URGENT >> BULLETIN >> MOVING: 10th Update 9:18 p.m. EDT U.S.A.) TelexFree figures James Merrill and Carlos Wanzeler have been indicted by a federal grand jury.
The indictment, dated today, includes eight criminal counts of wire fraud and one criminal count of wire-fraud conspiracy.
Among other things, the indictment alleged that Merrill and Wanzeler conspired with each other and with “others known and unknown to the Grand Jury” to fleece TelexFree members.
The indictment describes wire transfers involving Merrill and Wanzeler that began on the day after Christmas in 2013 and continued on Dec. 27.
Here are the alleged wire transfers:
Merrill: Dec. 26. $136,200 from TelexFree Inc. account at Fidelity Co-operative Bank to Merrill.
Wanzeler: Dec. 26. $500,000 from TelexFree Inc. account at Fidelity Co-operative Bank to Wanzeler.
Wanzeler: Dec. 26. $136,200 from TelexFree Inc. account at Fidelity Co-operative Bank to Wanzeler.
Wanzeler: Dec. 26. $158,900 from TelexFree Inc. account at Fidelity Co-operative Bank to Wanzeler.
Wanzeler: Dec. 26. $22,700 from TelexFree Inc. account at Fidelity Co-operative Bank to Wanzeler.
Merrill: Dec. 27. $3 million from TelexFree Inc. account at Fidelity Co-operative Bank to Waddell & Reed Inc., to Merrill.
Wanzeler: Dec. 27. $3 million from TelexFree Inc. account at Fidelity Co-operative Bank to Wanzeler.
Wanzeler: Dec. 27. $3.5 million from TelexFree Inc. account at Fidelity Co-operative Bank to Wanzeler.
Prosecutors from the office of U.S. Attorney Carmen Ortiz of the District of Massachusetts said in a statement early this evening that assets seized in the case so far total about $140 million.
From a statement by prosecutors (italics added):
The indictment also specifies approximately 70 assets to be forfeited as proceeds of the alleged fraud scheme, or assets traceable to such proceeds, including approximately $140,000,000 seized from TelexFree’s accounts and various real assets, such as homes, condominiums, cars and two boats.
Also from prosecutors (italics/bolding/carriage returns added):
According to the indictment, TelexFree, Inc., and TelexFree LLC (collectively, “TelexFree”) provided “voice-over-internet-protocol” (“VOIP”) telephone services that allowed customers to use the Internet to make phone calls. The indictment alleges, however, that TelexFree actually operated as a pyramid scheme, in which its ongoing operations were supported, not by actually selling TelexFree’s VOIP product, but by bringing in a constant stream of new investor dollars.
Between early 2012 and March 2014, TelexFree purported to aggressively market its VOIP service by recruiting thousands of “promoters” to post ads for the product on the Internet. Each promoter was required to “buy in” to TelexFree at a certain price, after which they were compensated by TelexFree, under a complex compensation structure, on a weekly basis so long as they posted ads for TelexFree’s VOIP service.
It is further alleged that over the course of the fraud TelexFree derived only a fraction of its revenue from sales of VOIP service and the vast majority of it from new people buying into the scheme, and so TelexFree was able to pay the returns it had promised to its existing promoters only by bringing in money from newly-recruited promoters. The indictment includes eight charges of wire fraud, based on Merrill, in December 2013, wiring about $10,000,000 in TelexFree funds to personal accounts belonging to him and Wanzeler.
Also see May 27 PP Blog story on SEC allegations about how some of the TelexFree money was dissipated.
Read the Grand Jury indictment (courtesy of the ASD Updates Blog.)