Trustee in TelexFree Case Details Alleged Fraud
3/3/2015
The court-appointed bankruptcy trustee in the TelexFree case said in a recent filing that the company took in over $1 billion in only 16 months from almost 1.9 million participants. Stephen Darr, the trustee, said he could not be certain the information was accurate because "the physical books and records available to the trustee are extremely limited and incomplete." He said TelexFree's principals have provided no assistance to his office. The filing lists $172 million in assets and $23.4 million in liabilities, mainly taxes owed to the Commonwealth of Massachusetts and the IRS.
TelexFree filed for federal bankruptcy protection in April 2013, shortly before being shut down by regulators for allegedly committing fraud by promising large returns on investment to participants who paid around $1,400.00 and promoted the company in online ads and among their friends and family members. TelexFree's two principals, Carlos Wanzeler and James Merrill, allegedly withdrew millions of dollars from the company shortly before the company was shut down. They are facing up to 20 years in prison if found guilty of fraud. Merrill is under house arrest awaiting trial. Wanzeler fled the country for Brazil, which does not have an extradition treaty with the U.S. Brazilian authorities are also pursuing a fraud case against TelexFree.
Darr intends to set up an electronic system for TelexFree participants to file claims. No funds will be distributed until the conclusion of the criminal proceedings.