TelexFree Trustee goes on clawback rampage
Dating back to early March, the TelexFree Trustee has filed no less than thirteen clawback lawsuits against non-investors who profited from TelexFree.
Under counts of fraudulent transfer filed in adversary proceedings, the parties the TelexFree Trustree is suing are as follows:
TelexFree’s owners, their families and manual credit net-winners
Providing some insight into the behind-the-scenes operation of a billion dollar Ponzi scheme, the Trustee has filed a lawsuit against TelexFree’s owners and members of their respective families.
TelexFree was a money-making machine for its Principals and the defendants.
The Principals and their associates reaped great rewards from involvement in the scheme, to the detriment of the vast majority of participants who were net losers.
In December 2013, the Principals collectively withdrew $10,000,000 from TelexFree.
The Principals additionally bilked money out of TelexFree in at least two other ways – by having related parties acquire membership plans and become Net Winners who recovered more from he scheme than they invested, and by having TelexFree issue so-called “manual credits” to relatives and associates of the Principals that could be sold for cash to other Participants.
The Principals enlisted relatives and other associates int heir implementation of the massive TelexFree fraud.
Certain Participants who were relatives or surrogates of the Principals received net winnings from their involvement in the scheme and used these net winnings to benefit themselves and the Principals.
The Principals also caused TelexFree to issue large amounts of “manual credits” – that is, credits unrelated to those credits generated from advertising and recruitment activity – to certain other individuals who were relatives or surrogates of the Principals.
These manual credits were then sold to other Participants for the benefit of the Principals and the Manual Credit Recipients.
Wheeling and dealing between a Ponzi scheme’s owners and their families? Just another day in the shady MLM underbelly…
Carlos Wanzeler (Co-owner, Treasurer and Director of TelexFree)
- Fabio Wanzeler is the brother of Wanzeler. Fabio Wanzeler had Net Winner Payments from participation in TelexFre totaling $511,828.
- Lyvia Mara Campista Wanzeler is the daughter of Wanzeler. Lyvia Mara Campista Wanzeler had Net Winner Payments from participation in TelexFree totaling $97,515.
- Maria Eduarda Wanzeler de Almeida e Souza is related to Wanzler. Maria Eduarda Wanzeler de Almerida e Souza had Net Winner payments from participation in TelexFree totaling $18,884.
- Drucila Wanzeler is related to Wanzeler. Drucila Wanzeler had Net Winner payments from participation in TelexFree totaling $15,678.
- Marisa Machado Wanzeler Salgado is related to Wanzeler. Marisa Machado Wanzeler Salgado had Net Winner payments from participation in TelexFree totaling $10,161
In total, Carlos Wanzeler’s family stole $654,066 from TelexFree victims.
Carlos Wanzeler himself stole at least $3.7 million dollars.
Carlos Costa (Co-owner, Principal and Senior Officer)
- Priscila Freitas Costa is the daughter of Costa. Priscila Freitas Costa had Net Winner payments from participation in TelexFree totaling $542,298.
- Ana Costa is related to Costa. Ana Costa had Net Winner Payments from participation in TelexFree totaling $1,499,350.
In total, Carlos Costa’s family stole $2,041,648 from TelexFree victims.
Carlos Costa himself stole at least $3.6 million dollars.
James Merrill appears to be the only TelexFree owner who didn’t involve his family (at least not directly).
Merrill himself stole at least $3.2 million dollars from TelexFree victims.
Net-winners who profited from manual credits
The amount of money top TelexFree investors accepted in exchange for generated credits within the system is staggering.
- Sandres Levis received manual credits totaling $29,526,000 ($29,489,858 were used)
- Nathana Santos Reis received manual credits totaling $25,249,566 (all credits were used)
- Renato Alves received manual credits totaling $16,074,651 ($15.2 million in credits were used)
- Michael Calazans received manual credits totaling $8,146,755 (all credits were used)
- Bruno Rangel Cardozo received manual credits totaling $4,477,523 (all credits were used)
- Robert Bourguingnon received manual credits totaling $2,913,701 (all credits were used)
- Fabio de Arraz Crispim received manual credits totaling $2,361,216 (all credits were used)
- Regina Celia Manhaes da Roza Regina Celia received manual credits totaling $2,341,414 (all credits were used)
- Sanderly Rodrigues received manual credits totaling $1,757,797 (all credits were used)
- Luis Ferreira received manual credits totaling $1,709,679 ($1,110,000 credits were used)
- Sheffa Montoya received manual credits totaling $1,508,234 (all credits were used)
- Vagner Roza received manual credits totaling $1,337,465 (all credits were used)
- Ana Costa received manual credits totaling $1,184,892 ($62,878 in credits were used)
- Fabio Faria received manual credits totaling $990,702 ($726,425 in credits were used)
- Febe Wanzeler de Almeida e Souza received manual credits totaling $900,000 ($900,000 in credits were used)
- Lelio Celso Ramires received manual credits totaling $726,425 (all credits were used)
For reference, these are credits generated when a TelexFree affiliate directly accepted payment for positions within the scheme.
New recruits paid the affiliate cash and in the affiliate generated a new account (based on how much was paid) using generated credits.
The used credits represents how much money an affiliate received versus the total amount of manual credits they generated.
In his lawsuit, the TelexFree Trustee is seeking the return of all profits earned illegally through TelexFree. The Trustee is also seeking additional damages across eleven counts of fraud.
In the fall of 2013, TelexFree entered into discussions with Sunwind Energy Group LLLP in relation to TelexFree LLC making a loan to or equity investment in the Sunwind Entities in the approximate amount of two million five hundred thousand dollars.
At some time after November 4, 2013, TelexElectric LLLP was formed and the terms of the agreement were changed so that TelexFree would advance mones to TelexElectric LLLP, an entity that Messrs. (Carlos) Wanzeler and (James) Merrill and (Carlos) Costa owned and controlled.
The revised agreement provided TelexElectric would make the loan to the Sunwind Entities.
In a nutshell, through TelexElectric, Sunwind Entities and Sunwind Energy Doyle North LLC, TelexFree’s owner’s laundered $2.5 million dollars.
The TelexFree Trustee is suing TelexElectric, Sunwind Energy Doyle North LLC, Sunwind Energy Solutions Doyle North LLC, Sunwind Energy Solutions LLLP and Sunwind Energy Group LLLP for $2.5 million dollars in fraudulent transfers.
Update 8th July 2016 – Sunwind Energy Group has settled with the Receiver for $2,608,889 plus over $423,497 in interest.
The proposed settlement agreement is currently pending approval by the court. /end update
Gerry Nehra and the law firm Nehra and Waak
Gerry Nehra and Nehra and Waak are providers of legal services and purportedly specialize in providing legal services to multi-level marketing companies.
Nehra and Nehra and Waak were retained by TelexFree in the spring of 2012 to provide advice with respect to the implementation of TelexFree’s business plan.
Nehra and Nehra and Waak failed to provide TelexFree with any compensable advice during the two years of their retention by TelexFree.
Instead Gerry Nehra was paid to send out cease and desist threats. BehindMLM received one such threat from Nehra back in 2013.
In fact, Nehra was actively involved in promoting TelexFree’s Ponzi scheme and duping participants.
The TelexFree Trustee is suing Nehra and Nehra and Waak for $23,975 in fraudulent transfers.
Joseph Craft, Craft Financial Solutions LLC and Craft Trust Financial LLC (aka Craft Trust Services LLC)
Joseph Craft began working for TelexFree in early 2012 and remained with TelexFree through the filing of the Chapter 11 cases.
Craft served as Chief Financial Officer for TelexFree for many months prior to the Petition Date. Notwithstanding that Craft rendered these serves individually, he arranged to have TelexFree compensate him through the other defendants.
The “other defendants” are Craft Financial Solutions and Craft Trust Financial, both owned by Craft.
Craft and the other defendants, acting through Craft, provided accounting, investment, and tax services to TelexFree and advised TelexFree respecting tax reporting and estimated tax payments.
In his position as Chief Financial Officer, Craft was uniquely situated to understand the unsustainability of TelexFree’s scheme.
Craft understood the amounts received from, and paid to, participants on an ongoing basis and that the VOIP sale revenues were wholly inadequate to sustain TelexFree’s obligations.
Craft and the other defendants, acting through Craft, were ultimately involved in, and fully understood, the nature of TelexFree’s Ponzi scheme.
The TelexFree Trustee is suing Joe Craft and his companies for $1,223,556 in fraudulent transfers plus damages.
Joele Frank Wilkinson Brimmer Katcher
Joele Frant Wilkinson Brimmer Katcher, upon information and belief, provides public relations services.
Two days before the (bankruptcy) Petition Date, TelexFree paid the sum of $85,000 to Joele Frank Wilkinson Brimmer Katcher as a “nonrefundable advance”.
Joele Frank Wilkinson Brimmer Katcher allegedly was not retained by TelexFree until April 11, 2014, two days before the bankruptcy filings.
Joele Frank Wilkinson Brimmer Katcher purportedly expended more than 180 hours providing public relations services during the period April 11, 2014 to April 13, 2014, with rates ranging up to $725 per hour.
Joele Frank Wilkinson Brimmer Katcher’s services related principally to preparing press releases and talking points for an ongoing Ponzi sceme.
The TelexFree Trustee is suing Joele Frank Wilkinson Brimmer Katcher for a sole $85,000 fraudulent transfer.
Update 8th July 2016 – On May 23rd the Trustee filed a proposed settlement agreement with Joele Frank.
Judge Hoffman has filed an endorsed order approving the agreement with a hearing scheduled for July 27th. /end update
Advent Communications Corporation
Advent Communications Corporation, upon information and belief, provides marketing services for multi-level marketing companies.
What services Advent Communication Corporation provided TelexFree isn’t specified, but they were paid over a hundred thousand dollars nonetheless.
The TelexFree Trustee is suing Advent Communications Corporation for $106,416 in fraudulent transfers.
ATW Training & Consulting INC.
ATW Training & Consulting INC., upon information and belief, provides corporate training seminars.
As with Advent Communications Corporation, the explicit nature of services provided to TelexFree by ATW Training & Consulting isn’t specified.
The TelexFree Trustee is suing ATW Training & Consulting for a sole $20,000 fraudulent transfer.
Update 23rd July 2016 – ATW Training and Consulting have reached a settlement with the Receiver.
ATW Training and Consulting were hired to create “employee manuals” for TelexFree employees.
As per the proposed settlement agreement, ATW Training and Consulting will pay back $7500. /end update
Hanna-Shea Consulting LLC
Hanna-Shea Consulting LLC, upon information and belief, provides executive placement services for companies purportedly engaged in direct sales.
Who Hanna-Shea Consulting LLC provided to TelexFree to hire is not disclosed, but they were paid $20,000 for their services.
The TelexFree Trustee is suing Hanna-Shea Consulting LLC for $20,000 in fraudulent transfers.
ISG Telecom Consultants LLC
ISG Telecom Consultants LLC, upon information and belief, provided assistance in obtaining state certification for VOIP services.
ISG Telecom Consultants assisted TelexFree in keeping up their VOIP charade, right up until the SEC shut TelexFree down in April, 2014.
The TelexFree Trustee is suing ISG Telecom Consultants for $747,973 in fraudulent transfers.
Infinium Wireless LLC
In the fall of 2013, TelexFree retained Infinium purportedly to build a mobile telephone application.
The mobile telephone application being built by Infinium was intended to be a joint venture between Infinium and Telex Mobile, LLC.
The owners of Telex Mobile, LLC were Carlos Wanzeler and James Merrill. TelexFree had no interest or rights int he product being developed by Infinium for which it was paying.
The TelexFree Trustee is suing Infinium Wireless LLC for $776,870 in fraudulent transfers.
Opt 3 Solutions INC. and Jay Borromei
In early 2013, TelexFree retained Opt 3 and Jay Borromei to provide website development and programming assistance, and compensation and network marketing advice.
Borromei was intimately involved in TelexFree’s affairs from early 2013 through the filing of the bankruptcy petitions in April 2014 and thereafter.
Borromei was a key figure in the implementation of the TelexFree Ponzi scheme.
Opt 3 and Borromei were at all relevant times insiders of TelexFree.
The TelexFree Trustee is suing Opt 3 Solutions INC. and Jay Borromei for $1,821,909 in fraudulent transfers plus damages.
Update June 17th 2016 – Citing potential unintended interference in the DOJ’s criminal case against James Merrill, the Trustee has sought a stay on clawback adversary proceedings until the conclusion of Merrill’s trial.