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Tag: U.S. Bankruptcy Judge Melvin S. Hoffman

  • BULLETIN: Judge Extends TelexFree Claims Deadline

    newtelexfreelogoBULLETIN: At the request of Trustee Stephen B. Darr, U.S. Bankruptcy Judge Melvin S. Hoffman has extended the deadline to file TelexFree claims until Dec. 31, 2016, at 4:30 p.m. Prevailing Eastern Time.

    The deadline had been Sept. 26.

    Darr asked for the extension on Sept. 21.

    Why was the extension needed?

    “The Trustee has determined that, given the unique circumstances of these cases, an extension of the bar date is appropriate.,” Darr advised Hoffman. “These circumstances include the number of participants involved in the Debtors’ program, the geographical dispersion of participants throughout the world, language barriers, and the time that participants may need to complete the assembly of records and to seek assistance in completing the ePOC.”

    About 80,000 claims had been filed through Sept. 20, Darr noted.

    With a scheme such as TelexFree that affected hundreds and hundreds of thousands of people, it seems likely that many, many more claims could be filed.

    Claims must be filed through TelexFreeClaims.com.




  • TELEXFREE: Trustee Requests Stay In Lawsuit Against MLM Attorney Gerald Nehra, Others

    newtelexfreelogoUPDATED 11:14 A.M. EDT U.S.A. TelexFree Trustee Stephen B. Darr has requested a stay in the lawsuit against MLM attorney Gerald Nehra, the Nehra and Waak law firm and certain other individuals or entities accused civilly of helping the judicially declared Ponzi- and pyramid scheme gain a head of steam.

    “The Trustee seeks this stay at the request of the United States so as not to interfere with the proper administration and prosecution of the Criminal Action” against James Merrill, Darr advised Chief U.S. Bankruptcy Judge Melvin S. Hoffman of the District of Massachusetts.

    Merrill, an alleged TelexFree principal from Massachusetts, has been under indictment for wire fraud and conspiracy since July 2014. His alleged business partner Carlos Wanzeler also was indicted, but fled to Brazil, prosecutors said. Merrill’s trial is scheduled for this fall.

    Wanzeler allegedly fled the United States via Canada after TelexFree declared bankruptcy in April 2014. Darr has said the cross-border program generated more than $3 billion in illicit business.

    “The Trustee was required to commence the Adversary Proceeding before the Criminal Action could be resolved because the expiration of the Statute of Limitation relevant to these actions was approaching and was clearly going to expire before the Criminal Action was resolved,” Darr advised Hoffman. “However, in commencing these actions, the Trustee does not intend to interfere with the proper administration of the Criminal Actions nor prejudice the Government’s prosecution of those actions.”

    The government’s concern about proceeding with the adversary actions against Nehra, the firm and others appears to be that Merrill could gain an advantage in the criminal case through discovery in the adversary actions.

    In April, Darr alleged that Nehra and the law firm were “actively involved” in promoting TelexFree’s Ponzi scheme and “duping” participants. Nehra and the firm are fighting the claim.

    Nehra and the firm advised Hoffman they “anticipated participation in criminal proceedings related to the case,” but did not define the nature of the criminal proceedings or say whether they anticipated being called as witnesses or potential indictees.

    “The Adversary Proceeding arises from the TelexFree Ponzi scheme that was perpetrated on thousands of mostly working class investors, domestic and worldwide, by James Merrill and Carlos Wanzeler and assisted by various individuals including those named in the Adversary Proceeding,” Darr advised Hoffman.

    The judge has set a hearing on the request for the stay at 10 a.m. on July 27 in Courtroom 2, J.W. McCormack Post Office & Court House, 5 Post Office Square, 12th Floor, Boston.


  • Alleged TelexFree Winner Tries To Sue Trustee For ‘Emotional Distress’; Separately, U.S. Judge Asks Dominican Court For Assistance

    breakingnews725It may be a first in MLM clawback cases.

    Dwayne Jones, an alleged winner of more than $561,000 in the judicially declared TelexFree Ponzi- and pyramid scheme, is trying to sue Trustee Stephen B. Darr for “Emotional Distress and Anticipated Attorney & Court Costs.”

    In a proposed defendant class-action, Darr sued Jones and dozens of other alleged winners earlier this year for return of their gains. Jones was sued at a New York address. Acting pro se, he appears to have responded to Darr’s adversary complaint filed in Massachusetts federal bankruptcy court with a kit pleading from Maryland federal bankruptcy court in which he denied he was a TelexFree winner, raised jurisdictional claims and asserted the emotional-distress counterclaim against Darr.

    Darr responded on June 6, saying he “denies in full the sole allegation in the defendant’s Counterclaim, that the defendant is entitled to unspecified damages for emotional distress and anticipated attorney and court costs arising out of this litigation.”

    The trustee also entered affirmative defenses.

    Class-action cases filed by Darr against alleged TelexFree winners potentially affect nearly 100,000 participants globally who gained more from TelexFree than they paid in. The scheme allegedly created hundreds and hundreds of thousands of losers.

    Chief U.S. Bankruptcy Judge Melvin S. Hoffman of Massachusetts is presiding over the cross-border TelexFree case and adversary proceedings.

    On May 24, Hoffman asked judicial authorities in the Dominican Republic for assistance in serving process on more than a dozen clawback defendants located there.

    Darr contends TelexFree generated more than $3 billion in illicit business worldwide and that winners must return their gains.

    Kenneth D. Bell, the receiver in the Zeek Rewards case, also has brought clawback claims against alleged domestic and international winners in that scheme. Zeek is alleged to have gathered on the order of $897 million.




  • Office Of U.S. Trustee Says It Will Challenge Fee Applications In TelexFree Bankruptcy Case

    newtelexfreelogoUPDATED 12:32 P.M. EDT U.S.A. A component of the U.S. Department of Justice has informed U.S. Bankruptcy Judge Melvin S. Hoffman that it will object to fee applications filed by two firms assisting Stephen B. Darr, the court-appointed trustee in the TelexFree bankruptcy case in Massachusetts.

    In court filings yesterday, the office of U.S. Trustee William K. Harrington did not say precisely why it intended to challenge the billings. The two firms assisting Darr are Mesirow Financial Consulting LLC and Murphy & King, Professional Corporation, a law firm.

    Harrington’s office said it will file a formal objection tomorrow with the assent of both Mesirow and M&K. Hoffman approved the request of Harrington’s office to file on June 5, instead of the original deadline of June 3. A hearing is scheduled June 10 to consider the applications and objections to them.

    Mesirow is seeking $1,629,430, plus $20,942.56 in expenses incurred from June 5, 2014 through Feb. 28, 2015. M&K is seeking $1,307,858.50, plus $36,116.25 in expenses from June 6, 2014 through March 31, 2015. Both firms have said in court filings that they have assisted Darr in the recovery of more than $17 million so far.

    Read the motion by Harrington’s office to object to the fee applications.

    Read other filings in the TelexFree bankruptcy case. (The fee applications are Court Docket Nos. 0599 and 0598, both filed May 5, 2015.)

    Visit the website of the U.S. Trustee.

  • BULLETIN: Judge Issues Order That Directs Justice Department’s Bankruptcy Watchdog To Appoint Trustee Over TelexFree Case

    breakingnews72BULLETIN: U.S. Bankruptcy Judge Melvin S. Hoffman of the Massachusetts Central Division in Worcester has ordered the appointment of a trustee in the TelexFree Chapter 11 bankruptcy case.

    The U.S. Trustee, the U.S. Department of Justice’s watchdog arm in bankruptcy cases, pressed for the appointment last month.

    “There are reasonable grounds to suspect that the members of the governing board who selected the Debtors’ new executives participated in actual fraud, dishonesty and criminal conduct in the management of TelexFree,” the U.S. Trustee argued last month.

    Notice of  Hoffman’s order appeared this morning on the TelexFree bankruptcy website. (Court Docket: #0234.)

    Based on the order, Jordan Maglich of PonziTracker.com is reporting that “TelexFree’s vision of emerging from bankruptcy with new products and revenue streams appears dismal at best.”

    For days, some TelexFree affiliates have been planting the false seed in various web reports that the appointment of a trustee means that TelexFree had been cleared of pyramid- and Ponzi charges. That simply is not the case.

    From PonziTracker (italics added):

    Now that an independent trustee will be appointed, he/she will follow Section 1106, which includes the filing of a statement of investigation, as soon as practicable, that includes “any fact ascertained pertaining to fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity in the management of the affairs of the debtor…”  Additionally, the trustee may recommend the conversion of the case to another Chapter under the Bankruptcy Code, including a liquidation under Chapter 7.

    See April 23 PP Blog story: BULLETIN: U.S. Trustee Says ‘Compelling Evidence Of Fraud’ And ‘Reasonable Grounds’ To Believe ‘Criminal Conduct’ Occurred On Road To TelexFree Bankruptcy Filing

    See May 1 PP Blog story: BULLETIN: Trustee: ‘It Appears That [TelexFree’s] Merrill, Wanzeler, And Craft Have All Fallen Down The Rabbit Hole And Are Now Expecting The [Bankruptcy] Court To Follow’

    James Merrill, one of TelexFree’s co-owners, was jailed in the United States May 9 on criminal charges of wire-fraud conspiracy. Carlos Wanzeler, another co-owner, allegedly fled to Brazil through Canada after U.S. federal agents raided TelexFree’s headquarters and seized computer equipment elsewhere on April 15.

    Like Merrill, Wanzeler was charged with wire-fraud conspiracy. The U.S. Justice Department has deemed him a fugitive.

    Joe Craft, TelexFree’s CFO, was appointed by Merrill and Wanzeler to that post on April 13, the same day TelexFree declared bankruptcy. On April 15, the SEC accused Craft of securities fraud. Court records show Merrill and Wanzeler are under criminal investigation for securities fraud and money laundering.

    The SEC has alleged that Craft was in possession of nearly $38 million in cashier’s checks on April 15, the date of the federal raid. One of the checks alegedly was for more than $2 million and was made out to Katia Wanzeler, the wife of Carlos Wanzeler.

    See May 20 PP Blog report: Realty Firm Linked To Carlos And Katia Wanzeler Also Linked To Former TelexFree CFO Joe Craft

    Earlier this week, the SEC linked Carlos Wanzeler to millions of dollars in real-estate acquisitions allegedly made with TelexFree investors’ money. The agency, in turn, linked Wanzeler, his wife or Merrill to companies external to TelexFree, including at least three firms allegedly formed by Craft.

    “[Carlos Wanzeler] 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.”

    In April, the SEC linked Craft to other TelexFree-related entities.