U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23788 / March 24, 2017
Securities and Exchange Commission v. TelexFree, Inc. et al., No. 1:14-cv-11858-DJC (D. Mass. filed Apr. 15, 2014)
United States v. Carlos Nataniel Wanzeler and James Matthew Merrill, No. 14-cr-40028-TSH (D. Mass. filed May 9, 2014)
Massachusetts-Based TelexFree President Sentenced to 6 Years Imprisonment for Operating Pyramid Scheme
On March 22, 2017, James M. Merrill, of Ashland, Massachusetts, the former president of TelexFree, Inc. and TelexFree, LLC, was sentenced to 6 years in federal prison and 3 years of supervised release for his role in operating a pyramid scheme through TelexFree.
On May 9, 2014, Merrill and another defendant, Carlos N. Wanzeler, who is a fugitive located in Brazil, were charged in a federal criminal complaint with conspiracy to commit wire fraud. The criminal charges against Merrill arose out of the same fraudulent conduct alleged by the SEC in a complaint filed in April 2014. The SEC's complaint alleged that TelexFree, Merrill, Wanzeler, and other defendants claimed to run a multilevel marketing company that sold telephone service based on "voice over Internet" (VoIP) technology but actually were operating an elaborate pyramid scheme. In addition to charging Merrill and the company, the SEC charged several other TelexFree officers and promoters, and named several entities related to TelexFree as relief defendants based on their receipt of ill-gotten investor funds.
The SEC's action, which remains pending against all parties, seeks injunctions against each of the defendants from further violations of the charged provisions of the federal securities laws, disgorgement of ill-gotten gains, and civil monetary penalties, among other things.
For further information, see Litigation Release Nos. 22974 (Apr. 17, 2014) (SEC Halts Pyramid Scheme Targeting Dominican and Brazilian Immigrants); 22992 (May 13, 2014) (Criminal Charges Filed Against Two Principals of Massachusetts-Based Telexfree); 23450 (Jan. 20, 2016) (Florida Resident Ordered to Jail Based On Violating Court Orders Obtained by the SEC); 23678 (Oct. 25, 2016) (Telexfree President Pleads Guilty to Operating Pyramid Scheme in Related Criminal Action).