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Tag: U.S. District Judge Timothy S. Hillman

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

    James Merrill

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

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

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

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

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

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

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

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

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

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

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

    More . . .




  • James Merrill, TelexFree’s President, Pleads Guilty

    James Merrill.
    James Merrill.

    3RD UPDATE 2:56 P.M. EDT OCT 25 U.S.A. James Merrill, the president of TelexFree, has pleaded guilty to eight counts of wire fraud and one count of conspiracy in Massachusetts federal court.

    Merrill, 55, of Ashland, Mass., is scheduled to be sentenced in February.

    “The significance of a guilty plea in a case of this magnitude cannot be overstated,” said special agent in charge Matthew Etre of Homeland Security Investigations, Boston. “James Merrill is finally facing justice for his role in bilking more than $3 billion from innocent investors, in more than 240 countries around the world, for what amounted to little more than greed. HSI special agents will continue to aggressively investigate those who seek to profit by taking advantage of others.”

    Records show Merrill formalized a plea agreement Friday with the office of U.S. Attorney Carmen Ortiz. The agreement calls for a maximum prison term of 10 years, plus forfeiture of criminal proceeds, including about $140 million, real estate, cars and boats, prosecutors said.

    The Telegram & Gazette, via Twitter and its own website, was first with the news of the formal guilty plea. The Boston Globe also was in the Worcester courtroom of U.S. District Judge Timothy S. Hillman this afternoon.

    More . . .

    NOTE: Our thanks to the ASD Updates Blog.

  • TELEXFREE: Prosecutors Docket Prospective Witness List And Exhibits Against James Merrill: Understanding The Background

    EDITOR’S NOTE: This story, which easily could be titled “What NOT To Do In MLM,” summarizes a few of the witnesses and exhibits the U.S. government may use against TelexFree’s James Merrill when his trial gets under way Oct. 24 in Massachusetts. The background provided below is based on research by the PP Blog. Prosecutors filed their witness/exhibit lists on Sept. 26 in U.S. District Court. For our Brazilian readers, we’ll note here that the United States is expected to call at least one member of the Brazilian Federal Police to testify. U.S. District Judge Timothy S. Hillman is presiding. In total, dozens of witnesses may testify, including some who have been sued by the SEC, TelexFree Trustee Stephen B. Darr or private attorneys. There are hundreds of government exhibits, some collected by the Massachusetts Securities Division and the U.S. Department of Homeland Security.

    **______________________**

    EXHIBIT: The government may introduce a document filed by TelexFree with the Alabama Public Service Commission in March 2014.

    BACKGROUND: This document potentially could be used to demonstrate Merrill lied to regulators and business consultants. It was filed on March 20, 2014, and asserts TelexFree was “financially qualified” to operate in the state as a telecom company and that its “current financials Show considerable net worth.”

    Less than a month later, however, TelexFree filed for bankruptcy, raising questions about the truthfulness of its telecom applications in various states. The document, which the PP Blog published before TelexFree’s bankruptcy filing, also ties Merrill to Indiana MLM accountant Joe Craft, a former interim TelexFree executive listed Sept. 26 by the government as a witness. Craft was sued alongside Merrill and others by the SEC in April 2014. He later filed a pleading in which he said he had concluded TelexFree was a Ponzi scheme selling unregistered securities and that he had been misled by TelexFree insiders.

    Joseph Isaacs, a Florida-based consultant for TelexFree, helped prepare TelexFree’s telecom filing in Alabama and other states. Isaacs also now is listed as a government witness. Filings in Missouri say Isaacs told regulators there that Merrill had not been truthful when submitting an affidavit.

    tfwcmmerrillsuv-1EXHIBIT: The government may introduce a photo of Merrill posing with a Hummer vehicle in TelexFree promos.

    BACKGROUND: Ponzi/pyramid schemes and flashy rides are virtually inseparable.

    In 2014, a federal judge ordered TelexFree pitchman Santiago De La Rosa — an SEC defendant — to sell two BMWs and a Land Rover Range Rover. De La Rosa now is listed as a government witness.

    EXHIBIT: The government may introduce a September 2013 email that shows Merrill was aware of a criminal indictment and prison term imposed against AdSurfDaily President Andy Bowdoin in a Ponzi case with remarkable similarities to TelexFree.

    BACKGROUND: The email described above allegedly was sent to Merrill by MLM attorney Jeffrey Babener. Babener now is listed as a government witness. Darr, the bankruptcy trustee, has said Babener informed TelexFree in August 2013 that it was operating a pyramid scheme, but TelexFree nevertheless continued to gather money.

    The ASD case, which also came up in the prosecution of Zeek Rewards’ operator Paul Burks, potentially could be used to demonstrate Merrill was engaging in willful blindness in his operation of TelexFree.

    One of Merrill’s MLM attorneys — Gerald Nehra — has been sued by Darr, private attorneys and the court-appointed receiver in the SEC’s case against Zeek. Nehra also was a figure in the ASD case. He now is listed as a government witness against Merrill.

    EXHIBIT: A video by Thomas More of Newport Beach, Calif.

    BACKGROUND: The SEC has warned for years that scams spread on social media. More, now listed as a government witness, was a TelexFree pitchman who was listed as a “winner” in the Zeek Rewards Ponzi- and pyramid scheme. Nehra once was a speaker at a TelexFree event in Newport Beach.

    EXHIBIT: Records from various banks and financial vendors for Merrill or TelexFree.

    BACKGROUND: Follow the money.

    NOTE: Our thanks to the ASD Updates Blog.




  • DEVELOPING STORY: U.S. Attorney Carmen Ortiz ‘Has Been Recused’ From Prosecution Of TelexFree Figures James Merrill and Carlos Wanzeler

    U.S. Attorney Carmen Ortiz has been recused from the prosecutions of TelexFree figures James Merrill and Carlos Wanzeler, according to a government filing.
    U.S. Attorney Carmen Ortiz has been recused from the prosecutions of TelexFree figures James Merrill and Carlos Wanzeler, according to a government filing.

    2ND UPDATE 6:27 P.M. EDT U.S.A. A government filing dated July 1 — a Friday before the long Independence Day weekend — says U.S. Attorney Carmen Ortiz of the District of Massachusetts “has been recused” from the prosecutions of TelexFree figures James Merrill and Carlos Wanzeler.

    The document does not say why Ortiz no longer will oversee the cases against the alleged pyramid- and Ponzi-schemers. The recusal comes more than two years after Merrill and Wanzeler were charged criminally by prosecutors in Ortiz’s office and nearly 24 months after they were indicted.

    Ortiz, in May 2014, described the alleged fraud as “breathtaking.”

    At the time of this story, no media announcement about the recusal appears on the U.S. Attorney’s website.

    On Saturday (today), Ortiz’s office did not respond immediately to a request for comment.

    U.S. District Judge Timothy S. Hillman is presiding over the cases.

    Here is the text of the “NOTICE OF RECUSAL BY THE UNITED STATES ATTORNEY” dated yesterday (italics added):

    The United States respectfully notifies the Court that United States Attorney Carmen M. Ortiz has been recused from this matter. Pursuant to 28 U.S.C. § 515 and related delegations, an Associate Deputy Attorney General has directed and authorized First Assistant United States Attorney John T. McNeil to have the status, and perform all of the authorized functions, of a United States Attorney with respect to this case.

    Ortiz announced the appointment of McNeil as her first assistant on April 28, 2014. TelexFree declared bankruptcy just 15 days earlier, on April 13. The SEC moved against TelexFree on April 17, 2014.

    Section 3-2.170 of the U.S. Attorneys’ Manual says recusals are required “only where a conflict of interest exists or there is an appearance of a conflict of interest or loss of impartiality.”

    From the manual (italics added):

    A United States Attorney who becomes aware of circumstances that might necessitate a recusal of himself/herself or of the entire office, should promptly notify [the General Counsel’s Office of the Executive Office For United States Attorneys] at . . . to discuss whether a recusal is required. If recusal is appropriate, the USAO will submit a written recusal request memorandum to GCO. GCO will then coordinate the recusal action, obtain necessary approvals for the recusal, and assist the office in arranging for a transfer of responsibility to another office, including any designations of attorneys as a Special Attorney or Special Assistant to the Attorney General . . .

    Whatever TelexFree-related conflict exists, it appears only to affect Ortiz, given that her first assistant has been put in charge and the entire U.S. Attorney’s Office in Massachusetts has not been excluded from the prosecution.

    NOTE: Our thanks to the ASD Updates Blog.




  • TELEXFREE CLASS-ACTION: Judge Restrains Assets Of 2 Alleged Promoters, Including Scott Miller And ‘MyAdvertisingPays’ Pitchman Daniil Shoyfer

    ponzinews1Let’s begin by pointing out that Daniil Shoyfer and Scott Miller have not been charged by the SEC in its 2014 TelexFree action. There are asset freezes aplenty in that government-brought case, including freezes against alleged promoters Sann Rodrigues, Faith Sloan, Randy Crosby and Santiago De La Rosa.

    The asset restraints imposed yesterday by U.S. District Judge Timothy S. Hillman against Shoyfer (of New York) and Miller (of Indiana) flow from an altogether different case: a proposed class-action brought by plaintiffs last year.

    Indeed, private plaintiffs represented by private attorneys — as opposed to government plaintiffs represented by government attorneys — have now managed to persuade a judge to block the flow of funds alleged to be tainted by fraud.

    This is horrible news if you’re a serial promoter of MLM fraud schemes or Ponzi-board “programs” because it demonstrates that the government no longer is your singular worry. Put another way, even if the SEC or some other agency “misses” you, aggressive class-action attorneys may not.

    They even may be tracking you as you move from scheme to scheme — and, of course, agencies such as the SEC follow court filings in related actions closely.

    Even though the private lawyers did not get everything they sought in yesterday’s order by Hillman, they got enough to seriously complicate the lives of their targets. Although the judge did not restrain assets with no nexus to the alleged $3 billion TelexFree Ponzi- and pyramid scheme, both Shoyfer and Miller now must make monthly financial reports to the court.

    From the order:

    “Each Individual Defendant shall file a statement of accounting with the Court, under seal, on the last day of each month by 5:00 p.m. EST, setting forth all monetary expenditures and the sale and/or transfer of all assets made in the prior month . . . To the extent that any Individual Defendant seeks to expend money or to sell, transfer dissipate, assign, pledge, alienate, encumber, diminish in value, or otherwise dispose of any funds or other assets which they would not be permitted to do under the terms of this Order, such defendant may file a motion with the Court setting forth, in detail the nature of the transaction.”

    And, the judge continued, “The Individual Defendants may petition the Court to exempt from this Order any fund or other assets in any bank, brokerage or other financial institution accounts and any other assets held by of for the benefit of such defendant on the grounds that such assets are not traceable to monies received by him in connection with his involvement with TelexFree. The Individual Defendants shall submit detailed financial statements and/or other documentary evidence to establish the funds held or assets in question are funds or assets were acquired independently. The Individual Defendants shall also submit an accompanying affidavit signed under the pains and penalties of perjury attesting to the authenticity and truth of the evidence submitted in support of their motion to exempt. All filings made pursuant to this section shall be filed under seal. After reviewing the filing, the Court will determine whether notice to the Plaintiffs, discovery and/or a hearing will be required.”

    The class-action lawyers already have accused Shoyfer of promoting “MyAdvertisingPays” on the heels of TelexFree. They alleged MAPS, as it is known, is another Ponzi scheme.

    So, under the terms of the order, it would appear that, if Shoyfer wants to keep any MAPS income that flowed to him on the grounds it did not originate with TelexFree, he would have to petition the court to do so.

    Miller, known for telling a “Carlos Danger” joke to a TelexFree audience and pitching the program to Americans while it was under investigation in Brazil amid reports of threats against a judge and prosecutor, was part of an effort to solicit sums as high as $15,125 from TelexFree prospects. Viewers were told their $15,125 would return at least $1,100 a week for a year.

    In restraining the assets of Miller and Shoyfer, Hillman found that the plaintiffs likely would prevail on the merits. Unlike Shoyfer. Miller did not seek to block the preliminary injunction.

    But Hillman also cautioned the plaintiffs that more work was needed and that the “depiction of Shoyfer as a ‘Top Level Promoter’ who swindled TelexFree victims out of millions of dollars is, on the current record, nothing more than unsupported rhetoric.”

    NOTE: Our thanks to the ASD Updates Blog.




     

     

  • SHADES OF ZEEK: Prospective Class-Action Defendant Tells Judge TelexFree Was Operating A Tax Scam

    newtelexfreelogoIn October 2014, federal prosecutors alleged that the Zeek Rewards MLM “program” shut down by the SEC two years earlier was in part a scam that caused “victim-investors to file inaccurate tax returns for phantom income they never actually received.”

    Now, a year later, a member of the TelexFree MLM scheme shut down by the SEC and other agencies last year is telling a federal judge that it appears TelexFree engaged in accounting fraud that caused him to pay taxes on income he never actually received.

    The claim was made in an Oct. 7 defense filing by Daniil Shoyfer, whom private plaintiffs want to make the lead defendant in a class-action case that effectively would sue Shoyfer and 20,000 other alleged TelexFree net winners believed to have collected money directly from recruits.

    Unlike Zeek’s Paul Burks and Dawn Wright-Olivares, alleged TelexFree operators James Merrill and Carlos Wanzeler have not been charged criminally with tax offenses. But the assertion by Shoyfer gives rise to questions about whether they and others could be as the federal probe of the enterprise continues. Merrill and Wanzeler currently face charges of wire fraud.

    Shoyfer, through attorneys from two Boston law firms, says U.S. District Judge Timothy S. Hillman should not permit the plaintiffs to amend the complaint to make him the class-representative. He further contends that “TelexFree has engaged in what appears to be fraudulent accounting practices intending to show that it paid Mr. Shoyfer in excess of $750,000 – however this is simply false.”

    “Although TelexFree credited Mr. Shoyfer with large amounts to his TelexFree account, he never withdrew or had access to the vast majority of these funds,” he contended through counsel.

    Shoyfer did not identify who might have helped TelexFree hatch a bogus accounting scheme. The SEC, in 2014, charged former TelexFree CFO Joseph H. Craft of Boonville, Ind., with securities fraud. Craft is an accountant. In its civil complaint, the SEC alleged Craft “has been the chief financial officer of other multi-level marketing companies” in addition to his work for TelexFree.

    From Shoyfer’s argument (italics added/light editing performed):

    Mr. Shoyfer worked with TelexFree from March of 2013 through April of 2014 . . . Over the course of those thirteen months, Mr. Shoyfer received a total of $122,000 from TelexFree . . . However, Shoyfer also spent many thousands of dollars in expenses in order to make this money from TelexFree . . . Mr. Shoyfer estimates that he paid nearly $60,000 to TelexFree in order to be a part of the MLM (including dozens of purchases of the $1,425 AdCentral Family packages, . . . plus other expenses . . . Contrary to the allegations in the proposed amended complaint, Shoyfer never earned $300,000 per week . . . Mr. Shoyfer cannot afford to be the class representative in this lawsuit: it would almost certainly bankrupt him (again), and it would work an immeasurable hardship on his wife, his daughter, his unborn daughter, his two sons, his father, his sister and others that depend on him.

    The argument describes Shoyfer as a teenager when he fled the Soviet Union for America years ago with his mother to escape “persecution because of their Jewish heritage.”

    Living in the United States, Shoyfer, now believed to be in his forties, eventually became a full-time occupational therapist who started a staffing business in that profession and also dabbled in MLM, according to the argument.

    Shoyfer asserts that he believed TelexFree to be legitimate.

    “Prior to TelexFree closing down and being charged with fraudulent acts, Mr. Shoyfer had no knowledge that TelexFree was engaged in any unlawful, unfair, or improper practices,” his lawyers argued. “To the contrary, Mr. Shoyfer relied upon the statements of TelexFree’s officers and legal representatives that TelexFree was a fully legitimate and legal enterprise . . . Mr. Shoyfer had no reason to believe otherwise (nor did he) until TelexFree and its officers were charged.”

    More from the argument (italics added/light editing performed):

    The defense costs Mr. Shoyfer would have to absorb as the named defendant for the putative defendant class would easily exceed the amounts he received from TelexFree and he, therefore, has no incentive to pay the defense costs of being the named defendant . . . If a defendant class is certified, Mr. Shoyfer intends to opt out of the class . . . Mr. Shoyfer has no interest in being lumped together with 20,000 or so other defendants, some of whom may have known more than he did about TelexFree’s activities and the purported pyramid scheme, and some of whom liked caused Mr. Shoyfer to suffer damages himself.

    The argument further contends Shoyfer is a good son and sibling who sends between $200 and $300 each month to both his father in Russia and his sister in Lithuania. He also has paid support of about $2,000 a month since 2008 for two children from his first marriage. Shoyfer now has a child with his second wife, with another child on the way.

    In June 2015, The PP Blog reported that Shoyfer also was promoting a scheme known as MyAdvertisingPays — or MAPS, for short. MAPS resembles the AdSurfDaily Ponzi scheme, a $119 million fraud uncovered by the U.S. Secret Service in 2008.

    Kenneth D. Bell, the Zeek receiver, has raised questions about MLMers moving from one fraud scheme to another.

    NOTE: Our thanks to the ASD Updates Blog.




     

  • Judicial Panel Of United States Moves TelexFree-Related Lawsuits To Massachusetts

    Carlos Wanzeler. From YouTube.
    Carlos Wanzeler. From YouTube.

    The United States Judicial Panel on Multidistrict Litigation has moved TelexFree-related litigation pending in federal courts in other states to Massachusetts. A directive ordering the transfers for the sake of judicial efficiency was issued on Oct. 21.

    Some plaintiffs from outside of Massachusetts sued TelexFree and other defendants in federal courts in Florida, Georgia and North Carolina. The order moves all of these cases to federal court in Massachusetts and puts them in the hands of U.S. District Judge Timothy S. Hillman, who is presiding over the criminal cases against TelexFree figures James Merrill and Carlos Wanzeler.

    Wanzeler has been deemed an international fugitive by U.S. federal prosecutors. He was born in Brazil, a country that has its own TelexFree-related investigations at both the state and federal levels.

    The U.S. Judicial Panel order provides yet another example of how cross-border MLM HYIP schemes that involve hundreds of thousands of people can lead to severe economic fallout and tidal waves of litigation that strain the resources of all parties involved. There are at two government actions against TelexFree and at least six private actions, all occurring while a court-appointed bankruptcy trustee for TelexFree is conducting an investigation.

    The great irony of the cases is that TelexFree, while operating, was presented as a means of making lives easier, a rising tide that would lift all boats. Serial promoters of fraud schemes continue to push similar “programs,” often using appeals to religious faith and lost economic opportunity as a lure

    From the order (italics added):

    On the basis of the papers filed and the hearing session held, we find that the actions listed on Schedule A involve common questions of fact, and that centralization in the District of Massachusetts will serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation.

    These actions share factual questions relating to the allegation that the TelexFree companies operated a Ponzi pyramid scheme involving the recruitment of investors in marketing TelexFree’s telephone service plan and that defendants directly participated in or aided and abetted the alleged scheme. Centralization will eliminate duplicative discovery; prevent inconsistent pretrial rulings, especially with respect to class certification; and conserve the resources of the parties, their counsel and the judiciary.

    Weighing all factors, we are persuaded that the District of Massachusetts is the most appropriate location for this litigation. The events giving rise to the alleged claims primarily occurred in Massachusetts, which is the principal place of business of the TelexFree companies. The federal and state enforcement actions against TelexFree and affiliated individuals are pending there. Thus, the primary witnesses and other evidence likely will be located in Massachusetts. Additionally, transfer of actions to this district will facilitate coordination with the TelexFree bankruptcy cases, which also are pending in this district. The Honorable Timothy S. Hillman, to whom we assign this litigation, presides over the related criminal action and thus is familiar with the factual and legal issues presented by these actions. We are confident he will steer this litigation on a prudent course.

    Current cases listed in Schedule A that began outside of Massachusetts and now have been moved there include:

    GUEVARA v. MERRILL, ET AL., C.A. No. 1:14-22405 (Southern District of Florida).

    COOK v. TELEXELECTRIC, LLLP, ET AL., C.A. No. 2:14-00134 (Northern District of Georgia).

    Cases already residing in Massachusetts include:

    GITHERE, ET AL. v. TELEXELECTRIC, LLLP, ET AL., C.A. No. 1:14-12825.

    MARTIN, ET AL. v. TELEXFREE, INC., ET AL., Bky. Adv. No. 4:14-04044.

    CELLUCCI, ET AL. v. TELEXFREE, INC., ET AL., Bky. Adv. No. 4:14-04057.

    FERGUSON, ET AL. v. TELEXELECTRIC, LLLP, ET AL., C.A. No. 4:14-40138 (transferred from the Eastern District of North Carolina).

  • BULLETIN: Prosecutors Ask Judge Not To Release Money To TelexFree Figure James Merrill

    James Merrill
    James Merrill

    BULLETIN: Federal prosecutors handling the criminal case against TelexFree figure and alleged co-owner James Merrill have asked a judge not to release $4 million Merrill says he needs to pay for his criminal defense.

    On July 1, Merrill asked for an evidentiary hearing aimed ultimately at securing “an order returning the identified funds” to him.

    TelexFree might be the largest MLM HYIP pyramid- and Ponzi scheme in U.S. history, based on global reach, dollar volume and the number of affected recruits. Regulators have called it a cross-border fraud that gathered more than $1.2 billion.

    Prosecutors contended today that the “funds Merrill asks the Court to release, however, are investor funds — money victims gave to TelexFree during the course of the alleged fraud.”

    The funds were seized via warrants on April 24. Thirty-seven TelexFree-related seizure warrants were applied for that day, after an undercover probe led by Homeland Security Investigations, an arm of the U.S. Department of Homeland Security. TelexFree had declared bankruptcy 11 days earlier. At least five of the seizure warrants were targeted at Merrill accounts holding more than $4.18 million, according to court filings.

    In cases involving assets alleged to be forfeitable, prosecutors typically argue that the assets should be preserved until a trial occurs and a verdict on the alleged underlying crime that led to the seizures is returned. If such assets are returned prior to trial, they will be dissipated and thus lost to victims in the event of a finding of guilt.

    Beyond that, prosecutors contended, Merrill is not automatically entitled to an evidentiary hearing on the release of the funds and has not made a threshold showing that he lacks access to other funds to pay for his defense.

    “[Merrill] fails to submit any evidence in support of his bald assertion that the United States cannot establish probable cause as to forfeitability of the seized assets, and such failure is fatal to his request for a hearing,” prosecutors argued to U.S. District Judge Timothy S. Hillman of the District of Massachusetts.

    Boston-based attorney Robert M. Goldstein is defending Merrill.

    “[T]he government cannot establish probable cause to believe that the assets in dispute are traceable or otherwise sufficiently related to the crime charged in the criminal complaint,” Goldstein argued on July 1.

    Prosecutors asserted today that probable cause to seize the funds already had been established and that Merrill was trying to get a “sneak preview” at the criminal case against him. Merrill currently faces a single charge of wire-fraud conspiracy brought via criminal complaint in May.

    A grand jury has been impaneled, which means that other criminal charges are possible. Some TelexFree members have alleged that the company was a racketeering enterprise.

    Merrill’s co-defendant in the existing criminal case charging wire-fraud conspiracy is alleged TelexFree co-owner Carlos Wanzeler, described by prosecutors as  an international fugitive who first ducked out of the United States through Canada on April 15 and ultimately fled to Brazil.  April 15 was the date of a federal raid on TelexFree’s office in Marlborough, Mass.

    Prosecutors from the office of U.S. Attorney Carmen Ortiz of the District of Massachusetts are handling the criminal cases against Merrill and Wanzeler.

    NOTE: Our thanks to the ASD Updates Blog.

  • BULLETIN: Judge Frees TelexFree Figure James Merrill On Bail, But Imposes Tight Restrictions

    James Merrill.
    James Merrill.

    BULLETIN: (3rd Update 5:56 p.m. EDT U.S.A.) A federal judge in Massachusetts has permitted TelexFree figure James Merrill to be freed on bail, but has imposed tight restrictions.

    In granting Merrill bail, U.S. District Judge Timothy S. Hillman overruled U.S. Magistrate Judge David Hennessy, who agreed with federal prosecutors and ruled last month that Merrill should continue to be detained pending trial because he posed a flight risk.

    Hillman today yanked Merrill’s passport, placed him in the custody of his wife Kristen, ordered his wife to supervise him and “to notify the court immediately in the event the Defendant violates any conditions of release or disappears,” ordered three pieces of real estate to be used as collateral for a $900,000 bond, ordered Merrill to remain in Massachusetts and to seek permission to travel outside the state and ordered him not to seek international travel documents.

    In addition, Hillman imposed an 8 p.m. to 8 a.m. curfew on Merrill, ordered him to wear an electronic monitoring bracelet and to “avoid all contact directly or indirectly, with any persons who are or who may become a victim or potential witness in the subject investigation or prosecution and any co-conspirators.”

    At this stage, the judge said in his bail ruling, the government “has presented a strong case against Merrill,” but “has failed to meet its burden of proof that no condition or combination of conditions would assure the Defendant’s presence” at trial on a charge of wire-fraud conspiracy.

    Merrill’s family bonds and community ties in Massachusetts appeared to have weighed heavily in the judge’s decision to free Merrill on bail. Regardless, Hillman placed travel restrictions on Merrill’s wife and children.

    “The Defendant’s wife and children must agree to surrender their passports and agree not to seek new passports or international travel documents without prior written approval of the Court,” Hillman ruled.

    The bail ruling does not mean that TelexFree has been found not to be a pyramid- or Ponzi scheme. Rather, it means that Merrill can go free pending trial. Some TelexFree affiliates falsely have claimed repeatedly that the “program” has been cleared of fraud charges.

    From the judge’s ruling (italics/carriage returns added):

    This Court recognizes that Merrill, if convicted, could face a substantial sentence and that the case against Merrill appears, at this juncture, to be a strong one. Additionally, the government argues that Merrill, unlike many white collar criminals, has both a place to flee to and the means to go there. It is this factor that Magistrate Judge Hennessey’s decision to detain Merrill relied most heavily upon. However, this Court finds the government has not been able to offer enough concrete evidence supporting this argument to overcome the factors discussed above which weigh against Merrill’s risk of flight.

    While the government has identified overseas accounts belonging to TelexFree, it cannot show how much money is in these accounts nor that Merrill is able to access them; in fact the affidavit of TelexFree’s interim CEO states that Merrill no longer has signatory authority over any accounts. Moreover, while the government points to Merrill’s international network of supporters, it has not offered proof that there are any individuals, with the possible exception of [co-defendant Carlos] Wanzeler, who would actually help Merrill flee.

    Prosecutors have contended that TelexFree had “a disturbingly cult-like quality” and that U.S. promoters would be in position to assist Merrill in going on the lam. Wanzeler allegedly fled to Brazil after TelexFree’s headquarters in Marlborough, Mass., was raided on April 15.

    Prosecutors said they had no comment on the bail decision.