U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23933 / September 12, 2017
Securities and Exchange Commission v. TelexFree, Inc. et al., No. 14-cv-11858 (D. Mass. filed Apr. 17, 2014)
SEC Obtains Final Judgments Against Officers of Pyramid Scheme Targeting Latino Community
The Securities and Exchange Commission announced that it has obtained final judgments in a fraud case against the co-owner and president and the CFO of a pyramid scheme targeting Latino communities.
The final judgments, entered on September 12, 2017 by consent by a federal district court in Boston, Massachusetts, permanently enjoin both James M. Merrill, of Ashland, Massachusetts, and Joseph H. Craft, of Kevil, Kentucky, from violating Sections 5 and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, impose conduct-based injunctions on both men, a permanent officer-and-director bar on Merrill, and a five-year officer-and-director bar on Craft. Merrill's final judgment deems his liability of approximately $3.6 million in disgorgement and prejudgment interest satisfied by the order of restitution in the related criminal case. Craft's final judgment to pay $298,708 in disgorgement and prejudgment interest and a $50,000 penalty is deemed satisfied by the order requiring Craft to transfer certain assets to settle an adversary action against Craft and his business filed by Stephen Darr, the Chapter 11 Trustee of TelexFree LLC, TelexFree, Inc., and TelexFree Financial, Inc. in the bankruptcy case.
In settling the SEC's charges, Craft admitted to preparing financial statements provided to telecommunications regulators, as well as a financial regulator, materially overstating the pyramid scheme's income.
Merrill and Carlos N. Wanzeler, the other co-owner and treasurer of TelexFree - were previously charged criminally. Merrill pled guilty to the criminal charges and was sentenced to six years' imprisonment. Wanzeler is a fugitive from justice. The SEC has previously obtained final judgments by consent against the international sales director and a promoter of TelexFree, who also was ordered to jail for civil contempt arising from his repeated violations of court orders.
The SEC's litigation continues against TelexFree, Wanzeler, and the remaining promoters of the alleged TelexFree pyramid scheme.