BULLETIN: TelexFree Trustee Stephen B. Darr today asked Judge Melvin S. Hoffman for an order that would compel TelexFree executive James Merrill to appear at a meeting of creditors at 11 a.m. on Feb. 10 at Mechanics Hall in Worcester, Mass.
Darr also wants Hoffman to designate Merrill as TelexFree’s corporate representative, setting the stage for him to be questioned by the office of the U.S. Trustee, an arm of the U.S. Department of Justice that participates in bankruptcy cases.
Carlos Wanzeler, another TelexFree principal, reportedly fled to Brazil in 2014, a circumstance that makes Merrill the only remaining shareholder known to be on U.S. soil. Merrill, who faces criminal charges of operating a Ponzi scheme, has been under close supervision with an ankle monitor since 2014, although he is permitted to leave his Massachusetts home to attend court functions and certain other events.
An appearance by Merrill at the meeting potentially sets the stage for him to invoke his Fifth Amendment right against self-incrimination before a large crowd at Mechanics Hall. On Jan. 13, the Telegram & Gazette reported that Darr had made plans to accommodate up to 1,000 people at the meeting, owing to the immense size of the TelexFree scheme.
Mechanics Hall, which calls itself “an acoustical masterpiece,” typically is known as a venue for music and performances.
“The historic performance hall, which can hold about 1,600 people, is an unusual choice for a meeting of bankruptcy creditors,” the Telegram & Gazette reported last month.”In most Worcester bankruptcy cases, creditors meet in a small room in a downtown office building.”
UPDATE 6:08 P.M. Feb. 8. Randall G. Reese, via Twitter (@Chapter11Cases), is showing a screen shot of a document today that says Merrill opposes the motion to appear on Wednesday and questions whether his right to a fair trial in the criminal case could be compromised if he is forced to appear at the meeting. See shot in No. 2 position in Comments thread below.
Unlike the boffo web-based schemes of TelexFree, Zeek Rewards and AdSurfDaily, the “Achieve Community” scam in which participants were told they’d glean returns of 700 percent did not perform well (relatively speaking) at the MLM Pyramid/Ponzi Scheme Box Office.
What’s particularly alarming about U.S.-based Achieve is that, though small in dollar volume and victims’ count compared to its larger fraud kin, it still reached into more than 140 countries.
Federal prosecutors from the office of U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina now say Achieve created about 10,000 victims, “including more than 4,000 located outside the United States.”
The U.S. victims’ count also presented a logistical challenge — enough of one, at least, for the Justice Department to assign its “Mega Victim Case Unit” to the Achieve matter. The unit helped prosecutors contact U.S. victims.
As the PP Blog reported in July 2015, prosecutors established a web page for victims. Authorities now say “[a]pproximately 229 victims including 29 located in foreign countries have provided details of their victimization. . .”
When a federal crime is committed, prosecutors said, victims have “[t]he right to reasonable, accurate, and timely notice of any public court proceeding . . . involving the crime or of any release or escape of the accused,” and “[t]he right to be reasonably heard at any public proceeding in the district court involving release, plea, sentencing, or any parole proceeding.”
When a case with a large number of victims such as Achieve presents itself, it becomes a practical impossibility to contact each and every person who has been defrauded. Because of this, prosecutors have asked a judge to approve a plan that provides “notification to victims who reside in other countries through the internet by posting details about the case and relevant victim impact forms on the United States Attorney’s Office website.”
And there are other logistical challenges when victims of a U.S. crime hail from other countries, prosecutors said.
“Because each country has its own procedures and requirements for contacting persons located in its territory, contacting each foreign victim directly is not practical or advisable,” prosecutors said. “Due to sovereignty concerns, many countries limit or prohibit foreign government officials from directly contacting persons within that country’s borders. This case’s 4,000+ foreign based victims hail from over 140 different countries.”
So, Internet notice is the thing.
We’ll conclude this column with a question: If Achieve created a need for the Justice Department to bring in its “Mega Victim Case Unit,” what sort of need will the TelexFree case create? There may be on the order of 1 million victims in that scheme.
Watch for a special PP Blog editorial tomorrow.
Achieve’s Kristi Johnson is scheduled to be sentenced Nov. 19. Matters pertaining to her alleged colleague Troy Barnes appear to be unresolved.
UPDATED 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.
Forex traders at four multinational banks — Citicorp, JPMorgan Chase & Co., Barclays PLC and Royal Bank of Scotland plc — formed “The Cartel” and conspired to manipulate the prices of the U.S. dollar and the euro, the U.S. Department of Justice said today.
All four banks have been charged criminally in an investigation that began when Eric Holder was Attorney General, said Loretta Lynch, Holder’s successor.
UBS AG, a fifth multinational, has been charged criminally with manipulating the London Interbank Offered Rate (LIBOR) and other benchmark interest rates, the Justice Department said. The UBS prosecution came about after the agency ripped up an earlier nonprosecution agreement (NPA) with bank, alleging that UBS had violated the terms of a pact reached in December 2012 to resolve the LIBOR matter.
Barclays also breached an NPA struck in June 2012 over the LIBOR matter and has agreed to pay an additional $60 million, the Justice Department said.
The charges, all felonies, include conspiring to fix prices and rig bids. They are filed against Citicorp, Barclays, JPMorgan and RBS.
A felony charge of wire fraud was filed against UBS, the Justice Department said.
As for Citicorp, Barclays, JPMorgan and RBS, Lynch said, “Starting as early as December 2007, currency traders at several multinational banks formed a group dubbed ‘The Cartel.’ It is perhaps fitting that those traders chose that name, as it aptly describes the brazenly illegal behavior they were engaged in on a near-daily basis. For more than five years, traders in ‘The Cartel’ used a private electronic chatroom to manipulate the spot market’s exchange rate between euros and dollars using coded language to conceal their collusion.”
All five of the banks have agreed to plead guilty to the criminal charges at the “parent level,” the Justice Department said.
Here, according to the Justice Department, are the market-manipulation timelines and the agreed-to criminal fines:
Citicorp, involved from as early as December 2007 until at least January 2013, $925 million.
Barclays, involved from as early as December 2007 until July 2011, and then from December 2011 until August 2012, $650 million.
JPMorgan, involved from at least as early as July 2010 until January 2013, $550 million.
RBS, involved from at least as early as December 2007 until at least April 2010, $395 million.
UBS (for NPA breach that occurred after December 2012), $203 million.
A statement by the Justice Department includes the type of language the agency normally directs at street criminals when it is trying to send a message. In this instance, however, the language is directed at the banks. From the statement (italics added):
Citicorp, Barclays, JPMorgan, RBS and UBS have each agreed to a three-year period of corporate probation, which, if approved by the court, will be overseen by the court and require regular reporting to authorities as well as cessation of all criminal activity. All five banks will continue cooperating with the government’s ongoing criminal investigations, and no plea agreement prevents the department from prosecuting culpable individuals for related misconduct. Citicorp, Barclays, JPMorgan and RBS have agreed to send disclosure notices to all of their customers and counter-parties that may have been affected by the sales and trading practices described in the plea agreements.
Today, in connection with its FX investigation, the Federal Reserve also announced that it was imposing on the five banks fines of over $1.6 billion; and Barclays settled related claims with the New York State Department of Financial Services (DFS), the Commodity Futures Trading Commission (CFTC) and the United Kingdom’s Financial Conduct Authority (FCA) for an additional combined penalty of approximately $1.3 billion. In conjunction with previously announced settlements with regulatory agencies in the United States and abroad, including the Office of the Comptroller of the Currency (OCC) and the Swiss Financial Market Supervisory Authority (FINMA), today’s resolutions bring the total fines and penalties paid by these five banks for their conduct in the FX spot market to nearly $9 billion.
Holder, Lynch said, “oversaw this investigation from its inception.
“His relentless work made this resolution possible, and I want to thank him for his commitment to this important effort,” she said.
From a settlement agreement between the U.S. Department of Justice and Ripple Labs. Red highlight by PP Blog. Source: U.S. Attorney’s Office for the Northern District of California.
EDITOR’S NOTE: Will MLM/network-marketing hucksters pushing UFunClub/UToken find any value in the story below?
Ripple Labs Inc., based in San Francisco, “developed and sold virtual currency known as ‘XRP,’” but didn’t follow the law and “failed to establish and maintain an appropriate anti-money laundering program,” the U.S. Department of Justice said.
At some point, Ripple became the subject of a criminal investigation led by the office of U.S. Attorney Melinda Haag of the Northern District of California. The IRS Criminal Investigation Division also participated.
As the investigation proceeded, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) became involved on the civil front.
Of particular note in the Justice Department’s news release about a settlement agreement with Ripple that ended the criminal probe was an allegation that a second Ripple subsidiary known as XRP II in late 2013 allegedly “negotiated a $250,000 transaction with an individual who had prior felony convictions for dealing in explosive devices and had been sentenced to prison.”
Ver was convicted in 2002 on charges of selling explosive devices on eBay.
XRP II appears to have constituted an effort on Ripple’s part to address FinCEN money-laundering concerns, but the subsidiary failed to “follow its own internal ‘know your customer’ requirements,” the Justice Department said.
“Virtual currency exchangers must bring products to market that comply with our anti-money laundering laws,” said Director Jennifer Shasky Calvery of FinCEN. “Innovation is laudable but only as long as it does not unreasonably expose our financial system to tech-smart criminals eager to abuse the latest and most complex products.”
From a Justice Department statement on the settlement (italics added).
Ripple Labs Inc. and its wholly-owned subsidiary, XRP II LLC, formerly XRP Fund II LLC, have agreed to resolve a criminal investigation in exchange for a settlement agreement calling for a series of substantial remedial measures, including a migration of a portion of Ripple’s virtual currency business to a separate entity, the company’s ongoing cooperation in other investigations, an extensive remedial framework to ensure future compliance with federal laws and forfeiture and penalties totaling $700,000.
Stephen B. Darr, senior managing director of Mesirow Financial Consulting LLC of Boston, has been appointed trustee in the TelexFree bankruptcy case.
The appointment was made by William K. Harrington, the United States’ Trustee, based on the order of U.S. Bankruptcy Judge Melvin S. Hoffman. The office of the U.S. Trustee is the bankruptcy watchdog arm of the U.S. Department of Justice.
News of Darr’s appointment first was Tweeted by Timothy J. Durken, an attorney writing about the TelexFree case.
UPDATED 5:06 P.M. EDT U.S.A. See Comments thread below for breaking news that the judge overseeing the TelexFree bankruptcy case in Massachusetts will appoint a trustee. First reported by the Wall Street Journal. Original story on separate TelexFree matter in Oregon is below . . .
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The staff of the Oregon Public Utilities Commission has recommended that the agency open an investigation into TelexFree, citing the MLM “program’s” bankruptcy filing, civil actions against it by the Massachusetts Securities Division and the U.S. Securities and Exchange Commission and the criminal charges against alleged TelexFree co-owners James Merrill and Carlos Wanzeler.
Should TelexFree not respond appropriately in Oregon, the PUC staff said, the commission should strip it of its telecom license.
TelexFree faces similar regulatory encounters in Nevada and Minnesota. On May 23 in Minnesota, the state Department of Commerce added to its TelexFree file by pointing the Public Utilities Commission to a May 20 Boston Globe story with a headline of “TelexFree co-owner to stay in custody until trial.”
It was a story about a U.S. Magistrate Judge’s decision not to grant Merrill bail. The Globe story notes Wanzeler is considered a fugitive by the U.S. Department of Justice.
TelexFree’s licensing in Alabama also is at risk, and there could be trouble brewing in other states even as TelexFree continues to pursue Chapter 11 bankruptcy protection.
In addition, TelexFree faces multiple prospective class-action lawsuits, including at least two that allege violations of the federal racketeering statute. A report in Peruvian media last week suggests that racketeering at TelexFree cut both ways.
With U.S.-based litigants asserting TelexFree was a racketeering enterprise, La Republica in Peru published a report that suggested a TelexFree promoter in the country was kidnapped by fellow members last week and ordered to go to a bank to withdraw funds to make them whole. The extortion plan reportedly failed.
TelexFree has asserted in bankruptcy-court filings that its future business prospects involving VOIP and app products are exciting. A U.S. Bankruptcy Trustee argued that TelexFree was advancing a “rabbit hole” narrative and expecting the judiciary to follow it.
From the Oregon filing by the PUC staff (italics added):
The allegations facing the Company raise serious issues as to whether or not the Company should be permitted to retain its certificate of authority. Staff has been unable to reach anyone from the Company to obtain further information. Staff stated in its communications that the Company may request that the Commission cancel its certificate under the current circumstances. It is unlikely that any services will be offered in Oregon as the Company’s assets are frozen, it is in bankruptcy proceedings, and its offices are the target of federal government activity. Nevertheless, cancelling the Company’s certificate to provide services in Oregon would foreclose the possibility.
TelexFree asserts on its website that it has “suspended all business activity.”
UPDATED 11:49 A.M. EDT U.S.A. Katia Wanzeler, the wife of accused TelexFree Ponzi-schemer and alleged fugitive Carlos Wanzeler, no longer is in the custody of the U.S. Marshals Service (USMS). Whether she has concluded an appearance before a federal grand jury in Massachusetts is unclear.
If the appearance occurred, it is possible it was delayed by 24 to 48 hours. Grand jury proceedings are secret.
In a brief statement to the PP Blog late Friday afternoon in response to a question from the Blog Thursday inquiring about Katia’s whereabouts, the USMS in Boston confirmed only that Katia “was in U.S. Marshals custody from May 15-23.”
Carlos Wanzeler, 45, is described as a fugitive by the U.S. Department of Justice. Katia, 49, was arrested May 14 on a material-witness warrant at John F. Kennedy International Airport in New York, and was issued a subpoena to appear before a grand jury on May 21 at 10 a.m., according to court records cited by her attorneys.
On Wednesday (May 21), Katia’s attorneys argued in Massachusetts federal court that their client had not been brought back from New York by USMS to make the scheduled appearance.
Kevin Neal, supervisory Deputy U.S. Marshal in Boston, said late Friday afternoon that “The Marshals Service does not disclose information related to individual prisoners, including details about prisoner transportation, for security purposes.”
The office of U.S. Attorney Carmen Ortiz did not respond to a request for comment.
Katia Wanzeler had been held at a detention center in New York.
In this TelexFree promo, former President James Merrill posed with a giant SUV.
The FBI and the U.S. Department of Homeland Security have established a website for individuals who believe they were defrauded by TelexFree, an alleged pyramid- and Ponzi scheme the Massachusetts Securities Division says gathered more than $1.2 billion.
Alleged TelexFree co-owners James Merrill and Carlos Wanzeler have been charged criminally with wire-fraud conspiracy. Merrill, 53, of Ashland, Mass., is jailed in the United States. Wanzeler, 45, of Northborough, Mass., is alleged to have fled to Brazil. The U.S. Department of Justice describes him as a fugitive.
TelexFree, Merrill, Wanzeler and six other alleged TelexFree managers, executives or promoters also are defendants in a major civil prosecution by the U.S. Securities and Exchange Commission.
By some accounts, TelexFree had between 700,000 and 1.5 million participants.
From the FBI/DHS statement (italics added):
The large number of possible victims necessitates that we ask for your assistance by completing the secure questionnaire online. Your responses are voluntary, but would be useful in the federal investigation and to identify you as a victim.
The office of U.S. Attorney Carmen Ortiz of the District of Massachusetts is prosecuting the criminal cases against Merrill and Wanzeler.
UPDATED 8:14 p.m. EDT U.S.A. James Merrill, the onetime president of TelexFree arrested and detained May 9 on wire-fraud conspiracy charges, was not freed at a bail hearing today and will remain in custody.
“The judge took the matter under advisement,” the office of U.S. Attorney Carmen Ortiz of the District of Massachusetts said early this evening. “Merrill remains in custody until such time” the judge rules on his bail application.
Precisely when the judge intended to rule was not immediately clear. It is believed the ruling will come next week.
Merrill proposed to surrender his passport and to sign over the equity in his Ashland (Mass.) home to secure his appearance at further court proceedings. The Merrill property equity was estimated at $300,000, and Merrill contended he was not a flight risk.
His TelexFree business partner — Carlos Wanzeler — has been labeled a fugitive by the U.S. Department of Justice. An affidavit says Wanzeler ducked into Canada after dark on April 15, the day TelexFree’s offices were raided in Marlborough, Mass. Two days after that, Wanzeler boarded a plane in Toronto and flew to Brazil.
Through his attorney Beverly B. Chorbajian, Merrill said he would not flee.
“Here, the government recites that Merrill is a risk merely because he ‘might’ flee,” Chorbajian argued. “There is absolutely no evidence of any indication that this is the case.”
Merrill’s wife, Chorbajian advised the judge, described him a loving family man with an interest in the community. Merrill, his wife said, has been a youth-baseball coach, a fine son to his mother and a friend who comforted a childhood friend dying of Lou Gehrig’s disease.
“His [C]atholic faith is important to him and has sustained him these past few months through this ordeal,” Merrill’s wife said, according to a defense memo to the judge.
From the remarks of Merrill’s wife as presented the judge (italics added):
He only took more interest in TelexFree because he saw a future with this business in spite of all his frustrations with the way it was being run. He spent countless hours working to make it better – finding consultants to help, consulting attorneys, and so forth. He was so vested in seeing it on the right path. Conspiracy to commit fraud is so far from his intentions and actions.
Repeating a contention in the TelexFree bankruptcy case, Chorbajian argued that Merrill was not part of a plot to hide money. Bankruptcy attorneys argued that cashier’s checks were destined to be placed in a safe-deposit box when found in the possession of former TelexFree CFO Joe Craft.
Nearly $38 million in cashier’s checks were discovered during the April 15 raid of TelexFree’s headquarters. TelexFree had declared bankruptcy two days earlier.
Wanzeler, according to a government affidavit, spent all or parts of three days in Canada prior to flying to Brazil. What he did there remains a mystery.
Maps estimate that it’s a four and a half-hour drive from Northborough, Mass. (where Wanzeler resided) to the Lacolle border crossing through which Wanzeler allegedly entered Canada at roughly 11 p.m. on the date of the TelexFree raid. If the government’s timeline is accurate, it may mean Wanzeler was in Canada for at least an hour on April 15, all day on April 16 and part of the day on April 17. Assuming Wanzeler chose an efficient route, he would have passed through New Hampshire and Vermont prior to arriving at Lacolle.
What he did with time on his hands in Canada is unclear, potentially leading to questions about whether he retrieved TelexFree cash that might have been stockpiled north of the U.S. border. Also unclear is why Wanzeler allegedly chose to fly out of Toronto, roughly six hours from the Lacolle crossing in Quebec. Montreal is much closer to Lacolle.
Toronto is about 281 miles from Lacolle, according to maps. Montreal is only about 41 miles.
TelexFree is alleged to be a combined pyramid- and Ponzi scheme that may have gathered $1.2 billion.
MLM attorney Gerald Nehra at a TelexFree rah-rah event in California last year. Source: YouTube.
In case you missed the big news yesterday, TelexFree figures James Merrill and Carlos Wanzeler were charged criminally.
Unofficially this brings the number of charged MLM HYIP “programs” (or clients) with links to MLM attorney Gerald Nehra to three in recent years. Nehra was an “expert witness” for AdSurfDaily in 2008. He testified that ASD, a 1-percent-a-day “program,” was a legitimate business and not a Ponzi scheme.
ASD operator Andy Bowdoin, who compared the men and women who guard the President of the United States to “Satan” and the 9/11 terrorists and clucked that “God” * was on his side, later was charged criminally and sentenced to a lengthy term in federal prison.
Nehra was brought in for marquee value and as an adviser to Zeek Rewards, Zeek operator Paul Burks said in late 2011 or early 2012. Zeek executives Dawn Wright-Olivares and Daniel Olivares later were charged criminally. Zeek was a 1.5-percent-a-day “program.”
At some point in 2012 or 2013, Nehra began to advise TelexFree. TelexFree executive Steve Labriola, like Zeek’s Burks before him, also saw marquee value in Nehra, according to Labriola’s comments in a TelexFree promo on YouTube. Now, Merrill and Wanzeler face the prospect of jail. Because the investigation is ongoing, others may, too.
TelexFree’s bogus returns were not tied to sales of its VOIP product and computed to more than 200 percent a year, making the “program” a classic Ponzi- and pyramid swindle, according to court filings. Some promoters claimed $15,125 returned $57,200. One promoter allegedly told an undercover federal agent that he’d scored $1.6 million in TelexFree “without selling a TelexFree product.”
This is a column about willful blindness and feigned obtuseness. (Think Faith Sloan.) It’s also a column about missed signals, whether they’re missed purposely or otherwise. (Think: Why would TelexFree hire Nehra after ASD and Zeek — and why would Nehra ever accept the work, which was bound to lead to racketeering allegations? Put another way, if you’re at the scene of too many highly suspicious fires, you shouldn’t be surprised if serious people start to believe you’re the arsonist or the arsonist’s helper. Even assuming Nehra is no MLM arsonist or racketeer, accepting the TelexFree work potentially put him in the position of being extorted or otherwise abused by the trade’s arsonists and racketeers.)
Spot any common themes or information roadmaps in the quoted material below?
AdSurfDaily “is not” a Ponzi scheme. “It is a legally structured, direct selling business model with multilevel compensation.” — Gerald Nehra, MLM attorney, Aug. 18, 2008. (Context: Nehra’s submitted testimony as defense witness in civil forfeiture action in the $119 million AdSurfDaily MLM HYIP Ponzi case. **)
“[AdViewGlobal] is the next iteration of the Ponzi scheme auto-surf programs, which [are] staffed with former [AdSurfDaily] executives and Bowdoin disciples.” — Class-action attorneys suing AdSurfDaily operator Andy Bowdoin and AdSurfDaily attorney Robert Garner of North Carolina, June 30, 2009. (Context: Motion in member-filed lawsuit against Bowdoin and Garner that alleged RICO (racketeering) violations.)
“With all of our efforts to punish and deter this criminal enterprise, the rights of innocent parties are protected and will subsequently be returned.” — A.T. Smith, assistant director, U.S. Secret Service Office of Investigations, Sept. 26, 2011. (Context: Successful forfeiture actions and remission (restitution) in AdSurfDaily MLM HYIP Ponzi case.)
“We will continue to use every tool at our disposal to bring justice to the citizens defrauded by these insidious schemes.” — Assistant Attorney General Lanny A. Breuer, U.S. Department of Justice, Criminal Division, Sept. 26, 2011. (Context: Successful forfeiture actions and remission (restitution) in AdSurfDaily MLM HYIP Ponzi case.)
“Just having him on retainer and having him on our team, it goes a long way from keeping anybody from launching an attack. Because generally when Gerry Nehra is involved, the Feds know that he’s cleaned up the act really well.” — Paul Burks, Zeek Rewards operator, c. December 2011. (Context: Burks’ remarks to early Zeek members that MLM attorney Nehra was on board.)
“I am pleading guilty because I am in fact guilty of the offense(s) identified in this Plea Agreement.” — Andy Bowdoin, AdSurfDaily operator, May 2012. (Context: Plea agreement to wire fraud in which Bowdoin disagreed with MLM attorney Nehra and acknowledged AdSurfDaily was a Ponzi scheme.)
“Capitalizing on the strength of our financial task force partnerships, we aggressively pursue criminals using computer experts, forensic specialists, investigative experts and intelligence analysts.” — Dennis Ramos Martinez, special agent in charge, U.S. Secret Service Orlando Office, Aug. 29, 2012. (Context: Prison sentence imposed on AdSurfDaily operator Andy Bowdoin.)
“While [Gregory] McKnight himself referred to Legisi as a “loan” program, and demanded that “members” not refer to their “loan” and an “investment,” Legisi was, in reality, an investment contract, which is considered a security and therefore regulated by the Securities and Exchange Commission. This semantic obfuscation was quite obviously an attempt to sidestep the securities laws.” — Office of U.S. Attorney Barbara L. McQuade, Eastern District of Michigan, September 2012. (Context: Sentencing memo against Gregory McKnight in Legisi $72 million HYIP swindle.)
“I’m not sure how many of you have heard the name ‘Gerry Nehra.’ But it is a very big name in this industry.” — Steve Labriola, TelexFree executive, Newport Beach, Calif., July 2013. (Context: Labriola introducing Nehra to TelexFree members at “Super Weekend” MLM rah-rah fest.)
“ZeekRewards used the enormous power of the Internet to rip off $850 million from hundreds of thousands of victims in less than two years. We will continue to work with our law enforcement partners to take down greedy scam artists who think nothing of stealing the savings of hard working people.” — U.S. Attorney Anne M. Tompkins, Western District of North Carolina, Dec. 20, 2013. (Context: The filing of criminal charges in the Zeek Rewards MLM/HYIP case.)
“The Massachusetts Securities Division charged TelexFREE Inc., with running a Ponzi scheme targeting Brazilian-Americans that has raised over $90 million from Massachusetts residents and around $1 billion globally.” — U.S. Department of Homeland Security,April 17, 2014. (Context: U.S. financial infrastructure protection. Sourced from DHS Daily Open Source Infrastructure Report.)
“At this [TelexFree] ‘super weekend’ event, Attorney Nehra spoke at length to attending investors, assuring them of the legality of TelexFree’s operation stating: ‘It is legally designed . . . you are on very solid legal ground.’” — Class-action attorneys, May 3, 2014. (Context: The filing of a prospective class-action against TelexFree and Nehra that alleged RICO (racketeering) violations.)
“Attorney Nehra’s extensive experience in multi-level marketing, and particularly his involvement with the Ponzi schemes involving AdSurfDaily and Zeek Rewards, armed him with the knowledge of what constitutes violations of United States securities law. 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.” — Class-action attorneys, May 3, 2014. (Context: The filing of a prospective class-action against TelexFree and Nehra that alleged RICO (racketeering) violations.)
“Investigating the flow of illicit money across U.S. borders and the criminal enterprises behind that money is one of our top priorities.” — Bruce Foucart, special agent in charge, Homeland Security Investigations, May 9, 2014. (Context: Comment on the filing of criminal charges in the TelexFree Ponzi- and pyramid case.)
“As alleged, these defendants devised a scheme which reaped hundreds of millions of dollars from hard working people around the globe.” — U.S. Attorney Carmen Ortiz, District of Massachusetts,May 9, 2014. (Context: Comment on the filing of criminal charges in the TelexFree Ponzi- and pyramid case.)
* Like jailed AdSurfDaily operator Andy Bowdoin, TelexFree figure Carlos Costa contends God is on his side. While Bowdoin talked of “Satan,” one TelexFree promoter has called a prosecutor in Brazil a “blonde she-devil.”
** Two members of AdSurfDaily who went on to become members of Zeek Rewards liked Nehra’s opinion so much they used it in a failed lawsuit (2011) against the U.S. government. The members, Todd Disner and Dwight Owen Schweitzer, both are listed as “winners” in the $850 million Zeek Rewards’ scheme. Disner’s Zeek haul was alleged to be more than $1.875 million.
