Ponzi Record

United States, Brazil ยท About two years to April 2014, according to the US Attorney's Office

TelexFree

The US Attorney's Office said TelexFree sold a VOIP phone service but that payouts came from new participants rather than product sales. It said participants paid $1,425 or $339 to join and received weekly payments for posting online ads, and that about 98 percent of revenue over two years came from new buy ins. The SEC described it as a pyramid scheme.1,2

Losses as statedThe US Attorney's Office said about 1,855,000 participants lost money, with total losses of about $3,045,000,000, and that at its April 2014 bankruptcy TelexFree owed about $6 billion to participants but had about $120 million on hand.1
Victims as statedThe US Attorney's Office said nearly 2 million people participated, mainly from the US, Brazil, China, Portugal, Peru, Italy and Russia.
Recovered for investorsThe Boston Globe reported on 9 July 2020 that the bankruptcy court approved a plan by trustee Stephen Darr to disburse more than $150 million to about 100,000 victims, with an initial distribution of 39 to 43 percent of approved claims.3

People and outcomes

James M. Merrill

Pleaded guilty in October 2016 to one count of wire fraud conspiracy and eight counts of wire fraud. Sentenced on 22 March 2017 by Judge Timothy S. Hillman to six years in prison and three years of supervised release, and agreed to forfeit about $140 million and other assets.1,2

Response: Merrill pleaded guilty, according to the US Attorney's Office.1
Carlos N. Wanzeler

Charged in the US alongside Merrill in a federal criminal complaint on 9 May 2014. Not convicted in the US. Described by the SEC in March 2017 as a fugitive located in Brazil. This status is as of March 2017. Later proceedings in Brazil are not covered here. Named as a defendant in the SEC civil action, which the SEC said in March 2017 remained pending.2

Response: No public response is recorded in the sources reviewed.2

Timeline

  1. SEC files civil complaint against TelexFree and its officers.2
  2. TelexFree files for bankruptcy.1
  3. Merrill and Wanzeler charged in a federal criminal complaint.2
  4. Merrill pleads guilty.1
  5. Merrill sentenced to six years in prison.1
  6. Bankruptcy court approves plan to disburse more than $150 million, the Boston Globe reports.3

Sources

  1. US Attorney's Office, District of Massachusetts, Former president of TelexFree sentenced for billion dollar pyramid scheme (22 March 2017)
  2. US Securities and Exchange Commission, SEC Litigation Release No. 23788 (24 March 2017)
  3. The Boston Globe, TelexFree bankruptcy judge approves $150 million for pyramid scheme victims (9 July 2020)