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.
In addition to Wanzeler and Merrill, the Secretary’s complaint also named as defendants company executives, Steve Labriola and Carlos Costa, and the company’s top promoter, Sann Rodrigues. Rodrigues has a history of fraudulent behavior and was previously charged in a similar telecommunications scheme in 2006 and consequently barred from selling securities by the Securities and Exchange Commission (“SEC”).
TelexFree has filed for Chapter 11 Bankruptcy protection, and Wanzeler and Merrill are facing federal criminal charges for wire fraud and conspiracy. Merrill is out on bail awaiting trial, while Wanzeler has fled to Brazil, a country that does not extradite its own citizens.
The Secretary of State’s lawsuit is ongoing, and includes investigating third parties’ association with the alleged scheme.
Sources: TelexFree Complaint, BostonGlobe.com, and BostonGlobe.com
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