While state and federal prosecutors in Massachusetts have secured more than $150 million of the $1 billion raised by alleged investment fraud, known as “TelexFree”, victims’ claims for restitution have yet to be processed. Authorities have said that these funds will not be available until the conclusion of the U.S. Department of Justice’s criminal case against the perpetrators of the fraud, Carlos Wanzeler and James Merrill. The court handling TelexFree’s pending bankruptcy proceedings also has approved a method for disbursing funds.
October 31, 2014 – In April 2014, Massachusetts Secretary of State, William Galvin, filed a complaint against Carlos Wanzeler and James Merrill, alleging that their company, TelexFree, Inc., was operated as a Ponzi scheme. The company operated out of Marlborough and raised almost $1 billion worldwide, which includes over $90 million from Massachusetts residents.
This purported investment fraud primarily targeted Brazilian Americans by selling Voice over Internet Protocol (VoIP) programs, which provided discount long-distance phone call services. Participants made investments of either $289 or $1,375, which bought them advertisement kits for TelexFree’s VoIP programs. Investors could earn a 200-250% return by placing daily ads online. Members were also paid $100 for recruiting another investor, and up to a 3% commission on their recruits’ sales. This compensation model is similar to a traditional pyramid scheme.
September 24, 2014 – Fidelity Bank in Fitchburg, Massachusetts, has agreed to pay $3.5 million dollars to the Massachusetts Secretary of State’s Office to settle claims that it allegedly allowed TelexFree Inc. to open bank accounts, without properly screening the company. TelexFree was an alleged investment fraud, which purported to sell discount, long-distance phone plans. The company was operated by Massachusetts residents James Merrill and Carlos Wanzeler and primarily solicited Brazilian and Dominican immigrants by selling “accounts” for about $1,400 and paying investors $100 per week to assist with marketing the company. TelexFree raised over $900 million from thousands of investors. The company was started in Brazil and had its U.S. headquarters in Marlborough.