TelexFree Trustee hunting down insider funds?
Prior to TelexFree filing their bankruptcy petition, James Merrill, Carlos Wanzeler and other TelexFree insiders collectively sought to make off with almost $40 million in stolen investor funds.
When the FBI, Department of Homeland Security and Immigration and Customs Enforcement raided TelexFree headquarters, accountant Joe Craft was caught red-handed trying to make off $37.9 million dollars in cashiers checks.
These checks were made out to James Merrill, Carlos Wanzeler, his wife Katia Wanzeler, TelexFree LLC (owned by Wanzeler) and TelexFree Dominicana SRL, a murky entity registered in the Dominican Republic.
Thankfully Craft was made to surrender the checks and the funds were promptly seized.
Tasked with recovering TelexFree assets and putting together an accurate picture of company operations and structure, TelexFree Trustee Stephen Darr is now asking for permission to subpoena the banks and institutions who issued these checks.
To what end? At this stage we’re not entirely sure, with Darr only revealing that
several of the financial institutions maintained banking relationships with (TelexFree0 prior to the bankruptcy filings.
What is clear though is that Darr’s subpoena request will focus on the cashier checks Craft was caught with;
Certain cashier’s checks, made payable to the Debtors (TelexFree and management), were drawn on the financial institutions prior to the filings, and the Trustee requires additional information respecting these checks.
Named in the subpoena request are Bank of America, J.P. Morgan Chase, Citizens Bank, Digital Federation Credit Union, Oriental Bank, Santander, TD Bank and Wells Fargo.
Darr makes his latest request after trying to obtain information “informally”, unfortunately though with only “limited success”.
After his appointment, the Trustee was provided with cashier’s checks payable to the Debtors and drawn on each of the financial institutions.
Certain of the (sic) cashier’s checks were subsequently dishonored by the financial institutions.
Over the past few weeks, the Trustee has attempted to obtain information informally from the financial institutions respecting the dishonored checks, with partial success.
If his request is granted, Darr will be able to subpoena for
- communications between TelexFree, their principals and the financial institutions
- bank statements
- cancelled checks and other evidence of receipts and disbursements
- communications between the financial institutions and federal and state regulatory authorities and
- information respecting the remitters of the cashier’s checks and the reasons for the dishonor of such checks
The subpoena request is yet to be granted but I can’t see any reason it won’t be. Darr has previously already had two rounds of subpoena requests approved.
Whether these latest subpoenas will result in the further seizing of funds James Merrill and Carlos Wanzeler might have stashed away remains to be seen.
One would imagine though that whatever the Trustee finds, the information will be shared at some point with US regulators.
In related news, last Friday the Court of Acre denied TelexFree’s appeal against being previously ordered to pay for expertise.
Originally it had been ruled that TelexFree should foot the bill. TelexFree appealed the decision, arguing that Public Prosecutors (ie. taxpayers) should foot the bill instead.
The appeal was granted but the Public Prosecutors filed their own appeal, which was granted last Friday.
TelexFree is now required to pay the R$500,000 ($199,640 USD) cost of expertise in the case against them.
The decision is currently preliminary but is expected to be made final at a later date.
Carlos Costa, head of TelexFree in Brazil, has not been seen or heard from in public since his crushing electoral defeat last month.
You clearly are misinformed. In court proceedings and sworn court testimony, it was determined that Alvarez and Marsal were marshaling those funds to be deposited in a safety deposit box that was documented by Greenberg Traurig in the Bankruptcy Proceedings.
This information was backed up in court with emails between GT Alvarez and Marsal and the Interim CEO. Furthermore, those amounts were already accounted for in the court documents presented prior to the raid so he was hardly in a position to run off with them.
In addition the testimony under oath of the officers involved in the raid outlined that Mr Craft was actually not running out with checks as The Globe and you have reported, rather they were in his brief case with prepared bank deposit slips for the Telexfree Bank Account that was listed in the Bankruptcy Documentation.
It doesnt fit with your salacious narrative but hey, your a blogger not a lawyer.
Yet that’s exactly what he attempted to do. He was caught fleeing the premises.
This was a billion dollar fraud, they had their exit-strategy well planned out in advance. Complete will bullshit to back it up.
MacMillan was a plant, as evidenced by his complete lack of an understanding as to the workings of TelexFree.
They paid him for one purpose and one purpose only, to prop up the bankruptcy sham.
MacMillan was to the bankruptcy what VOIP was to TelexFree’s Ponzi scheme.
Too bad it all turned to shit when TelexFree was raided. Craft didn’t get out in time.
Bankruptcy… lol, that’s why Wanzeler fled the night before the raid and his wife lied about it.
Read the court transcripts. As it turned out he wasnt fleeing the premises, and the checks and briefcase were not even with him. Please at least try to stick to the facts.
Not everything that the Globe writes is true. The transcripts and the testimony of the officer and the accountant from A and M repudiated this original story but that shouldnt stop you.
Oh I have. Unless you went back in time and modified them since I last looked at them, Craft was court fleeing with a black sports bag.
When asked what was inside, he told an agent it contained “personal belongings”.
The agent searched the bag and $37 million worth of checks tumbled out.
It’s done son. Trying to rewrite history will get you nowhere.
Of course you’re correct.
I mean, who would believe one of the accused in a billion dollar fraud case would ever stretch the truth even a teensy, weensy bit.
Which ones (court documents)?
The April 30 declaration of William H. Runge is rather vague. It’s his understanding that Meighan (A&M) and Craft were about to leave the building when HSI raided TelexFree’s offices = Craft had the cashier checks in his possession when he was stopped and searched by an agent from HSI. Craft’s intention was to leave the building and to deposit the cashier checks in a safety box.
8-2.pdf (TelexFree Criminal case), e.g. paragraphs 9-12.
Docket 121 “the MacMillan declaration” may contain something
Docket 18 “the Bank Accounts Motion” may contain something
One problem is that William H. Runge’s declaration is rather vague on certain points, e.g. in the description of other transactions.
It hurts when proof is handed in your face, doesn’t it?
Telexfree is a billion dollar ponzi that ruined thousands of lives. You’re caught. Get over it.
I wonder which documents did you read… Is it one of those fantasy novels? Since the SEC declaration was quite clear:
Excerpted from “Supplemental Declaration of Scott Stanley, Esq, Staff Attorney, Boston regional Office, SEC” for TelexFree case.
This news is about the Brazilian politicians and Telexfree:
Either you can’t read, don’t read, or are being lied to. Those checks were recovered from Craft’s gym bag. They were introduced as evidence after the raid in support of a motion to convert the Temporary Restraining Order to a Preliminary Injunction.
This is the first time I have heard this bit of nonsense. Nobody prepares deposit slips if they intend to place checks in a safety deposit box.
The facts are known.
As I see it, the funds were withdrawn and intended for storage in a safety box to avoid having them seized outright by the SEC.
Though not a perfect plan, it at least left open the possibility that Greenburg could convince the Court that the bankruptcy was legitimate, that the SEC was wrong and that the checks were the property of the payees.
It was a real long shot to begin with, and this plan completely fell apart when the Fed’s discovered the checks in Craft’s gymbag.
There was some speculation that the checks were freely negotiable and that Merril and Wanzeler were going to cash them later. Possibly this is true but its difficult to see how they could actually have pulled that off since there was a record of the withdrawals etc.
There is very limited availability of transcripts and its not likely you read one, but if you did where is it?
There is, however a Declaration and it clearly supports the version that Craft was trying to leave the premises with the checks in a gym bag.
That advocates argued something in court does not mean an issue was “determined” or that a “determination” was made.
Case records constantly evolve. The record available to a judge and attorneys on both sides may vary day to day.
The sort of disingenuousness you are displaying with the “it was determined” claim is seen so much in MLM that one has to wonder if any MLM can be trusted.
In 2013, TelexFree promoters claimed this:
Like you with your “it was determined” claim, they were planting the seed that something that had not happened had, in fact, happened.
There also were suggestions that the SEC had approved TelexFree and that President Obama was on the TelexFree train.
In Brazil, the TelexFree cheerleaders are claiming that TelexFree has scored major wins in court and that the mere acceptance of the bankruptcy filing is proof no scam exists.
Earlier, they were claiming that the fact the Massachusetts Commonwealth Secretary had approved corporation status for TelexFree was proof no scam exists.
The Zeekers did the same thing. So did the ASDers. The three “programs” combined appear to have taken in more than $2 billion and affected hundreds of thousands if not millions of people.
Just wait until the record of the case evolves into final form. I suspect you’ll see a nuclear bomb of legal narratives — and it will be written by a lawyer.
I suspect it will say that:
* Street-level TelexFree members were cherry-picking so much cash that TelexFree did not know its real bottom line.
* That a black market popped up around TelexFree and that it was the rough equivalent of the black-market peso exchange in Colombia that has been linked to MLM “programs” and narcotics runners, mules and traffickers.
* That street-level TelexFree promoters were running smaller scams inside the much-larger TelexFree scams. When TelexFree collapsed, it caused multiple bubbles to burst, causing things such as foreclosures and car repossessions.
* That there are members of TelexFree who had no idea that they were members and that nominee accounts and other artifices were used.
* That subscammers under the TelexFree umbrella immediately launched new scams that had the same erosive effect on local economies in Massachusetts and elsewhere.
* That lots of money that originated in TelexFree drove the engines of the reload schemes and created a condition under which banks and payment processors were in possession of money that had been laundered twice — if not more than twice.
* That the TelexFree “extravaganzas” and the soccer sponsorship were an effort to channel Herbalife, which now has its own problems.
Very true and this of course applies to both sides. Just because the SEC, a cop or a Trustee makes a statement does not make it so either.
However when a cop files a Declaration under penalty of perjury stating that Craft was trying to walk out with checks, and Craft does not dispute this, the declaration is determined to be true and factual.
@james charles , ok, so lets go with you and lets say he was NOT fleeing with the cash.
How does that change the fact that Telexfree placed a motion for an order authorizing the Rejection of all contracts between telexfree and all promoters.
and i quote article 12
so. these bastards wanted to reject any and all agreement they ever made of ROI’s with their investors.
and you’re here crying tears over joe crafts attempt at sneaking away some funds????
clearly you are still defending the company, which means most likely you made a good share of profits in the scheme. so buckle up bucko, they comin’ for you…
I dont know. I also dont know what that has to do with the what I was saying.
If PP or Oz or KC or any one of you wants to take the time to review the bankruptcy documents which were filed on the Sunday night. They will find that the checks that Mr Craft was supposedly running away with were included in the assets that Telexfree was declaring as a a part of the bankruptcy process.
While the SEC wanted to make it appear that they had an accountant on the run in order to facilitate their freeze of assets; this was later proven to not actually be the case. To Hoss’ point; just because the SEC said it is so does not make it so.
People say lots of things to achieve what they need. its what they say under oath that is a little more meaningful. It would make no sense for Telexfree executives to declare funds that they were planning to run away with.
Rather, they would have been funds they chose NOT to declare like all the offshore monies that were found if indeed they were planning to have Mr Craft run off with them.
I just ask you to use your heads. The accountant running off with the money was an over reach and makes for a great part of the tv movie to follow but sadly could end up being one of those miss-truths that ends up freeing guilty people.
Andrew. I am not defending the company. I am trying to get people to focus on the facts not the fun ready for prime time drama. If you focus on salacious narratives that have proven to not actually be factual you could in fact undermine the real case against the truly guilty.
I am not crying tears at all. I am subtly pointing out that you have some stuff right but are running down rabbit holes that have nothing to do with the real issue.
Joe Craft was running off with cash. Thats my only point.
I don’t think there is much doubt that the “marshalling of assets anticipated SEC action. However, neither Alvarez & Marsal or Craft could have known the funds being transferred to the safety box were actually frozen by a Temporary Restraining Order since the TRO was sealed until after the raid was conducted.
Be that as it may, Craft was clearly in the wrong when he tried to depart with the checks during the execution of a search warrant. (The SEC retained them as evidence and they are assets of the estate.)
Predictably, the SEC made much of Craft’s actions, arguing that it proved that nobody associated with Telexfree could be trusted and that the Court should convert the TRO and asset freeze into a Preliminary injunction against the company and all the defendants…which it did.
The checks were payable to James Merrill, Carlos Wanzeler, his wife Katia Wanzeler, TelexFree LLC (owned by Wanzeler) and TelexFree Dominicana SRL, a murky entity registered in the Dominican Republic and within a week of obtaining the funds, Telexfree declared bankruptcy seeking to void all payments it owed to investors.
Its really indefensible.
The sooner you accept the bankruptcy proceedings as initiated by TelexFree was all bullshit, the easier this becomes.
This was all part of the attempted plant to stop paying investors, get out of jail free (remember the “automatic stay” ruckus) and escape with the money.
Wanzeler had already fled with a cut of the money (which he’s living off now), Craft had what was left. He was caught red-handed trying to flee the scene.
Ponzi schemes don’t get to file bankruptcy and their principals “escape”. There’s a reason TelexFree lost control of their bankruptcy proceedings.
They were full of shit. Leave enough breadcrumbs to put together a story that didn’t convince a Judge, yet somehow you’re still holding a torch.
The TelexFree insiders are frauds. Every single one of them.
The sooner you stop trying to read tea leaves in their toilet bowls the better. Everything they’ve filed in relation to their initial bankruptcy proceedings has been a lie, set in motion the day they hired their bankruptcy lawyers to try and get out of this.
The owners are have been indicted ffs. There isn’t even the remotest shred of legitimacy here.
Craft was caught sweaty. Had he of declared the checks and provided the agent the bullshit story they later filed, one could argue a stronger case against the agent who was actually there.
But he didn’t. He wasn’t truthful about the contents of his bag and tried to run. He might have been an ignorant pawn but facts are facts.
I assume you are speaking of Sunday April 13th the night Telexfree filed its bankruptcy petition. There are 9 filings on that first day. What document # are you referring to?
Was? or was not? running off with the cash?
^^ For the record I didn’t edit the above comment, that’s what he wrote verbatim.
Docket #19 Runge Declaration……
“13. In addition, the Debtors are currently in the possession of several cashier’s checks in amounts that are approximately $38 million. These cashier’s checks are currently stored in a secure safety deposit box controlled by the Debtors. The Debtors’ Interim CEO and CFO
control, or will soon control, access to the safety deposit box. The Debtors intend to deposit
these cashier’s checks into an escrow account that is to be established by the Debtors after seeking authorization from the Court.
14. The Debtors’ transition into chapter 11 will be significantly less disruptive if the Accounts are maintained following the commencement of the Chapter 11 Cases with the same account numbers until the Debtors can rationalize their cash management system.”
………Docket #18 The “Cash Management Motion” provides exhibits listing all bank accounts related to Telexfree entities with further explanation where appropriate. The Wells Fargo Account upon which the cashiers checks in Craft’s bag were drawn is mentioned and specifically refers to Katia Wanzeler.
Pyramid moved $ 1.4 billion and ‘debtors’ had only 38 million, and checks? it’s a misery. joke. waste of time to discuss it.
1 + 1 = 2 What else is there to discuss?
Runge says 1 + 1 = 3.
OMG IF YOU WOULD ALL JUST READ THE COURT DOCUMENTS!
IT’S RIGHT THERE, SCAMMERS SAY IT EQUALS 3.
Just because the SEC says 1 + 1 = 2 doesn’t make it so.
It must be nice to be so rich that $38 million means nothing.
Only if you take TelexFree declarations “at face value”. And why should you do so when they are out to screw you?
Remember who the checks are made out to? To TelexFree Dominican republic, to Wanzeler’s wife Katia… etc. etc.
How can that be “TelexFree assets”? If it’s TelexFree assets it’d be made out to TelexFree itself.
You’re looking at evidence that doesn’t fit your “pre-existing beliefs” and you’re refusing to revise your existing beliefs due to overwhelming evidence. Instead, you’re trying to ‘bargain’.
You are going through the 5 stages of grief, but eventually you’ll get to ‘acceptance’. There’s no avoiding reality. Denial is merely a phase.
No, you’re trying to get people to focus on TelexFree’s own “narrative”, which does NOT have to be true. It’s merely their legal position.
The cashiers checks were Telexfree assets regardless of who the payees were. Per bankruptcy law they would have been deemed fraudulent conveyances and pulled back into the estate.
Additionally, once Greenburg filed the Runge Declaration disclosing the total amount of the checks and where they were believed to be located, the checks became known assets of the estate, no different than any other asset except as to form and location.
Since the checks were negotiable and not in a safety deposit box three days after Runge said they were anything is possible.
Another document on the daughter of Carlos Costa
Minor update: Wanzeler and Merrill have been granted access to over $400,000.
The money is in a bank account under the name Brazilian Help Inc., a company started prior to TelexFree.
No word yet on a decision about the $4 million Merrill has requested access to.
New documents on the site in KCC: (1/13/2015)
Verified Statement of Plaintiffs’ Counsel Pursuant to Bankruptcy Rule 2019
Notice of Appearance and Request for Service of Papers by the Interim Lead Class Counsel and Plaintiff’s Interim Executive Committee
Thanks for keeping track of that. Looks like lawyer admin stuff, nothing too important.