to make ends meet.”

    Added Matthew Etre, special agent in charge of Homeland Security Investigations in Boston:

    “While the harm and damage James Merrill caused by stealing more than $3 billion from innocent investors can never be repaired, his victims in more than 240 countries around the world can take some small measure of satisfaction that he is now looking at six years in federal prison and a substantial forfeiture as repayment for his crimes. HSI special agents will continue to aggressively investigate those who seek to profit by taking advantage of others.”

    Separately, police action against TelexFree figures in Brazil continued today, with Brazilian prosecutors formally announcing criminal charges against 22 people accused of operating a clandestine financial institution. (Google translation from Portuguese to English here.)

    Two of the Brazilian defendants — Carlos Costa and Carlos Wanzeler — are known business associates of Merrill. Wanzeler fled the United States for Brazil when investigators were closing in on TelexFree in 2014, U.S. prosecutors said.

    There are at least two major investigations of TelexFree under way in Brazil, including one about money-laundering. It was announced earlier this month.

    More . . .




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

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

    **____________**

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

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

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

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

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

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

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

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

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

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

    “The Deputy Sheriff told Craft he could not take the laptop and bag and that these items would be subject to the search,” the SEC said in the affidavit. “[Homeland Security Investigations] Agents searched the bag and identified ten Wells Fargo Bank, N.A. cashier’s checks totaling $37,948,296.”

    Nine of the checks were dated April 11, 2014, just two days before TelexFree petitioned for bankruptcy in Nevada, according to the SEC affidavit and other court filings.

    The nine checks were “remitted to” James M. Merrill, TelexFree’s co-owner and former president. Of the nine, five were made out to TelexFree LLC “totaling $25,548,809, and one was made out to Katia B. Wanzeler,” believed to be the wife of TelexFree co-owner and treasurer Carlos Wanzeler,” the SEC asserted in the affidavit.

    The Katia Wanzeler check was for the sum of $2,000,635, the SEC alleged.

    A check dated April 3 was “remitted to” Carlos Wanzeler and made out to “TelexFree Dominicana SRL in the amount of $10,398,000,” the SEC alleged in the affidavit.

    TelexFree Dominicana SRL’s relationship to TelexFree was not immediately clear.

    On April 15, two days after the TelexFree bankruptcy filing and apparently just hours before the raid, Merrill “submitted an unsolicited order to sell $1,150,000 of his mutual fund holdings” and to have the money transferred to a bank in Massachusetts, the SEC said in the affidavit.

    “Bank statements show that two companies controlled by Craft received more than $2,010,000 between November 19, 2013 and March 14, 2014,” the SEC said in its complaint.

    NOTE: Our thanks to the ASD Updates Blog.




  • TelexFree’s Merrill Concerned About Internet ‘Spectacle’

    EDITOR’S NOTE: This is a follow-up to our Feb. 4 article that reported TelexFree figure James Merrill potentially could be forced to take the Fifth Amendment in front of a large audience at a music hall in Worcester, Mass., on Feb. 10.

    **____________________________**

    James Merrill
    James Merrill

    Forcing him to take the Fifth Amendment tomorrow at Mechanics Hall in front of an expected large crowd at a meeting of TelexFree creditors could affect his right to a fair trial in the criminal case against him in October, James Merrill argued yesterday in bankruptcy court.

    Through attorney Robert Goldstein, Merrill argued that a “spectacle” easily could ensue and that all of it could end up on the Internet.

    Trustee Stephen B. Darr’s plan to hold the meeting at the hall may set the stage for news outlets to photograph or record Merrill’s invocation of his right not to incriminate himself and for attendees with cell phones to do the same thing and “widely disseminate the spectacle on the Internet,” Merrill argued.

    Merrill will “appropriately, and necessarily” invoke the Fifth if forced to appear “and will respectfully decline to answer any questions regarding” TelexFree, which filed for Chapter 11 protection on a Sunday evening in April 2014.

    Shortly after the filing, state and federal regulators called TelexFree a massive, cross-border fraud. Darr went on to deem it a Ponzi- and pyramid scheme, and Chief Bankruptcy Judge Melvin S. Hoffman agreed. Merrill and Carlos Wanzeler, another TelexFree executive, were charged criminally in 2014, after an investigation by the U.S. Department of Homeland Security.

    TelexFree, which operated over the Internet and may have produced about $3 billion in illicit transactions in about two years, was the top story in DHS’s Daily Open Source Infrastructure Report on April 17, 2014.

    In the 2008 AdSurfDaily Ponzi scheme, accused operator Andy Bowdoin invoked his Fifth Amendment right at a civil proceeding while a parallel criminal investigation was under way. Some ASD supporters immediately used the Internet to circulate a story that Bowdoin was “too honest” to testify.

    ASD, a $119 million Ponzi scheme that ultimately sent Bowdoin to prison, and TelexFree operated in similar fashion. Prosecutors have described TelexFree as having cult-like qualities.

    Read Merrill’s brief. Hoffman has ordered Darr’s motion to compel Merrill’s attendance “continued generally.” How that would affect tomorrow’s meeting was not immediately clear.




  • BULLETIN: Lyoness, ‘Plan B’ Program Of Zeek And ASD Figure Keith Laggos, Charged In Australia With Operating ‘Pyramid Scheme’

    recommendedreading1BULLETIN: (Updated 2:35 p.m. EDT U.S.A. Aug. 29) Lyoness, the purported “Plan B” scheme of Zeek Rewards and AdSurfDaily figure Keith Laggos, has been charged in Australia with operating a pyramid scheme.

    News of the Australian prosecution was published tonight by BehindMLM.com.

    The Australian Competition and Consumer Commission (ACCC) has issued a statement on the Lyoness prosecution. It appears below (italics added):

    The Australian Competition and Consumer Commission has instituted proceedings against Lyoness International AG, Lyoness Asia Limited, Lyoness UK Limited and Lyoness Australia Pty Limited (together ‘Lyoness’) for operating a pyramid selling scheme and engaging in referral selling.

    Although Lyoness has been investigated by regulators for conduct in other countries, this is the first court action taken against Lyoness alleging that the Lyoness Loyalty Program constitutes a pyramid scheme.

    Pyramid schemes involve new participants providing a financial or other benefit to other existing participants in the scheme. New participants are induced to join substantially by the prospect that they will be entitled to benefits relating to the recruitment of further new participants. Pyramid schemes may also offer products or services, but making money out of recruitment is their main aim, and often the only way for a member to recover any money is to convince other people to join up. In contrast, people in legitimate multi-level marketing schemes earn money by selling genuine products to consumers, not from the recruiting process.

    The ACCC alleges that Lyoness has operated the scheme in Australia from mid-2011 and that it continues to operate the scheme. The scheme offers ‘cash back’ rebates to members who shop through a Lyoness portal, use Lyoness vouchers or present their Lyoness card at certain retailers.

    Whilst cash back offers themselves are not prohibited by the Australian Consumer Law (ACL), the ACCC alleges that the Lyoness scheme also offers commissions to members who recruit new members who make a down payment on future shopping.

    “Pyramid schemes are often sophisticated and may be operated under the guise of a legitimate business. Although these schemes can appear to be legitimate, the most significant inducement for new members to get involved is to earn ‘residual’ or ‘passive’ income from new members signing up,” ACCC Chairman Rod Sims said.

    “The concern with pyramid schemes is that the financial benefits held out to induce potential members to join up rely substantially on the recruitment of further new members into the scheme. For these schemes to work so that everyone can make a profit, there would need to be an endless supply of new members.”

    “Under the Australian Consumer Law, it is illegal not only to establish or promote a pyramid scheme, but also to participate in one in any capacity,” Mr Sims said.

    The ACCC also alleges that the conduct by Lyoness breached the ACL prohibition on ‘referral selling’, where a consumer is induced to buy goods or services by the promise of a commission or rebate contingent on a later event.

    The ACCC is seeking declarations, pecuniary penalties, injunctions, an order requiring the Lyoness website to link to the case report and costs.

    As Lyoness International AG, Lyoness Asia Limited and Lyoness UK Limited are located overseas, the ACCC will be making arrangements for service on those entities.

    The first Directions Hearing in these proceedings will be at 9.30am on 16 September, 2014 before Justice Flick in Sydney.

    Among other things, Lyoness traded on the name of Nelson Mandela.

    Laggos pushed Lyoness as a “Plan B” to members of Zeek Rewards, suggesting in 2012 that it could be used as a “passive” hedge in case things went south at Zeek. Indeed, things did go south at Zeek: The U.S. Securities and Exchange Commission (SEC) described it as an international Ponzi- and pyramid scheme that had gathered hundreds of millions of dollars while engaging in securities fraud and selling unregistered securities as investment contracts.

    Among the tips Laggos provided Zeekers on a Lyoness conference call was this: “Don’t put no more than 70 percent back in [Zeek]. Take out 20 or 30 percent [on] a daily basis. [Unintelligible.]  This would be a good place. But, by the same token, if you put $10,000 in Zeekler, if nothing happens over the next year, you’ll probably make $30,000 or $40,000, if that’s all you do without building the front end, the matrix . . . The same amount of money in Lyoness, you’re looking . . . and not doing anything else, without single sponsoring . . . you can probably make a quarter-million dollars.”

    Also see Aug. 3, 2014, PP Blog story: ANOTHER MLM PR TRAIN WRECK: Receiver Alleges Clawback Defendants May Be ‘Serial’ Participants In Zeek-Like ‘Revenue Sharing’ Schemes, Asks Court To Take ‘Judicial Notice’ Of T. LeMont Silver Videos

    News of the Lyoness action in Australia was received on the same day that TelexFree was squaring off against both the SEC and federal prosecutors in Boston over matters pertaining to scheduling. TelexFree was charged by the SEC in April 2014 with operating a massive Ponzi- and pyramid scheme. The agency had charged Zeek less than two years earlier

    TelexFree figures James Merrill and Carlos Wanzeler were indicted in July 2014 on criminal charges of wire fraud and wire-fraud conspiracy.

    Lawyers from both sides are battling over contentious issues such as whether the SEC’s civil case should be stayed (delayed indefinitely) in favor of the criminal case and whether Merrill can receive a speedy, fair trial on the criminal side of things.

    An enormous amount of evidence remains to be sifted through by both sides.

    “The United States Attorney’s office has contacted the parties indicating that it intends to seek a stay of these proceedings while the criminal case is pending and sought assent from the parties,” the SEC and defense attorneys said in a joint filing in the agency’s civil case today. “The parties have not unanimously assented to a stay.”

    On the criminal side of things, Merrill contended today that his right to a fair trial would be put at risk if prosecutors were permitted to use “additional press releases and newspaper notices” to contact potential TelexFree victims.

    “Every press release and/or newspaper notice issued by the government will likely repeat the government’s characterization of TelexFree and Mr. Merrill” as a pyramid scheme and a pyramid schemer, Merrill attorney Robert Goldstein contended.

    And, Goldstein argued, “Mr. Merrill hereby respectfully opposes the government’s motion for complex case designation and exclusion of time . . . wherein the government seeks the exclusion of 90 days commencing on September 10, 2014, and instead respectfully asks the Court to defer a ruling regarding the exclusion of any time until the September 10, 2014 status conference (i.e., after the defense has had at least a minimal amount of time to review the government’s automatic discovery production, which was received today.”

    The office of U.S. Attorney Carmen Ortiz asked for the complex-case designation and to carve out an exception to the Speedy Trial Act earlier this month.

    Among other things, prosecutors contended that “evidence underlying this case is closely tied to certain foreign countries, especially Brazil” and that “it is likely that the parties will need to review evidence in foreign countries and arrange for foreign witnesses and/or law enforcement officers to travel to the United States to testify at trial.”

    Schemes that operate over the Internet may grow to affect hundreds of thousands of people. Cases can become extremely complex if a pyramid or Ponzi scheme (or both) are alleged.

    Regulators have warned for years that the schemes may use intricate disguises and exceptionally complex mechanics to ward off prosecutions. Cross-border schemes can pose monumental challenges to law enforcement.

    NOTE: Our thanks to the ASD Updates Blog.

    UPDATE 7:18 A.M. EDT U.S.A. Lyoness has denied the ACCC allegations. See denial in story at News.com.au.

  • UPDATE: No Ruling Today On Motion By TelexFree’s James Merrill To Release Seized Money

    newtelexfreelogoUPDATED 6:07 P.M. EDT U.S.A. A U.S. Magistrate Judge issued no immediate ruling today on a motion by TelexFree figure James Merrill to release $4 million to pay for his criminal defense.

    Instead, Judge David H. Hennessy will take the matter under advisement and issue an order later, according to the docket of the case. Hennessy heard arguments from both sides today.

    When the order would be issued was not immediately clear.

    Prosecutors in the office of U.S. Attorney Carmen Ortiz of the District of Massachusetts have contended Merrill isn’t entitled to the money because it belongs to victims swindled in a huge pyramid- and Ponzi scheme.

    Merrill, who is charged with wire-fraud conspiracy, is represented by Boston-based attorney Robert Goldstein

    NOTE: Our thanks to the ASD Updates Blog.

  • SEC: New York Pitchman, 73, Hawked ‘Illegal Offering’ For Murdoch Security & Investigations Inc. By Spinning Tall Tale Of ‘Anti-Piracy’ And ‘Anti-Terror’ Success On The ‘High Seas’

    EDITOR’S NOTE: In the past 24 hours, the SEC has filed charges against two firms purportedly in the business of preventing terrorism. Read the PP Blog’s story about the first firm here.

    The cavalcade of senior citizens implicated in securities schemes continues — as does the story about the bizarre nature of recent fraud cases in the white-collar arena.

    Robert Goldstein, 73, of New York City, has been accused in federal court by the SEC of orchestrating a $1 million offering fraud for Murdoch Security & Investigations Inc. (MSI), a firm that allegedly placed ads in the Wall Street Journal last year promising “repayment of principal plus 22 percent interest per year.”

    MSI also placed ads in Barron’s and Investor’s Business Daily for its securities, which were unregistered, the SEC said.

    Goldstein was MSI’s senior vice president. His 53-year-old boss — Connecticut-based MSI CEO William C. Vassell — also has been accused by the SEC of orchestrating the alleged offering fraud.

    But advertising in prominent publications to drive business to the firm was only part of the scam, the SEC said. Lying to customers who responded to the ads also drove the fraud, the agency alleged.

    Described by the SEC as MSI’s “primary salesperson,” Goldstein “provided investors with a wide array of false and otherwise misleading information in an effort to sell the 22% Notes,” the agency said.

    The falsities included “statements about the Company’s revenues, existing assets and overseas operations,” the SEC alleged.

    Investors were told tales of fabulous success in Mexico, fantastic revenues for 2010 and the company’s “explosive” growth potential. And, according to the SEC, Goldstein spun a yarn that MSI’s “anti-piracy” and “anti-terror” business was “probably one of the largest … on the high seas” in 2011 and “that such business, including in Somalia and Yemen, was expected to yield $100 million to $300 million in revenue for MSI in subsequent years.”

    In reality, the SEC said, “MSI’s internal documents reflect revenues that did not approach the numbers conveyed to potential investors; its total assets according to those documents were approximately $4 million, and it had no overseas operations whatsoever, let alone significant revenues from Mexico or a major presence “on the high seas.”

    “The plan Goldstein outlined for investors, in explaining how MSI could afford to offer such high yields on the 22% Notes, focused on what Goldstein described as MSI’s expectation to purchase six or seven security companies to fuel increased revenues,” the agency continued.

    “Contrary to this supposed plan, MSI not only failed to purchase any security companies with the money obtained from investors in the Notes; nearly all of the money raised from those investors was spent to fund Goldstein’s and Vassell’s salaries, fund the payments on the Notes themselves, and pay for various other of MSI’ s ongoing claimed expenses,” the agency alleged.