telexfree-logoAs required by Local Rule 116.5, yesterday the US government provided an update on the discovery process in the case against James Merrill and Carlos Wanzeler.

Founders of the billion dollar Ponzi scheme TelexFree, Merrill and Wanzeler were indicted on charges of fraud and conspiracy back in July.

The government has provided substantial discovery to date, but discovery is not complete.

As of the date of this report, the government has produced an electronic database containing most of the data and records the government has collected via subpoena while investigating this case (about 100,000 pages).

The government has also made several productions of additional material in response to specific requests from counsel, including all bank and brokerage records, and has made available the electronic evidence seized during execution of search warrants in April 2014.

Still in the process of being digitally cataloged for production are

  • about 40 boxes of documents seized from TelexFree’s offices in Marlborough, Massachusetts, in April 2014
  • about 81 gigabytes of data (about 355,000 pages) received in October 2014 from the Trustee supervising TelexFree’s affairs in bankruptcy
  • additional financial records received from the U.S. Securities & Exchange Commission pursuant to an access request, and from Homeland Security Investigations, totaling approximately 12 boxes of material
  • the results of five email search warrants served on or about September 25, 2014

Regarding the emails,

as of this date, the government has only received materials for one of the email accounts and is following up with the other internet service providers.

Two additional items of particular interest appear on the filed update, with specific respect to the activities of TelexFree’s top investors:

  • the results of a search warrant served on Google, Inc., on or about October 16, 2014, for a substantial amount of video content held by its subsidiary, YouTube.
  • various recordings made by undercover HSI agents at TelexFree conferences and in conversations with a TelexFree promoter

Naturally who HSI agents secretly recorded hasn’t been disclosed at this stage, but it does confirm the attendance of US regulators at TelexFree events – something we weren’t previously aware of.

Given the environment at such events, it’s likely that whoever they recorded provided the agents with a whole heap of incriminating evidence as they sang the praises of TelexFree.

The Google search warrant is also interesting, as it suggests regulators are hoping to recover promotional and perhaps secret unlisted videos that might have been deleted after TelexFree was shut down.

The “substantial amount” of video content requested again suggests regulators are amassing a sizable mountain of incriminating evidence against Wanzeler and Merrill.

The government intends to process this material, except for audio and video content, into the database format preferred by counsel and produce it, in a single batch, to supplement the database the government produced earlier.

In light of the above, and in keeping with the Court’s designation of this matter as a “complex case”, the government suggests an interim status conference in approximately 60 days.

In the meantime an upcoming status conference had been scheduled for October 30th. James Merrill’s lawyers however are unfortunately tied up with another case, so he’s requested the conference be postponed to November 6th.

Carlos Wanzeler meanwhile remains a fugitive on the run in Brazil.


Footnote: Our thanks to Don @ ASDUpdates for providing a copy of the US government’s “Status Report”.