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Tag: Steve Labriola

  • [PART 1]: CLAIM: Major TelexFree Promoter Operated Out Of New York City Beauty Salon And Marriott Hotel

    “Because that’s where the money is.” — Classic rejoinder attributed to Brooklyn-born criminal Willie Sutton, reportedly after he was asked why he robbed banks. The often-quoted line may or may not be apocryphal. (Also see “Sutton’s Law” on the need to consider the obvious and “When you hear hoofbeats, think of horses not zebras.”)

    newtelexfreelogoUPDATED 5:26 P.M. EDT U.S.A. If you had the means to throw down $140 for “Chocolate Body Therapy” or $260 to get the “Prince or Princess for a Day” treatment, would you also have the means to direct some cash to an MLM “program” purported to double or triple your money?

    Daniil Shoyfer of Staten Island perhaps thought so. In a proposed class-action lawsuit against various TelexFree figures, the plaintiffs accuse Shoyfer of holding TelexFree pitchfests at Salon Delacqua, a beauty shop that offers moderately priced and upscale services on 86th Street in Brooklyn. The meetings appear to have occurred at 8 p.m., near or at the shop’s published closing time.

    These pitches included promises of “fabulous wealth,” according to the plaintiffs. The salon also advertises a “Brazilian Karatine” hair-strengthening treatment that takes three hours and begins at $250.

    And when Shoyfer wasn’t at the salon, he allegedly was at the Marriott Hotel Grand Ballroom at 102-05 Ditmars Blvd. in the Queens neighborhood of East Elmhust near LaGuardia Airport, pitching the “program” in a room that hotel says on its website can be configured to seat 400.

    The demographics from the neighborhood (2010) suggest that 30 percent of its residents were born outside of the United States, with a Latino population on the rise.  TelexFree was accused last year by the SEC of targeting immigrants.

    Shoyfer pitchfests also were hosted elsewhere in the Greater New York City region, and allegedly were conducted in English and Russian. The sites included the SOHO Lounge in Brooklyn and a real-estate office in the Rego Park neighborhood of Queens.

    Accused TelexFree executive Steve Labriola was a co-host at a Shoyfer Marriott pitchfest, dubbed a “Superweekend in NY,” according to the plaintiffs.

    Shoyfer allegedly took his marching orders from Labriola and other TelexFree “founders,” including accused Ponzi schemers James Merrill, Carlos Wanzeler and Carlos Costa. Also within the alleged den of financial impropriety were accused TelexFree securities fraudster Joe Craft, an accountant, and Katia Wanzeler, the wife of Carlos Wanzeler.

    Along for the ride in the TelexFree swindle, according to the plaintiffs, were Sann Rodrigues, Faith Sloan, Randy Crosby and Santiago de la Rosa, all four of whom were accused by the SEC last year of securities fraud and named defendants in the proposed class action. It is one of several tied to the alleged TelexFree Ponzi- and  pyramid scheme.

    “Defendant Shoyfer was the creator and leader of a large network of TelexFree Promoters based primarily in New York City, but extending into other states as well, including Massachusetts, and he is believed to have been the largest single Promoter in the greater New York area,” the plaintiffs alleged. “Under any view, Shoyfer funneled a portion of his ill-gotten gain up the food chain to TelexFree, its masterminds and other Defendants.”

    The complaint includes alleged passages from Shoyfer text messages to his TelexFree group. These suggest he was gathering cashier’s checks from his downline, and included a claim that he had made “$142,320 in a single week in February 2014” from TelexFree.

    According to the complaint, in December 2013, prior to TelexFree’s Sunday night bankruptcy filing in April 2014, Shoyfer told his group this on behalf of himself and TelexFree “founders” (italics added):

    From my upper line “Happy New Year everyone!!! 2014 is gonna be the best year for Telexfree$$$! TelexMobil is about to be launched in January! ! And, on Thursday January 23rd at 6.30 pm I will be doing my first Telexfree Superweekend in NY with Steve Labriola (director of international marketing TF) at Marriott Hotel Grand Ballroom by La Guardia Airport at 102-05 Dimars Blvd, Flushing NY 11369 (parking available). Now is the time to meet with top corporate representative..and my top leaders in my rapidly growing team.. You MUST invite your people (forward this msg to them), especially those who r still sitting on sidelines, debating about legibility [sic] and future of this company. .Trust me after this event, all negativity will disappear. .and you will double and triple you earnings in this busine$$ venture in 2014…”

    On Feb. 26, 2014, about two days before the Massachusetts Securities Division made public the news that TelexFree was under investigation, Shoyfer allegedly told his group this on behalf of himself and TelexFree “founders” (italics added):

    I just received checks from everyone but will wait for u to bring it until 2 p.m… then I’m going to FedEx.

    On Feb. 28, the very day news broke that MSD was investigating TelexFree even as the company was reaching into Spain and conducting an event at an ornate hotel in Madrid, Shoyfer allegedly told his group this on behalf of himself and TelexFree “founders” (italics added):

    Bring me certified checks now I will send them to ewallet by federal express and they will post it immediately.

    TelexFree is alleged to have changed its compensation plan on March 9, 2014, much to the fury of affiliates.  Shoyfer, however, continued to promote it, according to the plaintiffs (italics added):

    Hey..my team Telexfree! ! And here we go again..Come to check out and learn about new compensation plan TF 2.0.. and how to grow it even faster and MUCH more aggressively and efficiently than the one we had before.…Here is this week’s schedule. . Monday 03/24 at Salon Delacqua (2027 86 str) at 8.00 pm (in English) ..Wednesday 03/26 at SOHO launch(2213 65th street) at 7.45 pm ( in Russian) and Thursday 03/27 at 7.30 pm at 63-112 Woodhaven Blvd in a real estate office. In my case, since I have started from absulute zero during this passed week Mon 03/17- Sun 03/23/14 I booked 11,500 from new one and 21,600 still coming from old plan..A total of 31,100 in 7 short days… Go Telex!!!”

    The import of this, according to the plaintiffs, is that [a]fter the institution of the new TelexFree compensation plan in March of 2014, Shoyfer took part in a closed meeting with TelexFree’s Directors and Owners in Marlborough, Massachusetts, at which Shoyfer was instructed not to discuss the new TelexFree compensation plan with other, non-insiders, as the new compensation plan was detrimental to Promoters and was adopted to forestall filing bankruptcy.”

    In short, the plaintiffs accuse Shoyfer of working in concert with TelexFree management to dupe people into enrolling “right up until TelexFree’s bankruptcy filing.”

    Filings in the TelexFree bankruptcy case suggest Shoyfer received nearly $88,000 from TelexFree in two separate payments just prior to the April 13 bankruptcy filing. The first, for $9,902.37, occurred on March 21, and the second, for $78,037.33, occurred on March 28.

    NOTE: Part 2 of this two-part PP Blog series on the class-action lawsuit, which was filed in U.S. District Court for the Southern District of New York, will be published later. Part 2 will cover other allegations from the complaint, filed Dec. 12. A copy of the complaint is available through TruthInAdvertising.org.  (Link to complaint temporarily disabled by PP Blog at 9 p.m. EDT March 9, 2015.)

     

     

     

  • BULLETIN: Government Of Colombia Investigates TelexFree, Ties

    newtelexfreelogoBULLETIN: The government of Colombia appears to be seizing assets linked to four Colombians with alleged ties to TelexFree, which authorities in the United States have described as a massive cross-border pyramid- and Ponzi scheme.

    La Superintendencia de Sociedades, Colombia’s Superintendency of Companies, has published notices of the action. (See link to document (Spanish) below.)

    At a 2013 TelexFree event in California, then-TelexFree President James Merrill suggested from the stage that the Colombian government “feared” network marketing.

    The precise context of Merrill’s remark on Colombia made at the Newport Beach TelexFree confab last year was unclear. In an April 2014 pyramid- and Ponzi complaint against TelexFree, the U.S. Securities and Exchange Commission referenced comments made by Merrill and TelexFree figures Carlos Wanzeler and Steve Labriola at the Newport Beach event.

    TelexFree’s presence in Newport Beach may create a tie to Zeek Rewards, another alleged massive pyramid- and Ponzi scheme that crossed national borders.

    See the Colombian government’s document.

    Also see story at Portafolio.co.

    The WCM777 scam — another recent MLM HYIP “program” — led to a police raid in Peru. The PP Blog reported in March 2014 that there were promotional ties between WCM777 and TelexFree.

    Brazilian federal police have conducted TelexFree-related raids, as have the U.S. Department of Homeland Security and the FBI in the United States.

    The infamous D.M.G. Group (DMG) “program” in Colombia and other nations had ties to money-laundering and narcotics trafficking, with U.S. federal prosecutors saying hundreds of “subsidiary and affiliated companies” were established in a bid to cleanse dirty money.

    In 2010, after DMG operator David Murcia had been extradited to the United States, U.S. prosecutors called DMG  “a vehicle for a multi-level marketing scheme.”

  • URGENT >> BULLETIN >> MOVING: TelexFree Was Ponzi Scheme Selling Unregistered Securities, Accused Former Interim CFO Says

    From a defense filing by Joseph Craft today.

    URGENT >> BULLETIN >> MOVING: (5th update 7:33 P.M. EDT U.S.A.) In a defense filing in the SEC’s securities fraud case against him, former TelexFree interim CFO Joseph Craft says he concluded TelexFree was a Ponzi scheme selling unregistered securities.

    The acknowledgement, which appears to be the first concession from the TelexFree inner circle that the enterprise engaged in fraud, potentially pits Craft against other TelexFree defendants and others who may have inside knowledge of the scheme. Craft paints himself in the filing as an outsider who was misled by insiders.

    Craft, 50, came to the Ponzi/securities conclusion in “approximately March” 2014, according to the filing. TelexFree filed for bankruptcy protection the following month. The SEC immediately sued, the Massachusetts Securities Division (MSD) filed a civil-fraud action and federal agents raided TelexFree headquarters in Marlborough, Mass. It later became known that the U.S. Department of Homeland Security had conducted an undercover investigation into TelexFree’s operations beginning at least by October 2013.

    Alleged TelexFree managers or executives James Merrill and Carlos Wanzeler later were indicted on criminal charges of wire fraud and wire-fraud conspiracy.

    Filings in the TelexFree bankruptcy case say Craft was appointed TelexFree CFO on April 13. Why he’d accept the appointment from Merrill and Wanzeler at an emergency board meeting on a Sunday night in April after concluding TelexFree was a Ponzi scheme in March was not immediately clear in defense filings.

    Tracy Hope Davis, the U.S. Bankruptcy Trustee when the TelexFree bankruptcy case was filed in Nevada, expressed concerns about what happened during that meeting.

    Craft, a certified public accountant in Boonville, Ind., was charged civilly by the SEC in April, two days after the bankruptcy filing. So were seven others, including Merrill and Wanzeler, former executive Steve Labriola and four alleged promoters. The scheme gathered more than $1.2 billion, MSD alleged.

    TelexFree also was charged civilly. Craft became TelexFree’s accountant in July 2012, according to the defense filing.

    Craft “denies that he was a principal or insider in the enterprise at any time, and says that he performed honest and legitimate accounting services for the corporations named in the Complaint,” the defense filing reads in part. “He denies that he assisted any wrongful activity. He was kept in the dark about the true nature of the enterprise’s activities and was a victim of misrepresentations for most of the time that he served as TelexFree’s accountant. He was not an insider, employee, owner, principal or promoter.”

    And, according to the filing, “[i]n 2013 and 2014” while performing accounting services for TelexFree, Craft “relied on the advice of the defendant enterprises’ counsel in all material respects.”

    The former CFO did not identify the counsel. One TelexFree lawyer, MLM attorney Gerald Nehra, has been accused of racketeering by some TelexFree members.

    Other Highlights Of Defense Filing

    Craft admitted he was aware a Brazilian state court in Acre had suspended TelexFree’s Brazilian affiliate (Ympactus) in June 2013, but says he “was told that the suspension was improper and was going to be overturned.”  He did not say who advised him the Acre action would be overturned.

    He “denies that he was involved in any way in ‘running a huge Ponzi and pyramid scheme.’ He was not involved in company operations. He was not a company principal or someone who was correctly informed about many of the [details] of the company’s true operations.”

    Craft admits that he “compiled an unaudited, informal financial statement” that was filed with MSD in 2013. But the statement, he says, was “based entirely on information provided by corporate officers.”

    “At the time of preparing the compilation Mr. Craft had been misinformed about the company’s activities and material information was withheld by company officers,” according to the defense filing.

    The SEC has said TelexFree’s VOIP service was a front to mask a billion-dollar fraud scheme.

    NOTE: Our thanks to the ASD Updates Blog.

     

     

  • Illinois Bans TelexFree Figure And Veteran HYIP Pitchwoman Faith Sloan From Selling Securities; Violation Of Ban Could Result In Felony Charge

    newtelexfreelogoLongtime HYIP huckster and TelexFree figure Faith Sloan has been banned by Illinois from selling securities. The prohibition order is dated June 9. It was issued by the Securities Department of Illinois Secretary of State Jesse White.

    The state found that Sloan, an Illinois resident, operated a TelexFree-related website and acted as an unregistered securities dealer, salesperson and investment adviser.

    Violating the order could result in a felony charge, the state said.

    Sloan, who faces TelexFree-related civil charges of securities fraud from the U.S. Securities and Exchange Commission, is associated with the website TelexFreePower.com. The website now appears not to be loading properly.

    When Illinois observed the site, the state said in the prohibition order, the site loaded an image of an “exotic sports car” with a statement that read, “I made $200 in 7 days working 3 minutes a day.”

    The image implied that “one would be able to afford the exotic sports car by becoming a member of TelexFree,” the state said.

    The SEC also has referenced the TelexFreePower website. In addition to promoting the massive TelexFree pyramid- and Ponzi scheme, the SEC said, Sloan violated the asset freeze in the case and lied to a federal judge.

    Faith Sloan. Source: YouTube.
    Faith Sloan. Source: YouTube.

    The order also bans TelexFree managers or executives James Merrill, Carlos Wanzeler, Joe Craft and Steve Labriola from selling securities in the state.

    Attorneys handling the TelexFree bankruptcy case appear to have became aware of the order at least by June 16, according to billing records in the bankruptcy case. The effect the order had on decision-making in the bankruptcy case is unclear.

    On July 16, bankruptcy trustee Stephen B. Darr said in court filings that he has “no intention of reorganizing or reactivating” the TelexFree businesses. TelexFree, its former manager or executives and some of its promoters, including Sloan, are facing a mountain of litigation.

    Merrill and Wanzeler have been indicted on U.S. charges of wire fraud and wire-fraud conspiracy. Brazilian federal police conducted TelexFree-related raids last week.

    Sloan has blamed TelexFree, Merrill, Wanzeler and MLM attorney Gerald Nehra for her TelexFree-related troubles.

     

     

     

  • RECOMMENDED READING: 50,000 Spaniards Reportedly Plowed Money Into TelexFree

    recommendedreading1In February 2014, the PP Blog reported that TelexFree had planned a purported “international convention” in Spain in early March.

    The pitch for the convention, hosted in Madrid, was voiced by Sann Rogrigues, whom the U.S. Securities and Exchange Commission successfully had sued in 2006 amid allegations he was operating a pyramid scheme and engaging in affinity fraud aimed at the Brazilian community.

    Rodrigues, now accused of securities fraud and a defendant in the SEC’s TelexFree civil case announced in April, reportedly was one of TelexFree’s top hucksters and had “earned” millions of dollars.

    As the PP Blog reported in February (italics added):

    The promo [for the Madrid convention] curiously is playing against the backdrop of an image of the Pyramids of Giza. For good measure, images of other famous world landmarks are thrown in. These include St. Basil’s Cathedral (near the Kremlin) in Moscow; Big Ben in London; The Eiffel Tower in Paris; the Empire State Building and the Statue of Liberty in New York; the Leaning Tower of Pisa; and the Burj al Arab Hotel in Dubai.

    Despite the fact TelexFree was under investigation in Brazil and almost certainly knew its days were numbered in the United States because investigators were closing in, TelexFree proceeded with the Madrid event. The confab was held under a cloud growing increasingly black. On Feb. 28, the eve of the convention, the PP Blog reported that Massachusetts securities regulators were investigating TelexFree, the first confirmation of such a probe by a regulator in the United States.

    James Merrill, TelexFree’s former president, attended the Madrid event with at least two other TelexFree executives or managers: Carlos Wanzeler, now described as an international fugitive who’d engaged in a criminal wire-fraud conspiracy with Merrill, and Steve Labriola, another defendant in the SEC’s fraud case.

    Here is part of what Merrill said from the stage in Madrid, as reported by the PP Blog on March 3, 2014 (italics added):

    Carlos Wanzeler was up here talking about Carlos Costa . . . two of the greatest leaders that I’ve met in my life,” Merrill said. “They’re very strong. They’re courageous, and they’re fighting for you. And I want you all to know that they didn’t join my team, I joined their team. OK. They’re great leaders.”

    Racketeering allegations later would surface in the United States, questioning the greatness of all three men. MLM attorney Gerald Nehra, billed as an honoree at the Madrid convention, is another defendant named in the RICO actions, which were brought as prospective class-action lawsuits by TelexFree members.

    Despite the fact Nehra had been billed as a star attraction of the Madrid confab, he appears not to have shown.

    Instead, Labriola, who suggested from the Madrid stage that TelexFree was suited for the impoverished people of Haiti, strolled out to accept Nehra’s award.

    “I was asked to come up and receive this for Jerry,” Labriola told the crowd.

    Labriola did not say who asked him to accept the award for Nehra. Precisely how long TelexFree had been operating in Spain remains unclear. But only in MLM La-La Land does the juxtaposition of the images of a recidivist securities violator-in-waiting (Rodrigues) and an MLM lawyer (Nehra) make sense in marketing materials, especially since TelexFree promoters were claiming $15,125 sent to the firm returned $57,200 in a year without the need for members to sell a single product.

    Rodrigues later appeared in a YouTube video in which he recorded himself tooling around in a Ferrari. He also allegedly claimed “God” started MLM and “binary.”

    Now, El Pais, Spain’s largest newspaper, is reporting that TelexFree might have fleeced 50,000 Spanish investors.

    Read the El Pais story. (Use the Chrome browser for a translation from Spanish to English or another language or access Google’s translation tool here.)

    NOTE: Our thanks to a longtime PP Blog reader who provided the El Pais link.

    ALSO: Coming soon on the PP Blog: a Special Report titled “How TelexFree’s ‘Big Revolution’ Dragged The MLM Trade, Lawyers, Payment Vendors And Service-Providers Into A La-La Land Rabbithole.”

    Here’s a snippet (italics added):

    On at least one occasion — in March 2014 — undercover [Homeland Security Investigations] agents were in the same conference room as TelexFree “speakers,” including alleged owners James Merrill and Carlos Wanzeler, both of whom were charged criminally in May with wire-fraud conspiracy. The room was part of the Marriott Copley Place Hotel in Boston, according to an affidavit. It turned out that, on the same date agents were in the room, a TelexFree speaker claimed from the stage that certain affiliates had been provided a private jet and that the jet had flown between the Dominican Republic and Haiti. Passengers on the jet were said to have been greeted by “the Prime Minister of Haiti’s motorcade.” The rep was pitching a TelexFree-related credit-repair “program.” Just two days earlier, on March 7, a TelexFree-related Blog falsely claimed that the TelexFree “program” at large had gained “SEC Approval from USA.”

  • Plaintiff To TelexFree Crew: You’re All Crooks And Racketeers — And Carlos Costa Is The ‘Mastermind’

    Carlos Costa
    Carlos Costa

    UPDATED 10:48 P.M. EDT U.S.A. A plaintiff bringing a prospective class-action lawsuit in Massachusetts federal court has accused 10 TelexFree figures of committing crimes and — as a group — committing racketeering violations through an “association-in-fact enterprise.”

    Unlike other prospective TelexFree-related class-actions, this one names neither attorneys nor banks nor TelexFree itself defendants. Rather, it pins the onus of the conduct exclusively on James Merrill, Carlos Wanzeler, Steve Labriola, Joe Craft, Fabio Wanzeler, Sann Rodrigues, Santiago De La Rosa, Randy Crosby, Faith Sloan and Carlos Costa.

    Costa, a Brazil-based TelexFree figure, is described in the complaint as the “mastermind of the TelexFree pyramid scheme of fraud.” The complaint further asserts Costa conducted business in Massachusetts, where TelexFree operated an entity known as TelexFree Inc.

    Olavo F. Magalhaes of Milford, Mass., is the plaintiff. The complaint says Magalhaes invested more than $209,000 in TelexFree LLC, the Las Vegas-based TelexFree business that operated in a Massachusetts office suite.

    The crimes alleged against the defendants include fraud, securities fraud, wire fraud and conspiracy. Violations of civil law also are alleged.

    On the racketeering front, the complaint alleged, the members of the “association-in-fact enterprise” associated together between January 2012 and April 15, 2014, “for the purpose of conducting an illegal pyramid scheme and wrongfully enriched themselves” at the expense of Magalhaes and others.

    “Each member of the enterprise played a role in the targeting of victims, advertising and working together to make the TelexFree enterprise work,” the complaint alleged.

    Fabio Wanzeler is the brother of Carlos Wanzeler, an alleged international fugitive accused criminally by federal prosecutors of wire-fraud conspiracy in the United States. Carlos Wanzeler is believed to be in Brazil.

    Fabio Wanzeler, formerly of Worcester, Mass., is believed also to be in Brazil, according to the Magalhaes complaint.

    In other TelexFree news, a federal judge has denied a motion by Faith Sloan to make more than $15,000 available to her.

    The SEC has accused Sloan of violating the asset freeze imposed against her in the case.

    NOTE: Our thanks to the ASD Updates Blog.

     

  • MLM Attorney Gerald Nehra Now Lawyered Up In TelexFree Bankruptcy Case

    newtelexfreelogoMLM attorney Gerald Nehra, his law partner Richard Waak and their law firm are now lawyered up in the TelexFree bankruptcy case.

    Groups of TelexFree members have sued them in bankruptcy court, alleging violations of the federal racketeering (RICO) statute and violations of federal securities laws. TelexFree filed for Chapter 11 bankruptcy protection on a Sunday evening in April, just prior to fraud actions filed by securities regulators.

    Attorneys Christopher F. Robertson and William J. Hanlon, partners in the Boston office of Seyfarth Shaw LLP, entered appearance notices for Nehra, Waak and the firm yesterday.

    Also named defendants in some or all of the actions are TelexFree, alleged officers or executives James Merrill, Carlos Wanzeler, Carlos Costa, Steve Labriola and Joe Craft, alleged promoters Sann Rodrigues, Randy Crosby, Santiago De La Rosa and Faith Sloan, and several alleged financial vendors or service-providers.

    In a complaint filed May 3, 2014, plaintiffs accused Nehra of counseling 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.”

    He further was accused of encouraging unknowing TelexFree members to “participate in the evasion of federal and state securities laws.”

    Sloan, in response to fraud allegations against her filed by the U.S. Securities and Exchange Commission, said she “believed what [SEC Co-] Defendants Carlos Wanzeler, James Merrill, Steve Labriola and their attorney, Gerald Nehra, had told her, until TelexFree continued to miss the deadlines for the launch of its new products.”

    Nehra, Waak and the law firm are not defendants in the SEC action. Nor are they defendants in a TelexFree-related securities action by the Massachusetts Securities Division. Sloan, who later was accused by the SEC of violating the asset freeze against her in the SEC case by sending thousands of dollars to another “program” and transferring her interest in a real-estate trust to her mother, is a longtime HYIP huckster.

    In a separate criminal case that alleges wire-fraud conspiracy against Merrill and Wanzeler, Merrill has signaled that he intends to use a defense of reliance on Nehra’s lawyering. The Massachusetts Securities Division has described TelexFree as a “financial pariah” and a combined pyramid- and Ponzi scheme that had gathered more than $1.2 billion. The SEC likewise has accused TelexFree of hatching a billion-dollar pyramid-and Ponzi scheme, saying it was aimed largely at Brazilians and Dominicans.

    Nehra, according to plaintiffs suing him in in at least one of the TelexFree-related actions in bankruptcy court, advised at least two other “programs” regulators accused of operating massive pyramid or Ponzi schemes: Zeek Rewards (2012/$850 million) and AdSurfDaily (2008/$119 million).

    Sloan is known to have promoted Zeek Rewards. Some HYIP promoters move from scheme to scheme to scheme, piling up purported “earnings” alleged to be fraudulent along the way.

    “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,” plaintiffs alleged.  “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.”

    Zeek-related actions still are winding their way through the courts. The Zeek “program” was back in the news yesterday, with the court-appointed receiver alleging that an affiliate who appears to have invested $10 filed a claim for $30 million and that a vendor alleged to have aided Zeek wanted nearly $15 million.

  • FAITH SLOAN: Blame TelexFree, Merrill, Wanzeler, Labriola And Nehra, Not Me

    Faith Sloan in a TelexFree promo. Source: YouTube
    Faith Sloan in a TelexFree promo. Source: YouTube.

    UPDATED 8:55 P.M. EDT U.S.A. Veteran HYIP huckster Faith Sloan told a federal judge presiding over the SEC’s TelexFree case that she is a victim of the company and was duped by TelexFree executives James Merrill, Carlos Wanzeler and Steve Labriola.

    And, the former Noobing, Zeek Rewards and Profitable Sunrise pitchwoman asserted, she also was duped by MLM attorney Gerald Nehra, a lawyer for TelexFree.

    Sloan was among four TelexFree promoters charged with fraud by the SEC. Four executives also were charged.

    “Sloan believed what Defendants Carlos Wanzeler, James Merrill, Steve Labriola and their attorney, Gerald Nehra, had told her, until TelexFree continued to miss the deadlines for the launch of its new products, which were to be the foundation of TelexFree’s growing business going forward into 2014,” Sloan said in court filings through her attorney.

    Those new products, Sloan said, included “MyFinancialAdvantagePlan,” “Mobile App,” “TelexCommerce” and “TelexMobile.”

    Taking a swipe at Nehra, Sloan contended that she and fellow promoters were “excited” about TelexFree after Nehra “had stood on the stage and publicly announced that TelexFree was ‘on a solid legal ground’, because they were selling a real product.”

    Nehra made the remark at a TelexFree rah-rah fest in Newport Beach, Calif., in July 2013, according to YouTube videos. The remarks followed a June 2013 action in Brazil in which certain TelexFree assets were frozen and new registrations were suspended, amid pyramid-scheme allegations.

    Sloan did not say why she continued to promote TelexFree with serious pyramid allegations on the table, except to suggest that Nehra’s remarks paved the way for her to continue with TelexFree. Nor did Sloan say whether her experience promoting Noobing, Zeek and Profitable Sunrise provided her any clues that something could be amiss at TelexFree.

    MLM attorney Gerald Nehra offering remarks about TelexFree; Source: YouTube.
    MLM attorney Gerald Nehra offering remarks about TelexFree; Source: YouTube.

    Sloan was not charged in the Noobing, Zeek and Profitable Sunrise cases. Regulators say Noobing, an HYIP that targeted people with hearing impairments, was attached to a government-grants swindle. It effectively was shut down by the FTC.

    Zeek, meanwhile, was an $850 million pyramid- and Ponzi scheme, and Profitable Sunrise was a cross-border securities swindle effectively run by a ghost that potentially raked in tens of millions of dollars. Both “programs” collapsed after SEC actions.

    In April 2014, the SEC described TelexFree as an epic, billion-dollar cross-border pyramid and Ponzi-swindle that engaged in securities fraud and the sale of unregistered securities. All four of the “programs” offered returns that bested Bernard Madoff on orders of between 20 and 70 to one on an annualized basis.

    Regulators have been warning about HYIP schemes for years, saying they offer returns that are too good to be true and make cosmetic tweaks to dupe the masses.

    Many such schemes proliferate because serial promoters turn blind eyes to obvious markers of fraud such as preposterous interest rates, a presence of a “program” on Ponzi-scheme forums, the presence of other serial fraud promoters and fractured relationships with payment vendors during the course of the fraud. The schemes pay commissions to unlicensed promoters to sell securities to recruits and typically have an illegal investment arm attached.

    When a scheme collapses, serial promoters disingenuously point fingers of blame back at management. Though the blame is deserved, it ignores the promoters’ roles in driving dollars to scams.

    Sloan also today accused Merrill and Labriola of threatening to boot her from the “program” after she made unflattering remarks about it — after she’d been in the “program” for a year or so and suddenly realized something was wrong at TelexFree.

    “In response to her public complaints, Labriola, with the approval of the Defendant, Merrill, threatened to terminate Sloan’s relationship with TelexFree shortly before they filed for bankruptcy protection on April 13, 2014,” Sloan contended in a “verified” memorandum of law filed by her attorney. The document seeks to have the charges against Sloan dismissed.

    From Sloan’s motion (italics added):

    Sloan became a “promoter” of TelexFree early in 2013. Sloan attended public webinars (web-based seminars) along with thousands of other TelexFree “promoters”. During those webinars, Sloan was told by TelexFree leaders that they were growing a company based on remarkable new products such as the “MyFinancialAdvantagePlan” (MFA), “Mobile App” “TelexCommerce” and “TelexMobile”, which was built on the backbone of Sprint, Verizon, and T-Mobile. All these products were due to be launched during the last quarter of 2013. The Mobile App was touted as being on a par with “WhatsApp”, which had been purchased by Facebook for 19 billion dollars. Based on what she was told by her fellow Defendants, Sloan and her fellow “promoters” were excited about the future of TelexFree, especially after the companies’ lawyer, Gerald Nehra, had stood on the stage and publicly announced that TelexFree was “on a solid legal ground”, because they were selling a real product.

    Sloan’s troubles aren’t limited to the SEC case. She’s also a defendant in at least three prospective class-action lawsuits that allege fraud and racketeering.

    Nehra is accused in the class-action complaints of turning a blind eye to TelexFree’s fraud to line his own pockets and dupe the masses.

    In the Legisi HYIP Ponzi case, HYIP figure Matthew John Gagnon tried a defense similar to Sloan’s defense in the SEC civil case. It didn’t work.

    Gagnon was held civilly liable and eventually was charged criminally for making a secret deal with Legisi to promote its scam, which had payouts similar to TelexFree, Noobing, Zeek and Profitable Sunrise. He was sentenced to five years in federal prison.

    Like the criminal side of the TelexFree case, the Legisi case was brought after an undercover investigation.

    NOTE: Our thanks to the ASD Updates Blog.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     

     

     

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

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

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

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

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

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

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

    From the SEC’s complaint (italics added)

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

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

    Nevis is an island in the Caribbean.

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

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

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

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

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

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

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

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

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

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

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

    NOTE: Our thanks to the ASD Updates Blog.

  • Full Statement By SEC On U.S. Justice Department’s Filing Last Week Of Criminal Charges Against TelexFree Figures

    U.S. SECURITIES AND EXCHANGE COMMISSION

    Litigation Release No. 22992 / May 13, 2014

    Securities and Exchange Commission v. TelexFree, Inc. et al., Civil Action No. 1:14-cv-11858-DJC (United States District Court for the District of Massachusetts)

    United States v. Carlos Nataniel Wanzeler and James Matthew Merrill, Case No. 14-MJ-4172-DHH (United States District Court for the District of Massachusetts)

    Criminal Charges Filed Against Two Principals of Massachusetts-Based Telexfree

    On Friday, May 9, 2014, the U.S. Attorney for the District of Massachusetts charged James M. Merrill, of Ashland, Massachusetts, and Carlos N. Wanzeler, of Northborough, Massachusetts, with conspiracy to commit wire fraud in connection with the alleged TelexFree pyramid scheme previously charged by the Securities and Exchange Commission. Federal authorities arrested Merrill on Friday, and an arrest warrant was issued for Wanzeler, who the Department of Justice announced is a fugitive. The Department of Justice also announced it has executed 37 seizure warrants seizing assets relating to the fraudulent pyramid scheme.

    The criminal charges against Merrill and Wanzeler related to the same conduct charged in a civil enforcement action filed by the SEC on Tuesday, April 15, 2014, against Merrill, Wanzeler, and others. Those charges were filed under seal, in connection with the Commission’s request for an immediate asset freeze. That asset freeze, which the U.S. District Court in Boston ordered on Wednesday, April 16, secured millions of dollars of funds and prevented the potential dissipation of investor assets. After the SEC staff implemented the asset freeze, at the SEC’s request the Court lifted the seal on April 17. On April 30, 2014, the Court entered preliminary injunctions extending the asset freeze as to defendants Santiago De La Rosa, of Lynn, Massachusetts, and Randy N. Crosby, of Alpharetta, Georgia. On May 8 and 9, the Court entered preliminary injunctions extending the asset freeze as to all the remaining defendants (Merrill, Wanzeler, TelexFree, Inc., TelexFree, LLC, Joseph H. Craft, of Boonville, Indiana, Steve Labriola, of Northbridge, Massachusetts, Faith R. Sloan, of Chicago, Illinois, and relief defendants (TelexFree Financial, Inc., TelexElectric, LLLP, and Telex Mobile Holdings, Inc.).

    The SEC alleges that TelexFree, Inc. and TelexFree, LLC claim to run a multilevel marketing company that sells telephone service based on “voice over Internet” (VoIP) technology but actually are operating an elaborate pyramid scheme. In addition to charging the company, the SEC charged several TelexFree officers and promoters, and named several entities related to TelexFree as relief defendants based on their receipt of investor funds. According to the SEC’s complaint filed in federal court in Massachusetts, the defendants sold securities in the form of TelexFree “memberships” that promised annual returns of 200 percent or more for those who promoted TelexFree by recruiting new members and placing TelexFree advertisements on free Internet ad sites. The SEC complaint alleges that TelexFree’s VoIP sales revenues of approximately $1.3 million from August 2012 through March 2014 are barely one percent of the more than $1.1 billion needed to cover its promised payments to its promoters. As a result, in classic pyramid scheme fashion, TelexFree was paying earlier investors, not with revenue from selling its VoIP product but with money received from newer investors.

    In related proceedings, on May 6, 2014, the U.S. Bankruptcy Court in the District of Nevada granted the SEC’s motion to transfer venue of those proceedings from Nevada to Massachusetts. The SEC had contended that the TelexFree entities hastily filed for bankruptcy in Nevada on Sunday night, April 13, 2014, in a transparent attempt to avoid Massachusetts. The SEC had noted that TelexFree does virtually no business in Nevada but rather was headquartered in Marlborough, Massachusetts. The SEC also argued that TelexFree did not have a legitimate business capable of reorganization under the bankruptcy code. The bankruptcy case will be transferred to Massachusetts for all further proceedings.

    Source: http://www.sec.gov/litigation/litreleases/2014/lr22992.htm