TelexFree News

TelexFree Fugitive Loses Citizenship

Npros.com | 2/24/2018

Wanzeler left the United States for Brazil the day federal authorities raided TelexFree's headquarters in 2014. The U.S. had been negotiating for Wanzeler's return, but Brazil does not extradite its citizens. Revoking Wanzeler's citizenship may be Brazil's first step toward extradition.

Brazil's Ministry of Justice cited that Wanzeler was losing his citizenship because he obtained American citizenship in 2009. Wanzeler's attorneys in Brazil appealed the ruling.

Wanzeler and TelexFree co-founder and CEO, James Merrill, were indicted on multiple fraud charges in the U.S. in 2014. Merrill pleaded guilty and was sentenced to six years in federal prison. Brazilian authorities are separately prosecuting TelexFree and its owners.

TelexFree President Sentenced

Npros.com | 3/26/2017

Merrill founded TelexFree with business partner Carlos Wanzeler, who is a fugitive living in Brazil.

Merrill's lawyer submitted dozens of written statements from friends and relatives of Merrill, describing a generous, naive man who could not have masterminded a complicated pyramid scheme. Prosecutors said that although Wanzeler was the "prime mover" in the enterprise, Merrill chose not to tell authorities that the company was engaged in fraud and continued to profit from it.

"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," acting U.S. Attorney William D. Weinreb said in a statement.

Agents Seize Approximately 20 Million in Scheme to Launder TelexFree Funds

Press Release | 2/2/2017

Cleber Rene Rizerio Rocha, 28, was charged in a criminal complaint with one count of conspiring to commit money laundering. Rocha was detained following an appearance today before U.S. District Court Magistrate Judge Judith G. Dein.

According to the complaint, in April 2014, federal agents searched the headquarters of TelexFree, Inc., in Marlborough, Massachusetts. Later that day, Carlos Wanzeler, one of the founders of the company, allegedly fled to Brazil, his native country, where he has remained. Wanzeler and TelexFree co-founder James Merrill were indicted in July 2014 on charges that they operated TelexFree as a massive pyramid scheme. Merrill pleaded guilty to those charges in October 2016 and is awaiting sentencing.

The complaint alleges that an intermediary working on Wanzeler’s behalf contacted an associate for help transferring millions of dollars of TelexFree money—still hidden in the greater Boston area—from the United States to Brazil. The associate, who subsequently became a cooperating witness for the government, allegedly arranged with Wanzeler’s nephew in Brazil to launder the cash through Hong Kong, convert it to Brazilian reals, and transfer it to Brazilian accounts.

According to court documents, Rocha, acting as a courier for Wanzeler’s nephew, flew from Brazil to JFK Airport in New York City a few days ago. Yesterday, Rocha met the cooperating witness at a restaurant in Hudson, Massachusetts, and allegedly gave him $2.2 million in a suitcase. After the meeting, agents followed Rocha to an apartment complex in Westborough, Massachusetts, and later arrested him. That night, federal agents searched an apartment at the Westborough complex and seized a massive stockpile of cash hidden in a box spring. The cash appears to total approximately $20 million.

The charging statute provides for a sentence of no greater than 20 years in prison, three years of supervised release, and a fine of $250,000 or twice the gross gain or loss, whichever is greater. Actual sentences for federal crimes are typically less than the maximum penalties. Sentences are imposed by a federal district court judge based on the U.S. Sentencing Guidelines and other statutory factors.

United States Attorney Carmen M. Ortiz and Matthew Etre, Special Agent in Charge of Homeland Security Investigations in Boston, made the announcement today. Assistant U.S. Attorneys Andrew E. Lelling and Neil J. Gallagher Jr. of Ortiz’s Economic Crimes Unit are prosecuting the case.

The details in the complaint are allegations. The defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

Press release courtesy of the U.S. Attorney’s Office, District of Massachusetts.

TelexFree President Pleads Guilty

Npros.com | 10/29/2016

TelexFree originated in Brazil before moving operations to Marlborough, MA, sold VOIP phone-service plans. It promised annual returns of 200% or more for members, known as "Promoters," who recruited mew members and placed TelexFree advertisements on free ad sites, according to the Securities and Exchange Commission.

In reality, prosecutors said, TelexFree was a pyramid scheme, bringing in only a fraction of its revenue from sales of VOIP service and paying the returns it had promised to its existing promoters only with the money derived from recruiting new members.

Merrill accepted a plea agreement just weeks before he was scheduled to go to trial on nine counts stemming from the fraud, which resulted in the collapse of TelexFree in 2014. The deal will limit his sentence to no more than 10 years in prison, sparing him from a possible 180 years if he had been found guilty at trial. Merrill's business partner, Carlos Wanzeler, fled to Brazil in 2014 and has avoided extradition.

TelexFree Exec Requests Suppression of Evidence

Npros.com | 6/17/2016

Meanwhile, the trustee in TelexFree's bankruptcy case filed a class action lawsuit against TelexFree representatives who were "net winners" in the company, demanding that they pay back their earnings so that the funds can go to those who lost money.

A website (telexfreeclaims.com) has been set up for participants in TelexFree to file claims for alleged losses.

Claims Against TelexFree May be Filed Starting April 1

Npros.com | 2/28/2016

Claimants will have to wait months for any potential repayments, as funds that were seized from TelexFree by Federal authorities will not be release until a verdict is reached in the government's criminal case against the company and its former owners.

The trial is scheduled to begin in October. James Merrill and Carlos Wanzeler are both facing criminal and civil fraud charges. Merrill was released on bail with a GPS monitoring device, while Wanzeler fled to his native Brazil before being arrested. US authorities have been negotiating to bring him to Massachusetts for trial.

TelexFree Rep Jailed for Contempt

Npros.com | 1/19/2016

Rodrigues had been given a deadline of January 15 to return $233,473 transferred out of his bank accounts, as well as the proceeds from the sale of real estate and cars. When he failed to do so, he was arrested.

Bankruptcy Judge Finds TelexFree Operated a Fraudulent Scheme

Npros.com | 12/4/2015

TelexFree, which offered VOIP service plans, took in about $360 million in cash from its members, though only about $6.6 million was from the actual sale of services. The company sought Chapter 11 protection last year, but its offices were raided by federal agents, and federal prosecutors issued warrants seizing all known assets.

Judge Hoffman's ruling applies only to TelexFree's bankruptcy proceedings and does not necessarily implicate the company's principals, James Merrill and Carlos Wanzeler, in wrongdoing. Merrill and Wanzeler have already been indicted on criminal fraud charges. Merrill pleaded not guilty and is under house arrest pending trial. Wanzeler traveled to his native Brazil before he could be arrested.

Lawyers in TelexFree Case Seek to Delay Trial

Npros.com | 11/24/2015

Both the Assistant U.S. Attorney prosecuting the case and Merrill's defense attorney said they need more time to go through data retrieved from TelexFree's computers and arrange for witnesses. U.S. District Judge Timothy S. Hillman took the request under consideration.

First Group of Claimants Receive TelexFree Settlement Checks

Npros.com | 8/16/2015

This first group of claimants to receive restitution from the $3.5 million fund was derived from records subpoenaed from TelexFree and individuals who contacted the Securities Division. A statement from the Secretary of State said that a second group eligible for distribution will be those individuals who submitted claims but for whom additional information is needed to validate their claim.

Class-Action Lawsuit Filed Against TelexFree

Npros.com | 4/16/2015

The lawsuit alleges that Bank of America and PricewaterhouseCooper continued to do business with TelexFree after learning the company had been shut down in Brazil for conducting a pyramid scheme. According to the complaint, Bank of America questioned TelexFree about its business in spring of 2013 and "had echanges with TelexFree about terminating their relationship and discontinuing the service of their accounts, but never did."

The complaint also alleges that PricewaterhouseCoopers "negligently advised" TelexFree to prepare inaccurate 1099 tax forms to participants who had lost money with the company.

In 2014, Massachusetts Secretary of State William F. Galvin negotiated a $3.5 million settlement with another service provider, Fidelity Bank of Fitchburg, for allegedly allowing TelexFree to open accounts without thoroughly vetting the business.

Trustee in TelexFree Case Details Alleged Fraud

Npros.com | 3/3/2015

TelexFree filed for federal bankruptcy protection in April 2013, shortly before being shut down by regulators for allegedly committing fraud by promising large returns on investment to participants who paid around $1,400.00 and promoted the company in online ads and among their friends and family members. TelexFree's two principals, Carlos Wanzeler and James Merrill, allegedly withdrew millions of dollars from the company shortly before the company was shut down. They are facing up to 20 years in prison if found guilty of fraud. Merrill is under house arrest awaiting trial. Wanzeler fled the country for Brazil, which does not have an extradition treaty with the U.S. Brazilian authorities are also pursuing a fraud case against TelexFree.

Darr intends to set up an electronic system for TelexFree participants to file claims. No funds will be distributed until the conclusion of the criminal proceedings.

TelexFree Victims May Have a Long Wait to Settle Claims

Npros.com | 11/28/2014

$3.5 million which resulted from a settlement by Massachusetts Secretary State William F. Galvin may soon be made available to reimburse victims. Galvin secured the funds by suing Fidelity Bank, which is run by the brother of TelexFree principal, James Merrill. The bank neither admitted nor denied Galvin's claims that it failed to fully vet TelexFree as a client, but settled the lawsuit. Claimants who wish to apply for funds must be Massachusetts residents.

An additional $150 million could be held up for some time. Before any claims against the funds seized by the Department of Justice or held in TelexFree's bankruptcy case can be processed, the company's principals must be found guilty of criminal fraud and the court must approve a claims process. Victims who want to apply for funds from the US Attorney's office must fill out an online claim form in English on an FBI website. Many of the victims are undocumented immigrants, which may make them reluctant to file a claim, despite assurances that doing so will not bring them to the attention of immigration authorities.

It will be challenging for authorities to determine how much each claimant is owed. Many alleged victims do not understand that they can only claim the amount they put into TelexFree, not the profits they believe they were owed.

Warning Issued Against iFreex, Possible Offshoot of TelexFree

Npros | 10/2/2014

"iFreex appears to have many of the same characteristics as other pyramid schemes the Securities Division has recently brought actions against, including Wings, TelexFREE and WCM777," the news release said.

Group Represents TelexFREE Victims

Npros.com | 9/18/2014

According to bankruptcy court records, three law firms have asked the court to release funds for legal counsel provided to TelexFREE when it filed for bankruptcy in April. A letter filed by a lawyer representing the victims' committee asked the court to either disallow the firms' applications for payment or postpone a decision on them until an official committee to represent TelexFREE's creditors has been created by the bankruptcy trustee.

TelexFree Accountant Denies Wrongdoing

Npros.com | 8/10/2014

Craft, who was not an employee of TelexFree, performed accounting services for the company from October 2012 until April 2014, when he was prevented from removing a bag containing $38 million in cashier's checks from TelexFree's offices during a raid by federal agents. Craft admitted that as of March 2014, he was aware that TelexFree appeared to be operating a Ponzi scheme. He said he served as the company's interim chief financial officer for a "few days" in April at the request of TelexFree's reorganization team but denied being the company's "actual CFO." Craft's lawyer argued that the SEC failed to show that Craft was liable for any claim, as he never promoted TelexFree's services, directed anyone to its website, signed financial statements or performed an audit.

Feds Seek Assets in TelexFree Case

Npros.com | 8/3/2014

The TelexFree case is moving forward in both criminal and bankruptcy court, raising the question of who would handle repayment of victims should prosecutors win their case against co-founders James Merrill and Carlos Wanzeler. The trustee in the bankruptcy case said he and the U.S. Attorney's office are cooperating, and that any assets attained by forteiture will be made available to victims.

TelexFree Owners Indicted in Federal Court

Npros.com | 7/25/2014

Wanzeler and Merrill were charged Wednesday with a nine-count indictment in U.S. District Court in Worcester, Mass.

TelexFree, which promoted Internet phone services to its customers, was operating as a pyramid scheme according to the federal indictment.

The indictment includes eight counts of wire fraud, and seeks $140 million seized from TelexFree's account and other assets forfeited by the owners. The indictment also claims Merrill wired over $10 million in company funds to personal accounts controlled by himself and Wanzeler.

Each count carries a maximum sentence of 20 years.

Merrill is currently released on bail, however Wanzeler is at large and considered a fugitive from justice.

U.S. Challenges Merrills Bid for Access to Funds in TelexFree Case

Npros.com | 7/15/2014

U.S. Attorney Mary B. Murrane, in a 15-page submission to the court, said "The funds Merrill asks the court to release...are investor funds - money victims gave to TelexFree during the course of the alleged fraud. The defendant cannot use forteitable victim funds to pay for his defense, much less an unusually expensive one."

Merrill, who has been charged with conspiracy to commit wire fraud, claimed in his initial request to the court that he needed "extraordinary funds" to pay for his legal defense and that it is the government's responsibility to prove the money was connected to the charge against him.

U.S. Attorney Murrance argued that defendants are not entitled to a hearing to determine whether their assets were obtained from their alleged crime. She also said that Merrill did not adequately explain why he needed such a large amount to pay for his defense, nor did he prove he did not have any other assets at his disposal. She asked the court to deny his request for the funds and his request for a hearing on the matter.

TelexFree President Seeks Release of Frozen Assets

Npros.com | 7/2/2014

Merrill's attorneys said that the amount they are requesting be made available is based on the magnitude of the crime he has been charged with, and the costs of defending white-collar cases such as his.

Also included in the filing was a petition to the court to release funds that attorneys say are related to Merrill's commercial cleaning business and not TelexFree, a request that was unopposed by the SEC.

Judge Allows Bail for TelexFree Co-Owner

Npros.com | 6/18/2014

The judge cited Merrill's "strong family and community ties" in his decision, noting that Merrill and his wife have been married for 23 years, have lived in Ashland, MA since 1997, and have three children. In addition, he cited Merrill's record of coaching youth sports and his lack of a prior arrest record.

Merrill will be required to wear a GPS ankle bracelet and be placed in his wife's custody. He must remain in his house every day from 8 PM to 8 AM and must relinquish his passport.

Trustee Appointed for TelexFREE, Class Action Lawsuits Filed

Npros.com | 6/9/2014

Meanwhile, three class-action lawsuits seeking in excess of $10 billion have been filed against TelexFREE on behalf of plaintiffs in North Carolina, Massachusetts, and Nevada.

The Securities and Exchange Commission and the Massachusetts Secretary of State have both charged TelexFREE with securities fraud. One of the company's co-owners, James Merrill, is being held in federal custody, while the other, Carlos Wanzeler, has fled to Brazil. Merrill is petitioning the court to allow home detention at his Massachusetts home under conditions including surrender of his and his wife's passports, GPS monitoring, and payment of a $900,000 personal recognizance bond. Prosecutors have said Merrill is a flight risk. Merrill's attorney pointed out that despite being aware of the government's criminal investigation, Merrill did not take the opportunity to flee to avoid prosecution, unlike his co-defendant.

TelexFree Co-Owner Denied Bail

Npros.com | 5/25/2014

Prosecutors said Merrill has access to hundreds of millions of dollars in accounts around the world and motivation to flee because, at age 53, he could in effect be facing life in prison. Merrill's lawyer argued he was not a flight risk and planned to appeal.

Merrill's partner, Carlos Wanzeler, fled to Brazil and is considered a fugitive. Wanzeler's wife, Katia, who was arrested as she tried to leave the country last week, has been released.

Wife of TelexFree Co-Owner Arrested While Trying to Flee Country

Npros.com | 5/17/2014

Carlos Wanzeler drove into Canada as agents raided the TelexFree offices in April and flew to Brazil two days later.

A court document released on Thursday alleged that Ms. Wanzeler misled investigators about her husband's whereabouts and participated in moving huge sums of money out of TelexFree bank accounts.

When Homeland Security Investigations agents visited the Wanzeler family home on April 17, Katia wanzeler told them that her husband was staying at a hotel. In reality, he had already left the country.

TelexFree filed for federal bankruptcy protection on April 13. In February, a total of $3.5 milion was moved from a TelexFree bank account into one in Katia Wanzeler's name. On April 11, Ms. Wanzeler and TelexFree co-owner James Merrill allegedly went to a bank in Connecticut to obtain more than $27 million in cashier's checks. One of the checks, for more than $2 million, was made out to Katia Wanzeler.

At a federal court hearing in Brooklyn on Thursday, Ms. Wanzeler was denied bail. Her lawyer said she had no reason to flee the country and had been planning to return at the end of the month. The prosecutor informed the judge that Wanzeler had checked four suitcases weighting 70 pounds and was carrying $3,000 in cash. The judge ordered that Wanzeler remain in the custody of U.S. Marshals to ensure that she appears before a grand jury next week.

Carlos Wanzeler and James Merrill have been charged with conspiracy to commit wire fraud and could be sentenced to 20 years in prison if found guilty. Wanzeler, who has dual U.S. and Brazilian citizenship, entered Brazil using a Brazilian passport. Brazilian authorities have refused to return him to the United States because the U.S. does not have an extradition treaty with Brazil.

TelexFree Owner Arrested

Npros.com | 5/10/2014

The US Securities and Exchange Commission and Massachusetts Secretary of State are investigating TelexFree. The company's assets have been frozen by the SEC, which filed a civil suit against it in April, accusing it of operating a pyramid scheme. Authorities say that TelexFree recruited "promoters" to buy into the company for about $300 to $1,400, then post ads for its Voice Over IP product online. Promoters were compensated not with money generated by the ads, but from the buy-ins of those subsequently recruited.

An undercover Homeland Security investigator who was recruited by TelexFree in October was told that by a company representative that it wasn't necessary to sell products to earn money and that with a $1425 investment the agent could earn $100 a week without selling any product, by posting ads online and recruiting others.

In court records, authorities said that a review of TelexFree's bank accounts revealed that out of thousands of deposits, only 19 were related to sales of the company's VOIP service.

TelexFree Owner Appears to Have Left the US

Npros | 5/8/2014

Federal and Massachusetts regulators sued and froze TelexFree's assets last month, alleging that it was a pyramid scheme. A criminal grand jury in Boston is investigating the case.

On Wednesday, a federal bankruptcy judge in Las Vegas moved TelesFree's case to Massachusetts after the Securities and Exchange Commission argued that there were no grounds to file the case in Las Vegas. TelexFree's lawyers said the company filed for bankruptcy protection in Nevada so that it can reorganize the business. The SEC said there is nothing to reorganize, as the company had no meaningful business to speak of.

TelexFREE Sets Up In Canada

Npros.com | 4/27/2014

TelexFREE's U.S. website has been taken down, but the Canadian version remains up. The B.C. Securities Commission has not said whether it is investigating TelexFREE.

SEC Urges Federal Judge to Move TelexFREE Case to MA

Npros.com | 4/25/2014

According to the filing, the hastily filed bankruptcy on a Sunday evening in Las Vegas, just two days before the Marlboro, MA TelexFREE offices were raided, was an act of "blatant forum shopping".

The SEC urged the judge not to reward such behavior.

The US Department of Justice has also requested control over the company and assets during the pending bankruptcy. Over thirty-eight million dollars in cashier's checks were recovered when the company's CFO, Joseph H. Craft, attempted to leave the building after a judge ordered the company's assets frozen.

TelexFree Issues Statement

Press Release | 4/19/2014

Earlier this week, TelexFREE filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. The Chapter 11 filing is intended to protect TelexFREE assets, quantify legitimate claims, restructure our operations, and establish a firm foundation for the future. The Chapter 11 filing further demonstrates our belief in the strength of our core business and products and the enthusiasm and dedication of our independent sales associates as well as our determination to protect the assets of the Company and maximize the recoveries for all constituents.

We remain confident in the Company's long-term business prospects and the value of the services we provide to customers. Unfortunately, the precipitous and unnecessary actions taken by the state and federal agencies have temporarily suspended the VoIP services TelexFREE customers rely on. The Company disputes the material allegations made by these agencies and regrets that their actions impede our ability to continue to serve our customers, restructure our operations, and thereby emerge as a stronger and more competitive company.

TelexFREE believes the Chapter 11 process is the most effective vehicle available to address the concerns of all constituencies, including the purported concerns of the state and federal agencies. We intend to address the pending legal proceedings against it through the Court process.

We remain confident that the value of our products, the benefits we provide our customers, and the outstanding entrepreneurial opportunities we provide our independent sales associates ultimately will be recognized and misunderstandings about our business model will be resolved.

Alvarez & Marsal North America, LLC is serving as restructuring advisor to the Company and Greenberg Traurig, LLP and Gordon Silver are serving as legal advisors to TelexFREE.

38M in Checks Recovered as CFO Flees TelexFree

Npros.com | 4/18/2014

The SEC received approval from a Federal judge to freeze the assets of TelexFree and 8 principals and associates of the company. The SEC's civil complaint names TelexFree owners, James M. Merrill, Katia B. Wanzeler and Carlos N. Wanzeler, as well as four of the company's top representatives: Steven M. Labriola, Santiago De La Rosa, Randy N. Crosby, and Faith R. Sloan. It also names Sanderley Rodrigues de Vasconcelos, who was sanctioned by federal securities regulators in 2006 for defrauding consumers through a prepaid phone card company called FoneClub.

The SEC alleges that TelexFree's financial records showed that it has transferred $30 million to the principals and affiliated companies since November 2013, and tens of millions more in customer funds are unaccounted for.

TelexFree's lawyer has not responded for requests for comment.

TelexFree Headquarters Raided by Feds

Npros.com | 4/17/2014

Massachusetts Secretary of State William F. Galvin's office said that TelexFree targeted mainly Brazilian immigrant communities, offering annual returns of up to 250 percent. TelexFree was shut down in Brazil last year for fraud, and has been under investigation in countries around the world since last summer.

TelexFree has denied the allegations of fraud in press releases. The company's US website was taken down on Tuesday.

State SEC Charges TelexFREE

Npros.com | 4/15/2014

TelexFree Files for Bankruptcy

Press Release | 4/14/2014

TelexFREE expects that it has cash on hand to support the business throughout its reorganization and to maintain services to its customers. In connection with the Chapter 11 filing, the Company announced that it has conducted a thorough review of its operations, including its multi-level marketing and pricing structure, and has determined that adjustments will be necessary to more effectively capitalize on the strong demand for its voice over internet calling product, rationalize its promotional expenses and ensure that its sales programs are compliant with applicable legal requirements.

The Company announced its intention to restructure its debt obligations, unveil and promote new products (including its TelexFREE app and TelexMobile), and return to growing its customer base in an effort to realize the Company's full potential to generate significant value for its constituents.

Stuart MacMillan, interim Chief Executive Officer of TelexFREE, said, "We anticipate that our global operations will continue to provide our customers with the high-quality products and services they have come to expect. We are taking this major step because we continue to believe in our business, our products and the enthusiasm of our world-class team. We believe that this restructuring plan, which will include significant enhancements to our governance practices and internal controls, will help us to build a stronger and more sustainable financial and operational foundation for the future."

The Company has filed customary "First Day Motions" with the Bankruptcy Court which, if granted, together with the plan, will help ensure that the restructuring process proceeds in an orderly manner.

MacMillan continued, "As a result of the filing of the chapter 11 cases, TelexFREE anticipates that it will have the time to build a solid foundation based on a compensation plan that rewards sales associates and promoters for customer acquisition and the promotion of well-established and new products. Our collective success depends on our united commitment to offer our customers the finest communications products and services available anywhere in the world. I look forward to moving through the process quickly with the support of our independent sales associates during this transition and the ongoing dedication of our customers."