You are on page 1of 54

U N I ~ L ' E I ~ STATE S DI STRI CT COU RT

DI STRI CT OF MASSACHU SE TTS
SE CU RI TI E S AN D E XC~ I AN GE COMMI SSI ON ,
P l a i n t i f f ,
v.
TE L E XFRE E , I N C.,
TE L E XFRE E ,L L C,
JAME S M. ME RRI L L ,
CARL OS N . WAN ZE L E R,
STE VE N M. L ABRI OL A,
JOSE P H H. CRAFT,
SAN DE RL E Y RODRI GU L S DE VASCON CE L OS.
SAN TI AGO DE L A ROSH,
RAN DY CROSBY a n d .
FAI TH R. SL OAN ,
Def en d a n t s,
a n d
TE L E XFRE E FI N AN CI AL , I N C.,
TE L E XE L E CTRI C, L L L P a n d
TE L E X MOBI L E HOL DI N GS, I N C.,
Rel i ef Def en d a n t s
Ca se N o.1:14- c i v- 11858- N MG
.1U RY TRI AL DE MAN DE D
AME N DE D COMP L AI N T
P ursua n t t o Rul e 15( a ) ( 1) ( B) of t h e Fed era l Rul es of Ci vi l P roc ed ure, p l a i n t i f f Sec uri t i es
a n d E xc h a n ge Commi ssi on (" t 11e Commi ssi on" ) submi t s t h i s emen d ed Comp l a i n t a l l egi n g t h e
f ol l owi n b a ga i n st d ef en d a n t s Tel exFree, I n c ., Tel exFree, L L C, Ja mes M. Merri l l , Ca rl os N .
Wa n zel er, St even M. L a bri ol a , Josep h H. Cra f t , Sa n d erl ey Rod ri gues d e Va sc on c el os
(" Rod z- i gues" ) , Sa n t i a go De L a Rosa , Ra n d y Crosby, a n d Fa i t h R. Sl oa n , a n d rel i ef d ef en d a n t s
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 1 of 54
" 1 , e l e x F r e e F ' i i z a l l c i a l , I , ~ 7 c . , T e l e x E l e c t r i c , LLLC, a nd T e l c ? ~ I V l o b i l e Ho l di nb s, I nc . , a nd he r e b y
de ma nds a j Li r y t r i a l :
PRE LI MI NARY ST AT E ME NT
L T hi s c a se i nvo l ve s a ma ssi ve Po nz i a nd pyr a mi d sc he me o pe r a t e d b y T e l e x F r e e ,
I nc . a nd T e l e x F t • e e , LLC ( c o l l e c t i ve l y, " T e l e x F r e e" ) a nd t he e i g ht i ndi vi du a l de fe nda nt s: fo u r
pr i nc i pa l s o f " T ` e l e x F r e e a nd fo u r pi° o i ni ne nt pr o mo t e r s. T e l e x F r e e i s a " mu l t i - l e ve l ma r ke t i ng "
c o mpa ny wi t h i t s he a dqu a r t e r s i n Ma r l b o r o u g h, Ma ssa c hu se t t s. I t pu r po r t s t o b e i n t he b u si ne ss
o f se l l i ng t e l e pho ne se r vi c e pl a ns t ha t La se " vo i c e o ve r i l l t e r ne t " (" V o I P" ) T e c hno l o g y. F r o m
Apr i l ? 01 2 t o Apr i l 201 4, T e l e x F r e e a nd i t s t wo o wne r s Me r r i l l a nd Wa nz e l e r , a ssi st e d b y
c o m~ a a ny i nsi de r s La b i - i o l a a nd Cr a ft a nd pr o mo t e r s su c h a s Ro dr i g u e s, De La Ro sa , Cr o sb y a nd
S1 Qa n, r a i se d mo r e t ha n $340 mi l l i o n fr o m hu ndr e ds o f t ho u sa nds o f i nve st o r s wo r l dwi de ,
i nc l u di ng ma ny me mb e r s o f t he B r a z i l i a n a nd Do mi ni c a n i mmi g r a nt c o mmu ni t i e s i n
Ma ssa c hu se t t s, t hr o u g h a fr a u du l e nt a nd. u nr e g i st e r e d o ffe r i ng o f se c u r i t i e s. ( T e l e x F r e e pu b l i c l y
c l a i ms t o ha ve r a i se d i 7 ~ o r e t ha n $1 b i 1 1 i o 1 1 fr o m mo r e t ha n 7 00, 000 i nve st o r s. ) T he se c u r i t i e s
t o o k t he fo r m o f " me mb e r shi ps" t ha t pr o mi se d su b st a nt i a l r e t u r ns — 200% pe r ye a r o r mo r e —fo r
b e c o mi ng " pr o mo t e r s" o f t he b u si ne ss. T e l e x F r e e pr o mi se d t o pa y i nve st o r s fo r pl a c i ng a ds o n
o b sc u r e c l a ssi fi e d a d si t e s o n t he I nt e r ne t a nd r e c r u i t i ng o t he r i nve st o r s t o do t he sa me . T he
me mb e r shi p t e e s fr o m i nve st o r s c o nst i t u t e d 99% o f t he mo ni e s t a ke n i n b y T e l e x F r e e . Pr i o r t o
Ma r c h. 9, 201 4, T e l e YF r e e di d no t r e qu i r e i nve st o r s t o se l l t he V o I P se r vi c e i n o r de r t o qu a l i fy fo r
pa yme nt s.
2. De spi t e t he mi sl e a di ng a ppe a r a nc e o f ha vi ng a l e g i t i ma t e V o I P b u si ne ss, t he
de fe nda nt s a c t u a l l y o pe r a t e d a n e l a b o r a t e Po nz i a nd pyr a mi d sc he me . B a se d o n t he i nfo r ma t i o n
2
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 2 of 54
a v a i l a b l e t o d a t e , Te l e xFre e 's re v e nue s fro m re t a i l Vo IP sa l e s —a b o ut $1.3 mi l l i o n i n t wo y e a rs —
we re b a re l y 0.1% o f t h e a i 7 l o uni ne e d e d t o h o no r i t s pro mi se s t o i nv e st o rs wh o pl a c e d i i 7 t e rne t
a d s — ne a rl y 5 1.1 b i l l z o n~ . As a re sul t , i n c l a ssi c fa sh i o n, Te l e xFre e pa i d i t s e a 1- l i e r i nv e st o rs, no t
wi t h re v e nue s fro m se l l i ng t h e Vo IP se rv i c e , b ut wi t 11 i l 7 o ne y re c e i v e d fro m l a t e r i nv e st o rs.
3. Te l e xFre e h a s b e e n a mo ne y - ma ki ng ma c h i ne fo r t h e i nd i v i d ua l d e fe nd a nt s. Th e
c o mpa ny 's fn~ ~ nc i ~ l 1- e c o rd s i l ~ d i c a t e t h a t , fro m mi d - No v e mb e r 2013 t h ro ug h z ni d - Apri l 2014,
Te l e xFre e t ra nsfe rre d a ppro xi ma t e l y $33 mi l l i o n t o t h e i nd i v i d ua l d e fe nd a nt s, t h e i r Fa mi l y
me mb e rs, a nd c o mpa ni e s t h e y c o nt ro l l e d ( i nc l ud i ng t h e re l i e f d e fe nd a nt s) . S e v e ra l o f t h e
d e fe nd a ~ z t s use d i nv e st o r fi u~ d s t o suppo rt a l a v i sh l i fe st y l e o f l a rg e h o me s a nd e xpe nsi v e c a rs.
Te ns o f mi l l i o ns o f i nv e st o r fund s re c e i v e d b y Te l e xl 're e a i • e pre se nt l y una c c o unt e d fo r.
4. Tl i e sc h e me c o l l a pse d b e g i nni ng i n Ma rc h 2014. On Ma rc h 9, 2014, Te l e xFre e
c h a ng e d i t s c o mpe nsa t i o n pl a n so t h a t i nv e st o rs wo ul d no w b e re q ui re d t o se l l t h e Vo IP se rv i c e
i z z o rd e r t o q ua l i fy fo r pa y me nt s t h a t . h a d pre v i o usl y b e e n pro mi se d t o t h e m. Th e c h a ng e
b e ne i • a t e d a st o rm o f pro t e st s fro m i nv e st o rs wh o po st e d h o st i l e c o mme nt s o n t h e Int e rne t . On
1~ pri 1 1, d o z e ns o f i nv e st o rs d e sc e nd e d o n t h e c o mpa r7 y 's o ffi c e i n Ma rl b o ro ug h t o c o mpl a i n — i n
pa rt b e c a use , a s o ne o f t h e m t o l d t h e p1• e ss, t h e Vo IP se rv i c e i s "a l mo st i mpo ssi b l e t o se l l". On
t h e e v e ni ng o f S und a y , Apri l 13 —fa c e d wi t h i nv e st i g a t i o ns b y st a t e a nd fe d e ra l a ut h o ri t i e s i n
Ma ssa c h use t t s — Te l e xFre e fi l e d fo r b a nkrupt c y i n Ne v a d a und e r Ch a pt e r 1 1, a d mi t t i ng t h a t i t
c o ul d no t me e t i t s o b l i g a t i o ns wi t h i t s Vo IP re v e nue s a nd se e ki ng t o re j e c t a l l i t s c o nt ra c t s wi t h
i nv e st o rs. ( Th e b a x7 l c rupt c y c a se h a s si nc e b e e n t ra nsfe rre d t o Ma ssa c h use t t s.) On Apri l 14, t h e
Ma ssa c h use t t s S e c uri t i e s D i v i si o n fi l e d a n e nfo rc e me nt a c t i o n a g a i nst Te l e xFre e , I7 1c . a nd
Te l e xFre e , LLC. On Apri l 15 , fe d e ra l a g e nt s e xe c ut e d se a rc h wa rra nt s a t t h e c o mpa ny 's o ffi c e
3
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 3 of 54
i X a Ma rlborough a nd s e i z e d docume nts ( i ncludi ng $3~ n7 i lli on of ca s hi e r' s che cks ) a nd the
compute r s e rv e rs . Als o on Apri l 15, the C oi nr~li s s i on fi le d the compla i nt i n thi s a cti on, a tld the
ne xt da y, the C ourt e nte re d a n e x pa t~te te mpora ry re s tra i ni ng of° de r, orde r fre e z i ng a s s e ts , a nd
orde r for oi li e r e q ui ta ble re li e f On Apri l 24, fe de ra l a uthori ti e s obta i ne d t~u~ne rous w a rra nts to
s e i z e prope r° ty re pre s e nti ng proce e ds from the Te le xFre e s che me . On Ma y 9, a fe de ra l cri mi na l
compla i nt w a s fi le d a ga i ns t Me 1ri 11 a nd Wa nz e le r, cha rgi ng the m w i th cons pi ra cy to commi t
w i xe fra ud. Me rri ll i s curre ntly i n cus tody; Wa nz e le r ha s fle d the country.
5. Through the a cti v i ti e s a lle ge d i n thi s Ame nde d C ompla i nt, the de fe nda nts ha v e
e nga ge d i n: ( a ) C ra udule nt oi ° de ce pti v e conduct i n conne cti on w i th the purcha s e or s a le of
s e curi ti e s , i n v i ola ti on of S e cti on 10( b) of the Excha nge Act of 1934 (". Excha nge Act") a nd
Rule l Ob-5 the re unde r; ( b) fra ud i 7 1 the offe r or s a le of s e curi ti e s , i n v i ola ti on of S e cti on 17 ( a ) of
the S e curi ti e s Act of 1933 ("S e curi ti e s Act"); a nd ( c) the offe r or s a le of unre gi s te re d s e curi ti e s ,
i ~ v i ola ti on of S e cti on 5 of the S e curi ti e s Act. Tn a ddi ti on, Me rri ll a nd Wa nz e le r v i ola te d
S e cti on. 20( a ) of the Excha nge Act a s control pe rs ons of Te le xFre e , I nc. a nd Te le xFre e , LLC .
6. The C ommi s s i on s e e ks : ( a ) a pe rma ne nt i nj uncti on prohi bi ti ng the de fe nda nts
from furthe r v i ola ti ons of the 7 -e le v a nt p1° ov i s i ol~s of the fe de ra l s e curi ti e s la w s ; ( b) di s gorge me nt
of the de fe nda nts ' a nd re li e f de fe nda nts ' i ll-gotte n ga i ns , plus pre j udgme nt i nte re s t; a nd ( c) ci v i l
pe na lti e s due to the e gre gi ous ma ture of the de fe nda nts ' v i ola ti ons .
JURI S DI C TI ON
7 . The C ommi s s i on s e e ks a pe rma ne nt i nj uncti on a nd di s gorge me nt purs ua nt to
S e cti on 20( b) of tl~e S e c~i ri ti e s Act [15 U. S . C . § 7 7 t( b)] a nd S e cti on 21( d)( 1) of the Excha nge Act
4
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 4 of 54
[15 U.S.C. ` ~ ' 7 8 u ( d} ( 1) ] . The Commission seeks t he iinp c ~ sit ioi~ of c iv il p ef~ a l t ies p u rsu a nt t o
Sec t ion 20( d ) of t he Sec u rit ies Ac t [15 U.S.C. ~ 7 7 t ( d ) ~ a nd Sec t ion 21( d ) ( 3) of t he Exc ha nge Ac t
[15 U.S.C. ~ 7 8 u ( d ) ( 3) ] .
8 . The CoL irt ha s j u risd ic t ion ov er t his c a se p u rsu a nt t o. Sec t ions 20( d ) a nd 22{a ) of
t he Sec u rit ies Ac t [15 U.S.C. ~ ~ 7 7 t ( d ) , 7 7 v ( a ) ] a nd Sec t ions 21( d ) , 21( e) a nd 27 of t he Exc ha nge
Ac t [15 U.S.C. ~ S~ 7 8 u ( d ) , 7 8 u ( e) , 7 8 a a ] . Venu e is p rop er in t 11is D ist i° ic t bec a u se Tel exFree, Tnc .
a nd Tel exFree, L L C ha v e t heir p rinc ip a l p l a c e of bu siness in Ma ssa c hu set t s, a nd Merril l ,
L a br- iol a a nd D e L a Rosa l iv e in Ma ssa c hu set t s. ( Unt il 1- ec ent l y , Wa nzel er a nd Rod rigu es a l so
l iv ed in Ma ssa c hu set t s.)
9. I n c onnec t ion w it h. t he c ond u c t d esc ribed in t his Amend ed Comp l a int , t he
d efend a nt s d irec t l y or ind irec t l y ma d e u se of t he ma il s or t he mea ns or inst i° L Unent s of
t ra nsp ort a t ion or c ommu nic a t ion in int erst a t e c ommenc e.
10. The d efend a nt s' c ond u c t inv ol v ed fia u d , d ec eit , or d el ibera t e or rec kl ess d isrega rd
of regu l a t ory requ irement s, a nd resu l t ed in su bst a nt ia l l oss, or signific a nt risk of su bst a nt ia l l oss,
t o ot her p ersons.
D EFEND ANTS
1 1. Tel exFree, I nc . is a Ma ssa c hu set t s c orp ora t ion w it h it s p rinc ip a l p l a c e of bu siness
in Ma rl borou gh, Ma ssa c hu set t s. P rior t o Febru a ry 2012, it w a s know n a s Com117 on Cent s
Commu nic a t ions, I nc . ("Common Cent s") , w hic h w a s inc orp ora t ed by Merril l , Wa nzel er a nd
L a briol a in 2002. Tel exFree, L L C is a Nev a d a l imit ed l ia bil it y c omp a ny w it h ifs p rinc ip a l p l a c e
of bu siness a t t he sa me a d d ress in Ma rl borou gh. I t w a s formed by Merril l , Wa nzel er a nd Ca rl os
Cost a ( a resid ent of Bra zil ) in J u l y 2012, a nd it regist ered t o d o bu siness in Ma ssa c hu set t s in
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 5 of 54
A p ~ ~ i 1 2 0 1 3 . On A p r i l 1 3 , 2 0 1 4, T e l e x F ~ - e e , I nc . and T e l e x F r e e . LLC' t i l e d f o r bankr up t c y unde r
Chap t e r 1 1 .
1 2 . J ai ~ l e s M. Me r r i l l , age 53 , l i v e s i n A s hl and, Mas s ac hus e t t s . He was a f o unde r o f
Co m i ~ z 7 o n Ce nt s i n 2 0 0 2 . He i s a SO% c o -o u~ l e r o f T e l e X F z ~ e e , I 7 7 c . e nd T e l e x F r e e , LLC. ~ t al l
r e l e v ant t i m e s , l i e was t he p r e s i de nt and a di r e c t o r o f T e l e x F l • e e , I nc . and a m anage r o f
T e l e x F r e e , LLC. ~ I e i s al s o t he o wne r o f Cl e ane r T nl abe A s s o c i at e s , I nc . , a s m al l c o m m e r c i al
c l e ani ng bus i ne s s t hat he has o p e r at e d f r o m hi s ho r l 7 e i 1 1 A s hl and s i l ~ c e 1 986.
1 3 . Car l o s N. Wanz e l e r , a~ ; e 45, l i v e d i n No r t hbo i - o ugl l , Mas s ac hus e t t s , unt i l A p r i l 1 5
{ t he day f e de r al age nt s e x e c ut e d s e ar c h war r ant s at T e l e x F r e e 's o f f i c e ) , whe n he l e f t t 1 1 e c o unt r y.
i - I e i s no w l i v i ng i n B r az i l . He was a f o unde r o f Co m m o n Ce nt s i n 2 0 0 2 . He i s a 50 % c o- o wne r
o f T e l e x F r e e , I uc . and T e l e x F i - e e , LLC. A t al l r e l e v ant di ne s , he was t he t r e as ur e r and a di r e c t o r •
o f T e l e x F r e e , I nc . and a m anage r o ~ T e l e x F r e e , LLC. I n addi t i o n, he was s o m e t i m e s he l d o ut as
T e l e x F r e e 's v i c e p r e s i de nt o f t e c hno l o gy.
1 4. St e v e n M. Labr i o l a, age 53 , l i v e s i n Up t o n, Mas s ac hus e t t s . He was a f o undi ng
di x e c t o r o f Co m m o n Ce nt s i i 1 2 0 0 2 . A t al l r e l e v ~ ul t t i m e s , he was t he s al e s m anage r f o r
T e l e x F r e e . He i s al s o t he o wne r - o f Gyv e r Wo r k, a s m al l c o m p ut e r i° e p ai r and m ai nt e nanc e
bus i ne s s l o c at e d i n So ut hbo r o ugh, Mas s ac hus e t t s .
1 5. J o s e p h H. Cr af t , age 50 , l i v e s i n B o o nv i l l e , I ndi ana. He i s a Ce r t i f i e d Publ i c
A c c o unt ant wi t h o f f i c e s i n I ndi ana and Ke nt uc ky. He was hi r e d as T e l e x F r e e 's ac c o unt ant i n
A p r i 1 2 0 1 2 , and he was s o m e t i m e s he l d o ut as t l ae c o m p any's CF O. ~ I e has al s o be e n. t he CF O o f
o t he r m ul t i-l e v e l ; Mar ke t i ng c o m p ani e s .
6
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 6 of 54
1 6 . S a l ~ d e r l e y (" S a ~ ~ 1" ) Rod 7•ib ie s d e V a s c on c e l c ~ s (" Rod r igue s" ), a be ~ 2, p r e v ious l y
l iv e d in Re v e r e , Ma s s a c hus e tts , a n d n ow l iv e s in Da v e n p or t, F l or id a . At a l l r e l e v a n t tim e s , l ie
wa s a p r om in e n t p r om ote r of Te l e a F r e e , e s p e c ia l l y a m on g the B r a z il ia n im m igr a n t c om m un ity
in Ma s s a c hus e tts a il d e l s e whe r e . In ?007, he s e ttl e d c ha r ge s br ought by the C on l l n is s ion for
op e r a tin g a fr a ud ul e n t p y r a m id s c he m e kn own a s Un iv e r s o F on e C l ub. Pur s ua n t to the
s e ttl e m e n t, he wa s p e r m a n e n tl y e n j oin e d fr om s e l l in g un r e gis te r e d s e c ur itie s a n d or d e r e d to p a y
a p p r oxim a te l y $1 . 8 m il l ion of d is gor ge m e n t.
1 7. S a n tia go De La Ros a , a ge 42, l iv e s in Ly ~ 1 n , Ma s s a c hus e tts . At a l l r e l e v a n t tim e s ,
he wa s a p r om in e n t p r oin ote i- of Te l e xF r e e , e s p e c ia l l y a l ~ ~ on g in the Dom in ic a n im n ~ igi° a ~ 1 t
c om i7l uiz ity in 1 V l a s s a c l z us e tts a n d e l s e whe r e .
1 8. Ra n d y N. C r os by , a ge 51 , l iv e s in Al p ha r e tta , Ge or gia . At a l l r e l e v a n t d in e s , he
wa s a p r om in e n t p r om ote r of Te l e xF r e e . He wa s p r e v ious l y a l ic e n s e d in s ur a n c e a ge n t in
Ge or gia , but his l ic e n s e l z a s e xp iz •e d .
1 9 . F a ith R. S l oa n , a ge 5~ , l iv e s in Dol ton , Il l in ois . At a l l r e l e v a n t tim e s , s he wa s a
p r om in e n t p r om ote r of Te l e xF r e e .
RELIEF DEF ENDANTS
20. Te l e xF r e e fin a n c ia l , In c . (" Te l e xF r e e F in a n c ia l" ) is a F l or id a c or p or a tion with its
p r in c ip a l p l a c e of bus in e s s in C oc on ut C r e e k, F l or id a . It wa s in c or p or a te d by C r a ft on
De c e m be r 26 , 201 3 a s a whol l y- own e d s ubs id ia r y of Te l e x~ r e e , LLC . At a l l r e l e v a n t d in e s , its
offic e r s a n d d ir e c tor s we r e Me r r il l a n d Wa n z e l e r , a n d its r e gis te r e d a ge n t wa s Wa n z e l e r . On
Ap x71 1 3, 201 4, it fil e d for ba n kr up tc y un d e r C ha p te r 1 1 .
7
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 7 of 54
21. T e l e x E l e c t r i c , LLLY (" T e l e x E l e c t i - i c" ) i s ~ Ne vada l i m i t e d l i ab i l i t y p ar t n e r s h i p
t n af was f or m e d b y C r af t on De c e m b e r 2, ?013. I t s g e n e r al p ar t n e r s ar e M e r r i l l an d Wan ze l e r .
22. T e l e x M ob i l e H o1di 11g s , I n c . (`° T ' e l e x M ob i l e" ) i s ~ Ne vada c or p or at i ol 7 t h at was
i ~l c or p or at e d b y C r af t on Nove m b e r 26, 2013. I t s of f i c e r s ar e M e i - ~• i l l ai 7 d Wan ze l e r .
ST AT E M E NT OF FAC T S
Bac kg r oun d
23. M e r r i l l m e t Wan ze l e r i n 1993 an d g ave h i m a job i n t h e c l e an i n g b us i n e s s . I n t h e
l at e 1990s , M e r r i l l an d Wan ze l e l - b e c am e s al e s ag e n t s For Wor l dx C h an g e , on e of m a1~y
c ox i l p an i e s t h e n of f e r i n g i n e x p e n s i ve l on g-di s t an c e p h on e s e r vi c e t h r oug h " 10- 10" ac c e s s
n um b e r s . (T o m ake a c al l , c us t om e r° s di al e d t h e c om p an y ' s s e ve n - di g i t ac c e s s l l us n b e r an d t h e n
di al e d t 11e p h on e n um b e r t h e y wan t e d t o r e ac h .) Wor l dx C l i an g e was am ul t i- l e ve l m ar ke t i n g
c om p aal y t h at r e l i e d on s al e s ag e n t s t o ~• e c r ui t ot h e r s al e s ag e n t s as we l l as c us t om e r s . M e r r i l l
an d Wan ze l e r r e c r ui t e d Lab r i ol a as on e of t h e i r s al e s ag e n t s . I n 2002, t h e t h r e e of di e m
i n c or p or at e d C om m on C e n t s ~s a ve h i c l e f or t h e i r s al e s e f f oi t s on b e h al f ' of Wor l dx C h an g e .
Wai ~ze l e r di d m os t of t h e c om p an y ' s r e c r ui t i n b t h i° oug h h i s c on t ac t s i n Br azi l an d t h e Br azi l i an
c or n n l un i t y i n M as s ac h us e t t s . I n 2003, 11owe ve r , t h e t h r e e s t op p e d wor ki n g f or Wor l dx C h ax l g e
af t e r i t was ac q ui r e d b y an ot h e r c om p an y an d ab an don e d t h e m ul t i- l e ve l m ar ke t i n g s t r at e g y .
24. I n 2005, Wan ze l e r b e g an s e l l i n g an al og t e l e p h on e adap t e r s — de vi c e s t h at l i n k a
t r adi t i on al t e l e p h on e l i n e wi t h a di g i t al n e t wor k or VoI P s e i° vi c e . M os t of h i s c us t om e r s we r e i n
Br azi l , an d Wan ze l e r us e d t h e n am e s " Di s k-a- Von t ade T e l e f on i a" i n Br azi l an d ` Br azi l i an H e l p "
i n t h e Un i t e d St at e s . H i s p r om ot i on al e f f or t s c on s i s t e d p r i m ar i l y of t e l e vi s i on an d r adi o ads i n
Br azi l ., b e c aus e an at t e m p t t o e m p l oy am ul t i- l e ve l m ar ke t i n g m ode l was n ot s uc c e s s f ul , an d t l ae
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 8 of 54
a d a p t e r s we r e ma inly s o ld in ne ig t lb o i- h o o d s t o r e s . I n ?007, W a ilz e le r inc o ~ • p ~ r a t e d B r a z ilia n
He lp , I nc . in M a s s a c h u s e t t s .
25. I n e a r ly 2012, Ca r lo s Co s t a , wh o h a d b e e n W a nz e le r 's t o p s a le s a g e nt in B r a z il,
s u g g e s t e d t h a t t h e y r e c r u it c u s t o me r s t h r o u g h a d s o n t h e I nt e r ne t . W a l~ z e le r a nd Co s t a c r e a t e d .
Yn~ p a c t u s Co ine r c ia l Lt d a . ("Ymp a c t u s") , ~ B r a z ilia n c o mp a ny t h a t u s e d t h e na me "Te le xFr e e "
a nd ma r ke t e d a Vo I P s e r v ic e c a lle d "99Te le xFr e e " f o r $49. 90 p e r mo nt h .
26. At t h e s a me t ime , M e r r ill a nd W a nz e le r b e g a n t a king s t e p s t o b r ing "Te le xFl- e e "
t o t h e Unit e d S t a t e s . Tn Fe b r u a r y 2012, t h e y c h a ng e d t h e na me o f Co mmo n Ce nt s t o Te le xFr e e ,
I nc . I n J u ly 2012, M e l- ~ ill, W a nz e le r a nd Co s t a f o r me d Te le xFr e e , LLC. W a nz e le r , Co s h a 7id
a s s o c ia t e s in B r a z il c r e a t e d a c o mp a ny we b s it e c a lle d "t e le xf r e e . c o m" t h a t wa s t r a ns la t e d f r o m
Po r t u g u e s e int o E ng lis h . I lz Ap r i12012, Te le xFi- e e b e g a n r a is ing mo ne y f r o m inv e s t o r s .
Th e Te le xFr e e I nv e s t me nt Pr o g r a m
Re lia nc e o n Pr o mo t io na l Ac t iv it ie s b y I nv e s t o r s
27. Te le xFr e e p u r p o r t e d t o b e in t h e b u s ine s s o f p r o v id ing a Vo I P s e r v ic e t h a t c o s t
$49. 90 p e r mo nt h . Cu s t o me r s r e g is t e r e d t h e ir p h o ne nu mb e r s wit h Te le xFr e e a nd r e c e iv e d
s o f t wa r e t h a t e na b le d t h e ir c o mp u t e r s t o p la c e p h o ne c a lls t h r o u g h t h e c o mp a ny's c o lllp u t e r
s e r v e r s in M a r lb o r o u g h .
28. Th e p r ima r y b u s ine s s o f Te le xFr e e , h o we v e r , wa s r e c r u it ing ne w inv e s t o r s a nd
p a ying t h e m t o p r o mo t e t h e c o mp a ny b y p la c ing int e i- ne t a d s a 11d r e c i~ iit ing mo r e inv e s t o r s . As
M e r r ill s t a t e d in a p r e s s r e le a s e d a t e d M a r c h 1, 2013, "I n a d d it io n t o p r o v id ing a n e xc e lle nt
s e r v ic e a t a v e ~ • y r e a s o na b le p r ic e , t h e ` s e c z • e t s a u c e ' o f o u r s u c c e s s is o u r c o mp e i~ s a t io z l p 1a 11. . .
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 9 of 54
We a c t u a l l y pa y o u l - r ept - es en t a t i v es weekl y i f t hey f o l l o w o u r s y s t em a l i d ~ c l v er t i s e o u r s er v i c e
o n t he I n t er n et . "
29. To r ea c h pr o s pec t i v e i n v es t o r s , Tel exFr ee r el i ed o i l t he c o i l l pa n y web s i t e,
web s i t s s o per • a t ec l b y pr o mo t er s , v i d eo s po s t ed o n t he I n t er n et ( pr i ma r i l y o n t he " Yo u Tu b e"
web s i t e) , a n d l a r g e g a t her i n g s a t ho t el s a n d r es o r t s .
Memb er s hi p Opt i o n s
30. Tel exFr • ee c ha r g ed $50 f o r a n i n v es t o r t o b ec o me a " ~ n en ~ b er " o r " pa r t n er" . U n t i 1
i t c ha n g ed i t s c o mpen s a t i o n pl a n o n Ma r c h 9, 201 4, Tel exFr ee ha d . t wo memb er s hi p o pt i o n s :
a . " Ad Cen t r a l" : $339 f o r a o n e- y ea r c o n t r a c t ( $50 mer n b er s l l i p f ee pl u s
$2$9 c o n t r a c t f ee) . I n v es t o r s r ec ei v ed t en o n e- mo n t h pa c ka g es o f t he Vo I P s er v i c e a t t he o u t s et
a n d wer e r eq u i r ed . t o pl a c e o ~ i e I n t er n et a d per d a y . Po r ea c h week t hey pl a c ed a l l . t he a d s , t hey
r ec ei v ed o n e mo r e Vo I P pa c ka g e. I n v es t o r s who po s t ed t he a d s wer e pr o mi s ed $20 per week, o r
$1 , 040 f o r t he y ea r ( i . e. , a r et u r n o f 207% o n a n i n v es t men t o f $339) .
b . " Ad Cen t r a l Fa mi l y" : $1 , 425 f o r a o n e- y ea r c o n t r a c t ( $50 memb er s hi p f ee
pl u s $1 , 375 c o n t r a c t f ee) . I n v es t o r s r ec ei v ed f i f t y o n e- mo n t h pa c ka g es o f Vo I P s er v i c e a t t he
o u t s et a n d wer e r eq u i r ed t o pl a c e f i v e I n t er n et a d s pei • d a y . Fo r ea c h week t hey pl a c ed a l l t he
a d s , t hey r ec ei v ed f i v e mo r e Vo I P pa c ka g es . I n v es t o l • s wl i o po s t ed t he a d s wer e pr o mi s ed
X1 00 per week, o r $5, 200 f o r t he y ea r ( i . e. , a r et u r n o f 265% o n a n i n v es t men t o f $1 , 425) .
I n c en t i v es f o r I n v es t o r s
3 L Tel exFr ee ha d a mu l t i- l ev el ma r ket i n g s t r u c t u ~ • e, wi t h s ev er a l b o z i u s ~ 1 a n s f o z •
i n v es t o r s who r ec r u i t ed ~ Z ew i n v es t o r s :
~ I 1 7
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 10 of 54
a . $20 f o r ea ch new A d C ent l - a l i nv es t o r a nd $100 f o r ea ch new A d C eni r a l
~ ' a i ni l y i nv es t o r .
b . $20 f o l ° ea ch i i 7 v es t o r (o r "memb er") i n a n i nv es t o r ' s "net wo r k", up t o a
ma xi mum. o f $440. a s l o ng a s t he i nv es t o r ha d r ecr ui t ed t wo memb er s (t her eb y cr ea t i ng a
"b i na r y " net wo r k s t r uct ur e).
c. 2% o f a l l pa y ment s t o ea ch i l ~ emb er i n a n i nv es t o r ' s net wo r k wi t h a t l ea s t
o ne V o I ~ P cus t o mer (whi ch co ul d b e t he menl b ei - s t hems el v es ), d o wn t o s i x "l ev el s".
d . 2% o f Tel ea Fr ee' s net mo nt hl y b i l l i ng, up t o a ma xi mum o f $39,600, f o r
a ~ n A d C ent r a l Fa mi l y i nv es t o r who r ecr ui t ed t en new A d C ent i - a l Fa mi l y memb er s , ea ch o f who m
s o l d f i v e V o I P pa cka ges (t o t hems el v es o r t o o t her s ).
32. Tel exFr ee a l s o o f f er ed co mmi s s i o ns f o r s el l i ng t he V o I I ' s er v i ce:
a . 90% (o r $44. 90) f o r t he i ni t i a l s a l e o f a mo nt hl y V o I P pa cka ge a t $49. 90.
b . 10% (o r $4. 99) per mo nt h f o r ea ch d i r ect memb er who r enewed t he
111o nt hl y V o I P s er v i ce a nd 2% (o r $0. 99) per mo nt h f o r ea ch i nd i r ect memb er who r enewed t he
s er v i ce, d o wn t o s i x l ev el s o f t he i nv es t o r ' s net wo r k.
c. 2% o f a l l s a l es o f t he V o I P s er v i ce b y d i r ect o r i nd i r ect memb er s i n a n
i nv es t o a ' s net wo r k, d o wn t o s i x l ev el s .
33. New i nv es t o r s i n A d C ent r a l co ul d pa y b y cr ed i t ca r d , a r t hey co ul d . pa y t he
pr o mo t er who r ec7 ~ ui t ed t hem. (So me pr o mo t er s f o r wa r d ed t he i nv es t o r s ' f und s t o Tel exFr ee;
o t her s kept t he i nv es t o r s ' f i o r d s a ~ 1d t o l d Tel exFr ee t o d eb i t t hei r i nt e7 - na 1 a cco unt wi t h t he
co mpa ny . ) New i nv es t o r s s i gned up t hr o ugh t hei r pr o mo t er ' s pa ge o n t he i nt er na l po r t i o n o f t he
co mpa ny web s i t e (r ef er r ed t o a s t he "b a ck o f f i ce") a nd s el ect ed a per s o na l l o b i n a nd pa s s wo z • d .
11
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 11 of 54
{Each co n t r act r e q u i r e d a s e p ar at e l o g- i n . ) Pr o mo t e r s r e ce i v e d t he i r - o wn p ag e i n t he ' ` b ack
af f i ce", s o t hat t he y co u l d k e e p t r ack o f t he i r accr u e d we e k l y p ayme n t s , b o n u s e s f o r r e cr u i t i n g
~ ~ e w me mb e r s , an d an y s al e s o f t he Vo IP s e r v i ce . In v e s t o r s co u l d s u b mi t r e q u e s t s t o wi t hd r aw
s o me o r al l o f t he i r accr u e d b al an ce (u p t o $10,000 p e r mo n t h) , an d t he co mp an y mad e ~ ~ ayme n t s
t o i n v e s t o r s b y che ck o r t hr o u g h a p ayme n t p r o ce s s i n g s e r v i ce .
34. Ne w r e t ai l . cu s t o me r s f o r t he Vo IP s e ~ • v i ce co u l d p ay b y cr e d i t car d , che ck o r cas h.
By co n t r as t , whe n e x i s t i n g i n v e s t o r s "p u r chas e d " t he Vo IP s e r v i ce , t he y t yp i cal l y ` ` p ai d " b y
l av i n g T e l e Y F r • e e d e b i t t he i r i n t e r n al acco u n t f o r t he $49. 90 mo n t hl y char g e . i n o t he r wo r d s ,
Vo IP "s al e s " t o e x i s t i n g i n v e s t o r s d i d n o t g e n e r at e ad d i t i o n al cas h f o r T e l e x F r e e —t he y me r e l y
r e d u ce d t he accr u e d p ayme n t s t o whi ch t he i l 7 v e s t o r was e n t i t l e d .
T he So l e Re q u i r e me n t f o r Ge t t i n g Pai d : Po s t i n g Me an i n g l e s s In t e r n e t Ad s
35. Be f o r e t he co mp e n s at i o n p l an was chan g e d o n Mar ch 9, 2 01. 4, t he r e was n o
r e q u i r e me n t t hat Ad Ce n t r al i n v e s t o r s act u al l y s e l l t he Vo IP s e r v i ce i n o r d e r t o r e ce i v e t he
p r o mi s e d we e k l y p ayme n t s . T he o n l y r e q u i r e me n t f o r r e ce i v i n g t 1~ e p ayme n t s was t o p o s t
In t e r n e t ad s (o n e p e r d ay f o r e ach Ad Ce n t r al co n t r act an d f i v e p e r d ay f o r e ach. Ad Ce n t r al f ami l y
co n t z • act ) .
36. T he ad s we r e wr i t t e n b y T e l e x F r e e an d av ai l ab l e o n t he "b ack o f f i ce " p o r t i o n o f
t l ae co mp an y we b s i t e . T he ad s o f f e r e d . a 60- mi n u t e f r e e t r i al o F t he Vo IP s e r v i ce . T he "b ack
o f f i ce " co n t ai n e d l i n k s t o e x t e n ~ al we b s i t e s whe r e t he ad s co u l d b e p o s t e d . Us i n g a co mp u t e r ,
t he i n v e s t o r co p i e d t he ad , p as t e d . i t o n t he e x t e r n al we b s i t e , an d r e t u r n e d t o t he "b ack o f f i ce " t o
"v al i d at e " t hat t he ad had . b e e n . p o s t e d . As a mar k e t i n g p r e s e n t at i o n o n t he co mp an y we b s i t e
s u mmar i z e d t he p r o ce s s : "1. Cho o s e ad . "2 . Pu b l i s hi n g Sp ace s . 3. Val i d at e Y o u r Ad . " In f act ,
12
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 12 of 54
, p r o m o t e r s who want e d t o p o s t m ~~y ads p e r day co uld us e t hi r d- p ar t y s e r v i ce s t hat aut o m at e d
t he ho s t i ng ar z d v ali dat i ng p r o ce s s f o r a s m all f e e .
37. Unli ke t e le v i s i o n o i ° ne ws p ap e r ads , t he Te le xFr e e ads we r e no t ai m e d at t he
g e ne r al p ub li c. I ns t e ad, t he ads we r e p lace d p r i m ar i ly o n we b s i t e s de di cat e d t o clas s i f i e d ads . I n
e ar ly A p r i l 2014, o ne we b s i t e {A dp o s t . co m ) co nt ai ne d m o r e t han 33, 000 ads f o r Te le xFr e e ,
whi le ano t he r ( C las s i f i e ds G i ant . co m ) co nt ai ne d m o r e t han 25, 000 ads p o s t e d i n t he p as t t wo
nao ~z t hs . The m o s t li ke ly way f o r s o m e o ne t o e nco unt e r t he ads was t hr o ug h an I nt e r ne t s e ar ch
f o r t he wo r d " t e le xf r e e" , b ut t hat s e al- cl1 wo uld als o le ad s t r ai g ht t o t he co m p any we b s i t e . I n
o t he r wo r ds , t he t ho us ands o f v i r t ually i de nt i cal ads we r e e s s e nt i ally m e ani ng le s s as a way t o
no t i f y t he p ub li c ab o t r t Te le xFr e e and p r o m o t e s ale s o f t he Vo I P s e r v i ce . A s Te le xFi • e e ' s i nt e r i m .
C EO, wi t h f i f t e e n ye ar s o f e xp e r i e nce wi t h m ult i - le v e l m ar ke t i ng co m p ani e s , t o ld a b ankl- up t cy
co ur t he ar i ng o n May 2, " we had no way t o de f i ne whe t he r t he ads we we r e p laci ng we r e
act ually caus i ng t he r e v e nue , and t o m e t hat j us t do e s n' t m ake s e ns e . "
38. Tl~e co m p le t e lack o f any r e qui r e m e nt t o s e ll t he Vo I P s e r v i ce was unde r s co r e d
b y t he s t at e m e nt s m ade b y Te le xFr e e i ns i de r s and p r o m o t e r s t hat t he we e kly p aym e nt s t o
i nv e s t o r s ( $20 f o r e ach A dC e nt r al co nt r act and $100 f o r e ach. A dC e nt r al Fam i ly co nt r act )
r e f le ct e d t he co m p any' s " r e p ur chas e " ( at $20 e ach) o f t 11e Vo I P p ackag e s t he y r e ce i v e d e ach
we e k f o r e ach co nt r act . I n f act , t 11e " b ack o f f i ce " als o had a s p e ci f i c p ag e f o r i ~7v e s t o r s t o s ub m i t
r e que s t s f o r t he co n~p a~ly t o r e p ur chas e Vo I P p ackag e s .
13
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 13 of 54
The TelexFree Investment Program Was a Ponzi and Pyramid Scheme
39. In June 2013, a Br° azilian state court suspended the operations of Ympactus,
Tele~ ~ ' ree' s affiliate in Brazil, and froze $100 million of its assets, based on suspicions that it
was operating a pyramid scheme.
40: A fter the enForcement action in Brazil, the leaders of TelexFree publicly claimed
that TelexFree was different fi° om illegal multi- level marketing programs, because it had an
actual product to sell —the VoIP service.
a_ M errill, Wanzeler and L abr- iola can. be heard on a slide presentation that
was posted on YouTube on June 20, 2013 with the title "Te1exFR~ E Investigation with Pi° esident
James M errill, Vice President Carlos Wanzeler - E- Steve L al~ riola." A ll three tried to downplay
the signifiealzce of the enforcement action in Brazil. M errill stated, "Inq uiries like this are very
coXnmon in network marketing." Wanzeler stated, "Our company is different from any other
network marketing." L abriola stated, "These things happen to network marketing companies
over and over again.."
b. Gerald Nehra, who is identified on the company website as TeleYFree' s
attorney, appeared. in a video that was posted. on YouTube on A ugust 2, 2013 with the title
"TelexFREE L awyer". Nehra stated, "Tl~ e special ingredient is that you have a real product."
c. Carlos Costa appeared in a video that was posted on YouTube on
A ugust 15, 2013 with the title "TelexFREE: Carlos Costa Proves TelexFREE is Not an Illegal
Pyramid." Costa stated that TelexFree "never was, nevez• will be" an illegal pyramid because it
sells the VoIP service. He added:
14
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 14 of 54
People w i ll pay t h e m on t t z ly fee for t h e VoIP s e~ ~ v i c e] .
Z , h at s u s t ai n s ou r b u s i n es s .
We do n ot depen d on ev er yon e c om i n g i n i n or der t o pay
t i e people w l~ o ar e alr eady i 1 1 .
41 . Th e r eali t y w as q u i t e di ffer en t , for t w o r eas on s . F i r s t , t h e b as i c feat u r es of t ale
TelexF r ee i n v es t m en t pr ogr am h ad all t h e h a1 1 ~ 1 1 ar k s of a Pon z i an d pyr am i d s c h em e:
{1 ) i n v es t ~ oi • s w er e pr om i s ed u n u s u ally h i gh r et u r n s —ov er 200% per year —for doi n g v i r t u ally
n ot h i n g (exc ept pos t i n g m ean i n gles s In t er n et ads ); (2) i n v es t or s w er e pr om i s ed b on u s es i f t h ey
r ec r u i t ed n ew i l~ v es t or s , w h o w ou ld do v i r t u ally n ot h i n g exc ept pos t ads an d r ec l- u i t n ew
i n v es t or s (ar i d s o on an d s o on ); an d (3) t h er e w as an ac t u al VoIP s er v i c e, b u t i n v es t or s di d n ot
h av e t o s ell t h e s er v i c e i n or der t o get pai d. Bec au s e i n v es t or s w er e s t r on gly en c ou r aged t o
r ec r u i t n ew i n v es t or s an d w er e n ot r eq u i r ed t o s ell t h e VoIP s er v i c e, t h e alm os t i n es c apab le
i n fer ei ac e i s t h at TelexF r ee w as u s i n g fu n ds fr om lat er i n v es t or s t o pay ear li er i n v es t or s .
42. Sec on d, t h e i n for m at i on av ai lab le t o dat e c on fi r m s t h at t h e r ev en ges fr om r et ai l
VoIP s ales w er e on ly a t i n y fr ac t i on of t h e m on ey TelexF r ee pr om i s ed t o pay t o AdCen t r al
i n v es t or s . Cr edi t c a1 • d an d b an k i n g t r an s ac t i on s i n di c at e t h at , fr om Au gu s t 201 2 t o Mar c h 201 4,
TelexI~ ' r ee r ec ei v ed s li gh t ly m or e t h an $1 . 3 m i lli on fr om t 1 1 e r et ai l s ale of appr oxi m at ely 26. 300
m on t h ly VoIP c on t r ac t s . Du r i n g t h e s am e per i od, TelexF r ee r ec ei v ed m or e t h an $340 m i lli on
fr om h u n d7 • eds of t h ou s an ds of i n v es t or s w h o pu r c h as ed AdCen t r al or AdCen t r al F am i ly
c on t r ac t s . Th r ou gh t h e s ale of t h os e on e- year c on t r ac t s , TelexF r ee effec t i v ely pr om i s ed t o pay
m ar e t h an X 1 . 1 b i lli on t o t h e i n v es t or s w h o pos t ed t h e r eq u i r ed ads — a t as k w h i c h , as explai n ed
ab ov e. w as ext r em ely eas y t o per for m . In ot h er w or ds , t h e r ev en u es fr om r et ai l VoIP s ales
c ov er ed b ar ely 0. 1 % of TelexF r ee' s ob li gat i on s t o pay AdCen t r al i n v es t or s w h o plac ed ads . Th e
1 5
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 15 of 54
d i s p a r i t y bet ween " I ' el ex F r ee° s r et a i l VoI P r evenues a nd i t s obl i ba t i ol l s t o Ad Gent r a l i nve~ s t ol - s
wa s even wor s e t ha n t ha t , beca us e t he f i g ul - e of $ L 1 bi l l i on d oes not i ncl ud e t he bonus es a nd
commi s s i ons t 1 1 a t ~ I ' el ex F t ~ ee a l s o p r omi s ed t o p a y i nves t or s , a s d es cr i bed a bove.
43. I n s hor t , M er r i l l a nd Wa nzel er , i n concer t wi t h t he ot her i nd i vi d ua l d ef end a nt s .
wer e r unni ng a hug e Ponzi a nd p y r ~ ni d s cheme. Beca us e r et a i l VoI P r evenues wer e s o s ma l l ,
Tel ex F r ee us ed mc~ ~ ney f r om l a t er i nves t or s t o mi ke i t s p a y i ~ l ent s t o ea r l i er i nves t or s .
44. The s heer vol ume of t r a ns a ct i ons bet ween Tel ex F r ee a s l d i nves t or s , ma ny i n s n1 a 1 1
d ol l a r d el ~ on~ i na t i oi ~ s , r a i s ed concel° ns a t t he ba nks a nd cr ed i t ca r d p a y ment p r oces s or s t ha t
Tel ex F r ee us ed . One ba nk a f t ez° a not her - —Ba nk of Amer i ca , TD Ba ~ 1 k, C i t i zens Ba nk, F i d el i t y
C o- Op Ba nk, Wel l s F a r g o, a ~ 1 d M i d d l es ex Sa vi ng s Ba nk — ul t i ma t el y t er mi na t ed t hei r ba nki ng
r el a t i ons hi p s wi t h Tel ex F r ee. Sever a l p a y ment p r oces s or s — Pa y Pa l , Pr oPa y , Gl oba l Pa y r ol l
~ .I a t ewa y , i - Pa y out , a nd Al l i ed Wa l l et — l i kewi s e t er mi na t ed t hei r r el a t i ons hi p s wi t h Tel ex F r ee.
C ol l a p s e of t he Tel ex F r ee I nves t ment Pr og r a m
45. On M a r c1 7 9, 2 0 1 .4, M er r i l l , Wa nzel er , La br i ol a , De La Ros a a nd C r os by a p p ea r ed
a t a conf er ence a t t he M a i 7• i ot t C op l ey Pl a ce Hot el i n Bos t on t o a nnounce t ha t Tel ex Pr ee wa s
cha ng i ng i t s eomp ens a t i oi z p l a y . Und er t he new f l a n, i nves t or s coul d not r ecei ve a ny p a y ment s
unl es s t hey a ct ua l l y s ol d f i ve mont hl y VoI P p a cka g es . (When i t f i l ed f or ba nkr up t cy one mont h
l a t er , a r ep r es ent a t i ve of Tel ex F r ee s t a t ed t ha t t he comp a ny a d op t ed t he new comp ens a t i on p l a n
a f t er " ques t i ons " ha d been r a i s ed a bout t he ol d p l a n." ) Wa nzel er , La br i ol a , De La Ros a . a nd
C r os by a l s o a p p ea r ed i n vi d eos t out i ng t he s up p os ed benef i t s of t he new p l a n. N ever t hel es s , t he
new p l a n g ener a t ed a s t or m of p r ot es t s f r om i nves t or s , ma ny of whom p os t ed a ng r y I nt er net
mes s a g es or vi d eos . On Ap r i l 1 , d ozens of i nves t or s d es cend ed on t he comp a ny ' s of f i ce i n
1 6
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 16 of 54
Marlbol°oubh t o complain — in part because, as o~ 1 e il~ v est or t old t he press, t he VoIP serv ice is
"almost impossible t o sell".
46. Lat e on Sund ay, A pril 1 3, d ef end ant s TelexFree, Inc. and TelexFree, LLC and
relief clef end al7 t TelexFree Financial f iled f or bankrupt cy in Nev ad a t ind er Chapt er 1 1 , claiming
t o Hav e liabilit ies of as much as $600 million bait asset s of approximat ely $1 00 million. (The
~ anit rupt cy case has since been t ransf erred t o Massachuset t s.) T~ IexFree st at ed t ~ lat , in t he f iv e
weeks af t er t he compensat ion plan was changed , inv est ors t ried t o wit hd raw $1 7 41 nillion f ro1 1 1
t heir account s wit h t he company, primarily f or commissions f ion1 A d Cent ral reeriiit ing. The
company ad mit t ed ghat , af t er March 9, payment s t o inv est ors "quickly became a subst ant ial d rain
on t he Compaliy's liquid it y." It also ad mit t ed t hat VoTP sales und er t he new plan "hav e been
d isappoint ing" and "d o not allow t he Company t o meet it s obligat ions."
47 . On A pril 1 4, t he Massachuset t s Securit ies D iv ision f iled an enf orcement act ion
against TelexFree, Inc. and TelexFree, LLC.
48. On A pi°il 1 5, f ed eral agent s execut ed search warrant s at TelexFree's of f ice and a
nearby d at a cent er• in Marlborough. They seiz ed d ocumerlf s (includ ing $38 milliol~ of cashier's
checks t hat had been obt ained in t he p1 • eced ing f ew d ays) , t he company's comput er serv ers in
Marlborough., and t he company's comput er serv ers in Fort Wort h, Texas. The same d ay,
Wa~ iz eler lef t t he count ry by d riv ing t o Canad a..
49. A lso on A pril 1 5, t he Commission f iled t he complaint in t his act ion. On A pril 1 6,
t l~ e Court ent ered an ex pu~ ~ t e t emporary rest raining ord er, ord er f reez ing asset s, and . ord er f or
ot her equit able relief as t o all d ef end ant s and relief d ef end ant s.
1 7
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 17 of 54
50. On A p r - i 1 2 4 , f e d e r a l a u t h o r i t i e s o b t a i ne d w a r e° a i z t s t o s e i z e p r o p e r t y r e p r e s e nt i ng
p r o ce e d s f r o m t h e " T ~ e l e x F r e e s cl ~ e ~ ne .
51 . On Ma y 9, a f e ~ d e i - a l ci ~ i l ni na l co mp l a i z i t ~ ~ a s f i l e d a g a i ns t Me r r i l l a nd Wa nz e l e r ,
ch a r g i ng t l i e n7 w i t h co ns p i i° a cy t o co mmi t w i r e f r a u d . Me r r i l l i s cu r r e nt l y i n cu s t o d y ; W~ u i z e l e r
l a g s f l e d t h e co u nt r y .
A ct i o ns o f t h e T e l e x F r e e Ow ne r s
Ja me s Me r r i l l
52 . P r i o r t o t h e b a ~ ~ k r u p t cy f i l i l ~ g s o i l A p r i l 1 3, 2 01 4 , Me r r i l l w a s t h e p r e s i d e nt a nd a
d i r e ct o r o f T e l e x F r e e , T nc., a co -n~ a i z a g e r ~ o f T e l e x F r e e , LLC, a i l d a n o f f i ce r • a nd d i r e ct o r - o f
T e l e x F r e e F i na nci a l . On A p 1 - i l 1 7 —a f t e r t h o s e t h r e e co mp a ni e s f i l e d f o r b a nk r u p t cy , t h e
Ma s s a ch u s e t t s S e cu r i t i e s D i v i s i o n. f i l e d i t s e nf o r ce me nt a ct i o n, f e d e r a l a g e nt s e x e cu t e d s e a r ch
t i v a r r a nt s a t T e l e x F r e e 's o f f i ce , a nd t h e Co mmi s s i o n f i l e d t h e co mp l a i nt i n t h i s ca s e —t h e
r e ce nt l y -a p p o i nt e d i nt e r i m CEO o f T e l e x F r e e f o r ce d Me r r i l l t o r e s i g n f r o m h i s p o s i t i o ns w i t h t h e
co mp a ni e s . Ho w e v e r , Me r r i l l s t i l l o w ns 50% o f t h e t l u e e co mp a ni e s , d i r e ct l y o r i nd i r e ct l y .
53. Me r r i l l w a s o ne o f t h e ma i n p u b l i c f a ce s o f T e l e x F r e e . He w a s qu o t e d i n t h e
co mp a ny 's p r e s s r e l e a s e s . Hi s p i ct u r e a nd b i o g r a p h y a p p e a r e d o n t h e co mp a ny w e b s i t e u nd e r
t h e h e a d i ng " F o u nd e r" . He a t t e nd e d ma ny p r o mo t i o na l . e v e nt s f o r T e l e x F r e e . S o me o f t h e
p r o mo t i o na l e v e nt s w e r e v i d e o t a p e d , a ~ ~ d t h e v i d e o s w e r e p o s t e d o n Yo u T u b e .
54 . T h e " F o u nd e r " s e ct i o n i n t h e p u b l i c p o r t i o n o f t h e T e l e x F r e e w e b s i t e s t a t e d t h a t
Me r r i l l r e ce i v e d a B.A . i n Eco no mi cs f r o m We s t f i e l d S a t e U ni v e r s i t y . Me r r i l l k ne w t h a t t h e
s t a t e me nt w a s ma t e r i a l l y f a l s e a nd mi s l e a d i ng , b e ca u s e h e d r o p p e d o u t o f We s t f i e l d S t a t e a f t e r
1 8
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 18 of 54
only two ~ ~ e a l- s mid took a job iii ja nitor ia l s e r v ic e s . De s pite be ing tl~ ie c ompa ny's pr e s ide nt,
M e r r ill f a ile d to ta ke e f f e c tiv e a c tion to pr e v e nt or c or r e c t th e mis s ta te me nt.
S5. Th e " F otiilde r " s e c tion of th e c ompa ny wc bs ite a ls o inc lu de d a ph oto of M e r r ill
s ta nding in f r ont of a la r ge t1 ~ • e e - s tor y bu ildinb, witl~ i t1 7 e c a ptiol~ " M ~ • . M e r r ill in f r ont of th e
h e a dq u a r te r s of Te le x f r e e in th e USA. " Simila r ly, ma r ke ting pr e s e nta tions on th e c om~ a a ny
we bs ite c onta ine d a s lide with a ph oto of M e 1 ~ - i1 1 a ild a ph oto of t1 1 e s a me bu ilding with th e
c a ption " Th e Compa ny HQ: Unite d Sta te s . " M e z 7 i1 1 kne w, wa s r e c kle s s in not la lowing, or wa s
ne glige nt a bou t th e f a c t th a t th e ph oto c a ptions we r e ma te r ia lly f a ls e a nd mis le a dinD, be c a u s e :
{a ) Te le x F r e e , I nc . doe s not own or oc c u py th e e ntir e bu ilding; (b) Te le x F r e e , I i1 c . or igina lly
s h a r e d a s ingle s u ite (c ons is ting of a r e c e ptionis t, c oi~ 7 f e r e nc e i° ooins , a nd c u bic le s ) with ma ny
oth e r c ompa nie s ; (c ) only in De c e mbe r 201 3 did Te le x F ~ • e c , I f 1 c . mov e into its own s u ite in a
por tion of th e f ir s t f loor ; a nd (d) Te le x F r e e , LLC h a s no ph ys ic a l of f ic e a t a ll, ju s t a ma iling
a ddr e s s in Ne v a da . De s pite be ing th e c ompa ny's pr e s ide nt, M e r 1 • ill f a ile d to ta ke e f f e c tiv e a c tion
to pr e v e nt oz ~ c or r e c t th e mis s ta te me nts .
M e r r ill:
56. On M a r c h 1 , 201 3, Te le x Pr e e is s u e d a pt~ e s s r e le a s e th a t inc lu de d a q u ote f r o1 1 7
I n a ddition to pr ov iding a n e x c e lle nt s e r v ic e a t a v e r y
r e a s ona ble pr ic e , th e r e a l " s e c r e t s a u c e " of ou r s u c c e s s is
ou r c ompe ns a tion pla n. We h a v e de v e lope d a u niq u e
s ys te m wh ic h a llows e v e r y one of ou r inde pe nde nt
r e pr e s e nta tiv e [ s ic ] th e a bility to ma ke mone y e v e r y we e k.
We a c tu a lly pa y ou r r e pr e s e nta tiv e s we e kly if th e y f ollow
ou r s ys te i~ a ~ a a z d a dv e r tis e ou r s e r v ic e on th e I nte r ne t.
1 9
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 19 of 54
57. M e r r i l l can be he ar d on t he Yoi i Tube vi de o t hat was host e d on June 20, 2013,
shoz - t l y af t e r B r az i l i an aut hor i t i e s had shut down Ympact us, Te l e xFr e e 's af f i l i at e i n B i - az i L I u
t he vi de o; M e z - r i l l made r e assur i ng st at e me nt s about t he B i - az i l i ~ l e nf or ce me nt act i on:
We unde r st and y our conce r ns.
I t doe s not af f e ct t he U.S. mar ke t . We 'r e st i l l g r owi ng l i ke
cr az y , t hanks t o y our e f f or t s.
I nq ui r i e s l i ke t hi s ar e ve r y common i i ~ l ne t wor k mar ke t i ng .
We have such unbe l i e vabl e ar ow- t h t hat . we 'r e g oi ~ ~ g t o
dr a~ ~ at t e nt i on.
M e r r i l l kne w, was r e ckl e ss i n cl ot knowi ng , or was ne g l i g e nt about t he f act t hat hi s st at e 117e nt s
we r e mat e r i al l y f al se a11d mi sl e adi ng , be cause he f ai l e d t o di scl ose t 11at t he B ~ • az i l i an aut hor i t i e s
we r e conce r ne d t hat Ympac~ us, whose act i vi t i e s we r e vi r t ual l y i de nt i cal t o t l ~ l ose of Te l ~ x~ r e e ,
was ope r at i ng an i l l e g al py r ami d sche me .
58. M e r r i l l at t e nde d a l ar g e g at he r i ng of i nve st or s al l d pr omot e r s i n C al i f or ni a on
Jul y 27, 2013. P or t i ons of t he e ve nt we r e vi de ot ape d. M e r r i l l c~ ~ be se e n i n a vi de o t hat was
post e d on YouTube on Aug ust 1, 2013 wi t h t he t i t l e "Te ~ l e xFRFE C or por at e Spe ake r s at
Ne wpor t B e ach Ext r avag anz a Jul y 27, 2013." I n t he vi de o, M e r r i l l st at e d:
C ar l os and. I i n t hat busi ne ss back i n '88, we 11ad a g ood
busi ne ss g oi ng . OK? I t was abusi ne ss- t o- busi ne ss
busi ne ss. We wor ke d f or a l ot of cor por at i ons, a l ot of
For t une 500 compani e s.
M e r r i l l kne w t hat hi s st at e me nt s we r e mat e r i al l y f al se and mi sl e adi ng , be cause : (a) i n 1.9 88, he
was act ual l y ope r at i ng a smal l comme r ci al cl e ani ng busi ne ss f r om hi s home ; (b) he di d not e ve n
me e t Wanz e l e r unt i l 19 9 3, whe n he ; ave Waal z e l e r a job i n t he cl e ani ng busi ne ss; and {c) he and
20
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 20 of 54
Wanzeler founded Common Cents i n 200? to market " 1 fl-1 0" long -c li stai ~ c e c alli ng p lans for
V V orldx Cl~ an~ e —not to work for " a lot of Fortune X00 c omp ani es" .
59. On Marc h 9, 201 4, Men~ i ll ap p eared onstag e at the event i n Boston whel° e
Telex Free announc ed the new c omp ensati on p lan that req ui red eac h i nvestor to have fi ve V oIP
c ustomers. Merri ll. told the audi enc e:
You're g o1 ~ ~ a g et p ai d.
We are here to help you make money.
60. On Marc h 21 , 201 4, Telex Free i ssued a p ress release that i nc luded a q uote from
Merri ll: " We have been i n V OIP telec ommuni c ati ons for more than a dec ade." Merri ll lazew
that hi s statement was materi ally false and mi sleadi ng , bec ause the busi ness of CoTnmon Cents,
the p redec essor of Telex Free, Inc . that was founded i n 2002, was mai lc eti ng " 1 0-1 0" long -
di stanc e Mans for Worldx Chang e —p lans that 1 1 ad nothi ng to do wi th V oIP tec hnolog y.
61 . Merri ll knew that i nvestors were strong ly enc ourag ed to rec rui t new i nvestors and
were not req ui red to sell the V oIP servi c e, that authori ti es had shut dawn Telex Free's affi li ate i n
Brazi l as an i lleg al p yrami d sc heme, and that ntunerous banks and p ayment p roc essors had
te7 .lni nated thei r relati onshi p s wi th Telex Free. He knew, was rec kless i n not knowi ng , or was
neg li g ent about the fac t that Telex Fi • ee deri ved. vi rtually no revenue from retai l V oIP sales, whi le
99% of i ts i nc ome c ame from i nvestors i n AdCentral. As a result, Merri ll knew, was rec kless i n
not knowi ng , or was neg li g ent about the fac t that hi s p ubli c statements p romoti ng Telex Free,
i nc ludi ng those q uoted i n the p revi ous p arag rap hs, were materi ally false and mi sleadi ng and,
mote g enerally, that hi s p romoti onal ac ti vi ti es on behalf of Telex Free were fraudulent and
dec ep ti ve, bec ause Telex Free was a Ponzi ai 7 d p yrami d sc heme that was desti ned to c ollap se,
21
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 21 of 54
t h e r e b y p r e v e n t i n g i t fr om maki n g t h e p ay me n t s p r omi se d t o i n v e st or s. As al l offi c e r a1 1 d
di r e c t or , Me n i l l 's st at e of mi n d c an b e at t r i b u t e d t o Te l e xFr e e , I i ~ c . an d Te l e xFi - e e , LLC.
Car l os ~ 'V an z e l e r
62. P i • i o7 - t o t h e b an kr u p t c y fi l i n g s on Ap z • i l 1 3, ?01 4, Wan z e l e r was t h e t r e asu r e r an d
a di r e c t or of Te l e xFr e e , I n c . , a c o- man ag e r of Te l e xP r e e , LLC, an d an offi c e r an d di r e c t or of
Te l e ~ : Fr e e Fi n an c i al . On Ap r i l 1 7 —aft e r t h ose t h r e e c omp an i e s fi l e d foi ° b an kr u p t c y , t h e
Massac l ~ l u se t t s S e c u r i t i e s D i v i si on fi l e d i t s e n for c e me n t ac t i on , ~ e de l - al ag e n t s e xe c u t e d se ar c h
war r an t s at Te l e xFr e e 's offi c e , an d t h e Coi n i n i ssi on fi l e d t h e c omp l ai n t i n t h i s c ase —t h e
r e c e n t l y -ap p oi n t e d i n t e r i m CEO of Te l e xFr e e t r i e d t o For c e Wan z e l e r t o r e si g n fr om h i s p osi t i on s
wi t } 7 t h e c omp an i e s. Wan z e l e r r e fu se d, so t h e i n t e r i m. CEO t e r mi n at e d h i m as an offi c e r an d
ag e n t of t h e c omp an i e s. Howe v e r , Wan z e l e r r e mai n s a di r e c t o~ ~ or man ag e r (as ap p l i c ab l e ) of t h e
c omp an i e s, an d h e st i l l own s 50% of t h e t h r e e c omp an i e s, di r e c t l y or i n di r e c t l y .
63. Wan z e l e r was on e of t h e mau l p u b l i c fac e s of Te l e xFr e e . He at t e n de d man y
p r omot i on al e v e n t s for Te l e xFr e e . S ome of t h e p r omot i on al e v e n t s we r e v i de ot ap e d, an d t h e
v i de os we r e p ost e d on You Tu b e .
64. Wan z e l e r c an . b e h e ar d on t h e You Tu b e v i de o t h at . was p ost e d on Ju n e 20, 201 3,
sh or t l y aft e r B r az i l i an au t h or i t i e s h ad sl l t r t down Ymp ac t u s, Te l e xFr e e 's affi l i at e i n B r az i l . I i i .
t h e v i de o, Wan z e l e r made r e assu r i n g st at e me n t s ab ou t t h e B r az i l i an e n for c e me n t ac t i on .
I 'm su r e 99% we c an fi x t h e se p r ob l e ms t oday or
t omor r ow.
Th i s i s n ot g oi n g t o affe c t u s i n si de U. S . or an y ot h e r
c o~ . i n t r y b e si de s B r az i l .
22
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 22 of 54
O u r • company i s d i f f e r e nt f r om any ot h e r ne t wor k
maa~ ke t i ng .
We 'r e s t i l l h e r e . We 'r e g oi ng t o s t ay I 1 e r e f or a l or 7 g d i ne .
Wanze l e r kne w, was r e ckl e s s i n not I czl owi ng , or • was ne g l i g e nt abou t t h e f act t h at h i s s t at e me nt s
we r e mat e z• i al l y f al s e and mi s l e ad i ng , be cau s e h e f ai l e d t o d i s cl os e t h at t h e B r azi l i an au t h or i t i e s
we r e conce r ne d t h at Ympact u s , wh os e act i v i t i e s we r e v i r t u al l y i d e nt i cal t o t h os e of T e l e x F r e e ,
was ope r at i ng an i l l e g al pyr ami d s ch e me .
65. Wanze l e r can be s e e d i n t h e v i d e o i d e nt i f i e d abov e s h owi ng por t i ons of an e v e nt
i n C al i f or ni a oi l J u l y 27 , 201 3. I i 7 t h e v i d e o, Wanze l e ~ ~ s t at e d :
We h av e a company s i nce 1 995. I t 's a VoI P pr od u ct
company. O K? And we h e l p, e s pe ci al l y i n t h e B r azi l i an
Mar ke t , cal l B r azi l f or i ncr e d i bl e pr i ce .
And we h av e a pr od u ct l i ke t h e y can cal l u nl i mi t e d cal l s t o
ce l l ph one s and f i x e d l i ne s i n B r azi l and pay l i ke $49. 90
wi t h a company I t h i nk a l ot of pe opl e know abou t i s Di s k-
a-Vont ad e . I t 's s t i l l t h e r e f or 1 5 ye ar s .
Wanze l e r kne w t h at h i s s t at e me nt s abou t t h e or i g i ns of T e l e x F r e e we r e mat e r i al l y f al s e and
mi s l e ad i ng , be cau s e : (a) i n 1 995, h e and Me r r i l l we r e wor ki ng i n Me r r i l l 's s mal l comme r ci al
cl e ani ng bu s i ne s s ; {b) wh e n t h e y f ou nd e d C ommon C e nt s i n 2002, t h e y we r e i n t h e bu s i ne s s of
mar ke t i ng a "1 0-1 0" l ong -d i s t ance cal l i ng pl an, not a VoI P s e r v i ce ; and (c) l i e d i d not s t ar t d oi ng
bu s i ne s s as "Di s k-a-Vont ad e " u nt i l 2005, wh e n h e be g an s e l l i i zg t e l e ph one ad apt e r s i n B r azi l .
66. I n t h e v i d e o of t h e C al i f or ni a e v e nt , Wanze l e i • al s o s t at e d :
Wh e n you g u ys cannot s e l l t h at [VoI P] accou nt , we g i v e
t l ~ e oppor t u ni t y you . can s e l l i t back t o ou r company.
Ev e r ybod y i n t h i s r oom can make mone y.
We h av e a g r e at pr od u ct .
23
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 23 of 54
b 7 . On March 9, 2014, ~ V a~ l z e l e r appe are d onstage at the e ve nt i n ~ 3 oston whe re
Te l e xFre e announce d. the ne w compe nsati on. pl an that re q ui re d e ach. i nve stor to have f i ve V oIP
custome rs. Porti ons of the e ve nt we re vi de otape d. W al z z e l e r can b e se e n. i n a vi de o that was
poste d ors YouTub e on March 12, 2014 wi th the ti tl e "Te l e xFre e Boston Conf e re nce —
Compe nsati on Pl an Part 4. " Irs the vi de o, W a7 l z e l e r state d that some one had come to hi m and
sai d, "Carl os, you don't ask f or f i ve custon7 e rs f or the ol d one s [AdCe nti° al contracts] . W e l ose
mone y. I want yoi ~ te ach e ve ryone to have f i ve custome rs. " He al so tol d the audi e nce :
W e have a product and se rvi ce no one e l se have ; none of
the m.
I don't want anyb ody to worry.
68. W anz e l e r kne w that i nve stors we 1- e strol ~ gl y e ncourage d to re crui t ne w i nve stors
and we re not re q ui re d to se l l the V oIP se rvi ce , that authori ti e s had shut down. Te l e xFre e 's
af f i l i ate i n B1- az i 1 as axl i l l e gal pyrami d sche me , and that nume rous b anks and payme nt
proce ssors had te rmi nate d the i r re l ati onshi ps wi th Te l e xFre e . W anz e l e i ~ kne w, was re ckl e ss i n
not ki 7 owi ng, or was ne gl i ge nt ab out the f act that Te l e xFre e de ri ve d vi rtual l y no re ve nue f rom
xe tai l V oIP sal e s, whi l e more than 99% of i ts i ncome came f rom i nve stors i n AdCe ntral . ~ 1s a
re sul t, W anz e l e i ~ kne w, was re ckl e ss i n not knowi ng, o~ • was ne gl i ge nt ab out the f act that hi s
pub l i c state me nts promoti ng Te l e xFre e , i ncl udi ng those q uote d i n the pre vi ous paragraphs, we re
mate ri al l y f al se and mi sl e adi ng and, more ge ne ral l y, that hi s promoti onal acti vi ti e s on b e hal f of
Te l e xFre e we re f raudul e nt and de ce pti ve , b e cause Te l e xFz • e e was a Ponz i and pyrami d sche me
that was de sti ne d to col l apse , the re b y pre ve nti ng i t f rom maki ng tl ~ e payme nts promi se d to
24
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 24 of 54
i n v e s t o r s . As an o f f i c e r an d di r e c t o r , Wan ze le r 's s t at e o f mi n d e ai i be at t r i bi ~ zt e d t o Te le aFr e e ,
I n c . as ~ ld Te le xFr e e , LLC.
Ac t i o n s o f t he Ot he r Te le xFr e e I n s i de r s
St e v e n Labr i o la
69. P r i o r t o t he ban kr upt c y f i li n g s o n Apr i l 13, ?014, Labr i o la wo r ke d i n Te le xFr e e 's
o f Fc e i n Mar lbo r o ug h an d was s o me t i me s i de n t i f i e d as i t s " di r e c t o r o f i n t e r n at i o n al mar ke t i n g "
o r ' " di r e c t o r o f bus i n e s s de v e lo pme n t" . I - I e was r e s po n s i ble f o i - Te le xFr - e e 's r e lat i o n s hi ps wi t h i t s
pr o mo t e r s an d r an n ume r o us t r ai n i n g c o n f e r e n c e s . He was o n e o f t he mai n publi c f ac e s o f
Te le xFr e e , pr o v i di n g pe r i o di c " c o r po r at e updat e s " a17 d appe ar i n g i n o t he r pr o mo t i o n al v i de o s
t hat we r e po s t e d o n Yo uTube .
7 0. Labr i o la c an be he ar d o n t he Yo uTube v i de o i de n t i f i e d abo v e t hat was po s t e d o n
Jun e 20, 2013, s ho r t ly af t e r B r azi li an aut ho r i t i e s had s hut do wn Ympac t us , Te le ~ Fr e e 's af f i li at e
i n B r azi l. I n t he v i de o , Labr i o la made r e as s ur i n g s t at e me n t s abo ut t he B r azi li an e n f o r c e me n t
ac t i o n :
We 'r e s t i ll plan n i n g he r e t o ke e p o n i ° o lli n g f o r war d.
The s e t hi n g s happe n t o n e t wo r k mar ke t i n g c o mpan i e s o v e r
an d. o v e r ag ai n . .
We hav e a g r e at r o ad ahe ad o f us all. Le t 's n o t wo r r y
abo ut i t .
Labr i o la kn e w, was r e c kle s s i n n o t kn o wi n g , o r was n e g li g e n t abo ut t he f ac t t hat hi s s t at e me n t s
we r e n 7 at e r i ally f als e an d mi s le adi n g , be c aus e he f ai le d t o di s c lo s e t hat t he B r azi li an aut ho r i t i e s
we r e c o n c e n 7 e d t hat Ympac t us , who s e ac t i v i t i e s we r e v i r t ually i de n t i c al t o t ho s e o f Te le xFr e e ,
was o pe r at i n g an i lle g al pyr ami d s c he me .
25
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 25 of 54
7 L La b r i o l a spo ke d t t r i n f f a sl i d e pr esen t a t i o n t h a t wa s h o st ed b y Cr o sb y a n d po st ed
o i l Yo wl ub e o n J ut y 22, 2013 wi t h t h e t i t l e ° ` S pec i a l Te1exFREE COKPORATE CALL S t eve
La b l - i o l ~ .° ' In t h e vi d eo . La b r i o l a sf a t ed :
Ab so l ut el y we h a ve pr o d uc t s t h a t c a l l c h a n ge yo ur l i f e.
Th er e' s n o t a n o t h er c o mpa n y o n t h e pl a n et t h a t wi l l pa y t h e
a mo un t o f mo n ey t h a t we pa y o ut .
I h a ven ' t Fo un d . o n e r ea so n a t a l l wl i y t h i s b usi n ess mi gh t
n o t b e f o r a n yo n e.
Th er e i s n o l i i z l i t t o n et wo r k ma r ket i n g.
72. La b r i o l a spo ke d ur i n g a sl i d e pr esen t a t i o n . t h a t wa s h o st ed b y Cr o sb y a n d po st ed
o n Yo uTub e o i l J a n ua r y 2~ , 2014 wi t h t h e t i t l e "Tel exFREE S t eve La b ~ r i o l a Co i - po r • a t e Upd a t e
Ca l l 1/ 29 / 14. " In t h e vi d eo , La b r i o l a st a t ed :
We a r e n o t a n i n vest men t c o mpa n y. We a r e a pr o d uc t s a n d
ser vi c e c o mpa n y t h a t pa ys a gen t s t o use, sel l a n d pr o mo t e
o l u ser vi c es.
It ' s a l l a b o ut get t i n g c ust o mer s. We wa n t t o b e a r o un d f o r
t h e n ext f i f t y- pl us yea r s. We wa n t t o keep gr o wi n g. We
wa n t t o keep mo vi n g f o r wa r d . An d t h e wa y t h a t we c a n d o
t h a t i s b y sel l i n g pr o d uc t s a r l d ser vi c es.
Th er e a l° e peo pl e ma ki n g i n c r ed i b l e mo n ey i i 1 t h i s.
73. On Ma r c h 9 , 2014, La b r i o l a a ppea r ed o n st a ge a t t h e even t i n Bo st o n wh er e
Tel exFr ee a n n o t mc ed t h e n ew c o mpen sa t i o n pl a n t h a t r eq ui r ed ea c h i n vest o r t o h a ve f i ve Vo IP
c ust o mer s. He c a n b e seen i n a vi d eo o f t h e even t t h a t wa s po st ed o n Yo uTub e o n Apr i l 7, 2014
wi t h t h e t i t l e "Tel exFr ee In t er n a t i o n a l LIVE FROM BOS TON, Ma r c h 9 — 2014, p. 3. " In t h e
vi d eo , La b r i o l a st a t ed :
26
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 26 of 54
We have an u nb el i evab l e, u nb el i evab l e produ ct i n ou r
pocket.
We have the b es t marketi ng pl an on t1 1 e pl anet and i t' s
ab ou t to get b etter• .
The potenti al i s l i mi tl es s .
74. Lab ri ol a can b e heard o~ 1 a s l i de pi - es entati oi i that was pos ted on You Tu b e on
March 1 7, 201 4 wi th the ti tl e "New Tel exFree Comp Pl an —Randy Cros b y +Steve Lab ri ol a." In
the vi deo. Lab z • i ol a s tated:
Thi ngs are ab ou t to get even b etter.
No one i n the corporate of f i ce i s q u i tti ng.
75. Lab ri ol a can b e s een i n a vi deo that was pos ted on You Tu b e oi ~ A pri l 5, 201 4
wi th the ti tl e "Tel exFREE Steve Lab ri ol a Lots of Qu es ti ons I Have A ns wers 4/5/1 4." In the
vi deo, Lab ri ol a s tated:
Tel exFree i s a eti i s tomer acq u i s i ti on company. Has b ee1 ~ ,
al ways wi l l b e. We go ou t and get cu s tou l ers . You go ou t
and get cu s tomers . You get res i du al i ncome on thos e
cu s tomers . That' s what the b u s i nes s i s and that' s what i t
al ways l eas b een.
We want you to know that we have i ncredi b l e p1 • odu cts f or
you to go ou t and s el l .
We have the ri ght produ cts . We have the ri ght s ervi ce.
76. In the A pri l ~ , 201 4 vi deo, Lab ri ol a al s o s tated that Tel exFree had more than
500, 000 VoIP cu s tomers i n Feb ru ary 201 4. Lab ri ol a knew, was reckl es s i n not knowi ng, or was
negl i gent ab ou t the f act that l ei s s tatement was materi al l y f al s e and mi s l eadi ng b ecau s e, as noted
ab ove, the i nf ormati on avai l ab l e to date i ndi cates that Tel exFree made approxi matel y 26, 300
retai l s al es of monthl y VoIP contracts du ri ng the enti re peri od f rom A u gu s t 201 2 to March 201 4.
27
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 27 of 54
77. Labriola knew t h at inv es t ors were s t rong ly encourag ed t o 1° ecruit new inv es t ors
and were not req uired t o s ell t 1 1 e VoIP s erv ice, C h at aut h orit ies h ad s h ut down TelexFree's
af f iliat e in B raz il as an illeg al py ramid s ch eme, and t h at numerous banks and pay ment
proces s ors h ad t ex- ~ llinat ed t h eir relat ions h ips wit h TelexFl° ee. Labriola knew, was reckles s in not
knowing , or was neg lig ent about t h e f act t h at TeleXFree deriv ed v irt ually no rev enue f rom ret ail
VoIP s ales , wh ile more t h an 99% of it s income came f rom inv es t ors in AdC ent ral. As a res ult ,
Labriola knew, was reckles s in not knowing , oi° was neg lig ent abot rt t h e f act t h at IZ is public
s t at ement s promot i~ lg Tele~ ~ 'ree, including t h os e q uot ed in t h e prev ious parag raph s , were
mat erially f als e and mis leading a1 1 ci, more g enerally , t h at 1 1 is promot ional act iv it ies on beh alf of
TelexFree were f raudulent az ld decept iv e, becaus e TelexFree was a Ponri and py ramid s c~ leme
t h at was des t ined t o collaps e, t h ereby prev ent ing it f rom ilz aking t h e pay ment s promis ed t o
inv es t ors . As t h e s ales manag er at rt h oriz ed t o make public s t at ement s f or t h e company ,
Labriola's s t at e of mind can be at t ribut ed t o TelexFree, Inc. and TelexFz • ee, LLC .
Jos eph C raf t
78. C raf t was h iT- ed as TelexFree's accouz lt ant in Apri1 201 2, and h e was s omet imes
h eld out as t h e company 's C FO.
79. C raf t prepared f inancial s t at ement s t h at were s ubmit t ed t o v arious s t at e
t elecommul~ icat ions reg ulat ors , as well as t h e Mas s ach us et t s S ecurit ies D iv is ion. Th e s t at ement s
indicat ed t h at TelexFi- ee, Iz ic. and TelexFree, LLC h ad combined t ot al income of more t h an
$1 $.3 million in 201 2 and more t h an $1 .1 9 billion in 201 3, as well as combined net income of
$9 million in 201 2 and $55.7 million in 201 3
'?
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 28 of 54
80. C r a f t knew, v a s r ec kl es s i n i a o t kno wi ng, o r wa s ne~ l i ~ ,er 7 t a bo ut t h e f a c t s t h a t
numer o us ba nks a nd pa yment pr o c es s o r s h a d t er mi na t ed t h ei r - r el a t i o ns h i ps wi t h Tel exFr ee, t h a t
i x7 v es t o i • s wer e no t r eq ui r ed t o s el l t h e Vo IP s er v i c e, t h a t Tel exFr ee der i v ed v i 1 - t ua l l y no r ev enue
f r o m r et a i l Vo IP s a l es , t 1 1 a t s no r e t l ~ a ~ ~ 99% o f i t s i neo i ne c a me f r o m i nv es t o r s i n A dC ei ~ t r a l , a nd
t h a t Tel exFr ee's ba nk s t a t ement s a nd c r edi t . c a r d t r a ns a c t i o ns r ef l ec t ed t o t a l 201 3 r ev enues o f
l es s t h a n $300 mi l l i o n. A s a r es ul t , C r a f t knew, wa s r ec kl es s i n no t ki 7 o wi l ~ l g, o r wa s negl i gent
a bo ut t h e f a c t t h a t t h e f i na nc i a l s t a t ement s h e pr e~ a a r ed —wh i c h c l a i med t o t a l r° ev enues o f mo r e
t h a n $1 .1 9 bi l l i o n a nd di d no t di s t i ngui s h bet ween i nc o me f r o m i nv es t ment s i l ~ A dC ent r a l a nd
i nc o me f r o m r et a i l s a l es o f t h e Vo IP s er v i c e —wer e ma t er i a l l y f a l s e a nd mi s l ea di ng a nd, mo r e
gener a l l y, t h a t h i s pr epa r a t i o n o f f i na nc i a l s t a t ement s f o r Tel exFr ee wa s f r a udul ent a nd
dec ept i v e, bec a us e Tel exI'r ee wa s a Po nzi a nd pyr a mi d s c h eme t h a t . wa s des t i ned t o c o l l a ps e,
t h er eby pr ev ent i ng i t f r o m ma ki ng t h e pa yment s pr o mi s ed t o i nv es t o r s . A s t h e c o mpa ny
a c c o unt a nt a nd de f a c t o C FO, C r a f t 's s t a t e o f h i nd c a n be a t t r i but ed t o Tel exFr ee, Inc . a nd
Tel exFr ee, LLC .
A c t i o ns o f t h e Tel exFr ee Pr o mo t er s
81 . Tel exFr ee i l l o ni t o i • ed t h e a c t i v i t i es o f i t s pr o mo t er s , wh o wer e 1 1 o t per mi t t ed t o t ~ s e
ma z° ket i ng ma t er i a l s t h a t h a d no t been po s t ed o i l t h e c o mpa ny webs i t e o r o t h er wi s e a ppr o v ed by
t h e c o mpa ny. If Tel exFr ee o bj ec t ed t o s o met h i ng po s t ed by a pr o mo t er , i t c o ul d bl o c k t h e
pr o mo t er 's a c c es s t o t h e "ba c k o f f i c e" o r ev en r ev o ke t h e pr o mo t er 's r egi s t r a t i o n.
29
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 29 of 54
Sanderley 12odriQues
82. Rodrigues, who inet M errill and W~lzeler in 2006, inv est ed in his f i7 • st 1~dC ent ral
c ont rac t in February 2012 ai d began working f rill- t inge f or TelexFree in June 2012. I - I e bec ame
a prominent pi°omot er of TelexTree, espec ially wit hin t he B i- azilia~l c ommunit y in M assac huset t s
aild elsewhere and wit h his c ont ac t s in B razil I I e appeared at public ev ent s and in promot ional
v ideos t hat we1- e post ed on YouTube (he post ed at least one v ideo himself . M any of his v ideos
wez°e in Port uguese. He c laimed t o hav e made $3 million t hrough his promot ion of TeleaFree.
83. Rodrigues c an be seen in a v ideo t hat was post ed on YouTube on A pril 17 , 2013
wit h t he t it le "TelexFree USA f irst M illionaire Sann Rodriguez [ sic ] Tells His St ory." (The
v ideo v as oz• iginally post ed by Sloan on M arc h 13, but af t er• t he C ommission f iled t his c ase,
Sloan remov ed t he v ideo f rom YouTube.) I n t he v ideo, Rodrigues st at ed:
Ev erybody get s paid weel~ly in TelexFree.
Just plac e your ads ev ery day and ev eryone get s paid
weekly.
What c ompany in t he c ount ry, in t he world, you c a11 make
money ... you don't need t o sell anyt hing? Now it exist s,
TelexFree.
When T put my heart in t his business, my lif e c hanged. I
now leav e many, many opt ions.
I t hink t hat TelexFree is f orev er.
I ant t he ~irsC mult i- millionaire. I make t hree millions.
84. Rodrigues c an be seen in a v ideo t hat was post ed on YouTube on A ugust 17 , 2013
wit h t he t it le "TelexFree I nt erv enc ion y t est imonios Sann Rodriguez [ sic ] y Sant iago De La
Rosa." He spoke in Port uguese wit h siilzult aneous t ranslat ion int o English. I n t he v ideo,
30
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 30 of 54
Rodrigues st a t ed t h a t h e h a d b eex l invol ved in mul t i- l evel ma rket ing compa ~Zies f or over t went y
yea rs. {He f a il ed t o ment ion t h a t iri ?007, a s not ed a b ove, h e set t l ed f edera l securit ies f ra ud
ch a rges coiz ccr~ning one of t h ose coi~npa nies. } He st a t ed t h a t , wh en h e h ea rd a b out I ' el ex F ree in
F eb rua ry 2012, "I 1:new t h a t t h e pl a ns, t h e ma rket ing syst em, cveiyt h inb wa s dit f ei- ent f rom wh a t
I wa s used t o. " He cl a imed t h a t h e ref ina nced a ca r t o get enol z gh money f or h is init ia l
iuvest nl ent s. I - ~e a l so st a t ed:
My l if e a l l of a sudden st a rt ed ch a nging dra st ica l l y. Every
week, more a nd more b onuses f or t h e sa l es of my t ea ms.
And t h en T wa s over sip digit s weekl y.
Everyb ody sh oul d h et pa id weekl y.
l h a ve peopl e in six t y dif F erent count ries, a nd everyt h ing
st a rt ed wit h a meet ing in Bost on wit h f our peopl e.
Your decision ca n ch a nge your l if e.
T h e decision ca n ch a nge your l if e t ot a l l y.
85. Rodrigues knew t h a t invest ors were st rongl y encoura ged t o recruit new invest ors
a nd were not req uired t o sel l t h e VoI P service. Given h is "b a ck of f ice" a ccess t o inf oz ~ma t ion
a b out purch a ses of AdCent i° a l meinb ersl ~l ips a nd t h e VoI P service b y memb ers of h is net work,
Rodrigues knew, wa s reckl ess in not knowing, or wa s negl igent a b out t h e f a ct t h a t T el ex F ree
derived very l it t l e revenue f rom ret a il VoI P sa l es, wh il e virt ua l l y a l l of it s income ca me f rom
invest ors in AdCent ra l . As a resul t , Rodrigues knew, wa s reckl ess ii7 not knowing, or wa s
negl igent a b out t h e f a ct t h a t h is pub l ic st a t ement s promot ing T el ex F ree, incl uding t h ose q uot ed
in t h e previous pa ra gra ph s, were ma t eria l l y f a l se a nd misl ea ding a rid, more genera l l y, t h a t h is
promot iona l . a ct ivit ies on b eh a l f of T el ex F ree were f ra udul ent a nd decept ive, b eca use T el ex F ree
31
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 31 of 54
was a Fonzi and pyramid scheme t hat was dest ined t o col l apse, t hereby prev ent ing it f i- om
making t he payment s promised t o inv est ors.
Sant iag o De La Rosa
8~. De La Rosa met Rodrig ues ii1 J ul y 201 2 ail d be~a7 1 recruit ing f or T el ex Fi- ee in
Nov ember 201 2. He became a prominent promot er of T el ex Free, especial l y wit hin t he
Dominican commt iul it y in Massachuset t s and el sewhere. He appeared at publ ic ev ent s and in
promot ional v ideos t hat were post ed on YouT ube. I v l ar~y of l eis v ideos were in Spanish.
87 . De La Rosa prov ided t he v oiceov er f or a sl ide present at ion. t hat was post ed on
YouT ube on Deceul ber 1 2, 201 2 wit h t he t it l e " T el ex f i- ee P resent acion ei1 Espanol Sant iag o De
La Rosa. " T he present at ion cont ained a det ail ed descript ion of t he t wo t ypes of AdCent ral
memberships, t he process f or pl acing I nt ernet ads, and. t he v arious bonus and. commission pl ans.
I n t he v ideo, De La Rosa st at ed (as t ransl at ed f rom Spanish int o Eng l ish) :
T he business opport unit y 1 ? as f inal l y arriv ed where you
don' t hav e t o make mont hl y payment s, you don' t hav e t o
make del iv eries or buy anyt hing . Simpl y work f rom. t he
comf ort of your own home making ads f or t his wonderf ul
company t hat is T el e~Free.
88. De La Rosa. can be seen in a v ideo- t hat was post ed on YouT ube on J ul y 21 , 201 . 3
wit h t he t it l e " T est imonio Sant iag o de l a Rosa Vision t el ex f ree. " I n t he v ideo, De La Rosa made
t l ~e f ol l owing st at ement s (as t ransl at ed f rom Spanish int o Eng l ish) :
How did T el ex f ree chang e my l if e? 3 60 deg rees, onl y f iv e
mont hs ag o my f amil y onl y had 1 . 00 dol l ars in sav ing s.
I can' t say I am a ~nil l ioi~aire or mul t i- mil l ionaire, but wil l
be in t he nex t coupl e of naont l ~s.
3 2
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 32 of 54
Nov we have an account i n t1 1 e bank ~ i ~ i th more than s i x
~ ~ g ures .
I~ ow i s Telex Free d i f f erent f rom other marketi ng
networks ? The f i ~ • s t 1 letwork wI1 e1 ~ e you can d eci d e what
s alary you want and make i t happen. If you want $500
d ollars per week you can make i t happen by buyi ng f i ve
Ad Central Fami ly.
89. De La Ros a can be s een. i n the YouTube vi d eo i d enti f i ed above that was pos ted on
Aug us t 1 7, 201 3. He s poke i n Spani s h wi th s i multaneous tz - ai ls lati on i nto Eng li s h. In the vi d eo,
De La Ros a s tated that he boug ht hi s f i rs t Ad Central Fami ly Conti° act i n J uly 201 2, but by
November 201 2, hi s i ncome "had d ropped d ras ti cally" and he was . parki ng hi s car at hi s n7other-
i n- law' s hous e to avoi d havi ng i t towed . He s tated that he beg an acti vely tryi ng to recrui t f or
Telex Free that month, but when lz e was i nvi ted to meet f ri end s i n Flori d a, he could not af f o7~ d the
$80 charg e to check lei s lug g ag e. He then recoul~ ted hi s s ucces s as a promoter and s tated :
I thi nk i t' s very eas y to d o thi s opportuni ty here at
Telex Free. Everybod y s hould und ers tand i f you want to
g row a lot i n thi s bus i nes s . Fi rs t thi ng . You need to learn
the bas i cs of the bus i nes s . How to place an ad . How to
reg i s ter a cli ent. How to reg i s ter• a promoter. Become a
prof es s i onal i n thos e three thi ng s .
90. De La Ros a can be s een i n a vi d eo that was pos ted on YouTube on September 1 9,
ZOl 3 wi th the ti tle "Santi ag o De La Ros a — Telex Free Long Is land Recomend ad o! !" The vi d eo
contai ned a d etai led d es cri pti on of the Ad Central Fami ly plan. In the vi d eo, De La Ros a s tated
(i n Eng li s h) :
Every d ay 365 d ays a year you place an ad .
If you cai u7ot s e1 1 the prod uct that they g i ve you, the
company buys i t back f rom you f or $20.
~ ~
J J
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 33 of 54
$50 p l u s $289 t h a t $339 a nd t h e comp a ny p a ys you 20
Mme s ~2 = $1,040.
91. De La Ros a p rovide d t h e voice ove r f or a s l ide p re s e nt a t ion t h a t wa s p os t e d on
You Tl zbe on Oct obe r 16, 20 i 3 wit h t h e t it l e "Te l e xFre e Bu s ine s s P re s e nt a cion — En Es p a nol con
Sa nt ia go De La Ros a ." In t h e vide o, De La Ros a s t a t e d (a s t ra ns l a t e d f rom Sp a nis h int o
Engl is h ) , "P os t ing t h e da il y a ds is e a s y, s imp l y cop y a nd p a s t e ."
92. On Ma rcl l 9, 2014. De La Ros a a p p e a re d ons t a ge a t t h e e ve nt in Bos t on wh e re
Te l e xFre e a ml ou l l ce d t h e ne w comp e ns a t ion p l a n t h a t re q u ire d e a ch inve s t or t o h a ve e ve VoIP
cu s t ome rs . He ca n be s e e n ii1 a vide o of t h e e ve nt t h a t wa s p os t e d on You Tu be on A p ril 7, 2014
wit h t h e t it l e "Te l e xFre e Int e rna t iona l LIVE FROM BOSTON, Ma rch 9 — 2014, p .l ." In t 11e
vide o, De La Ros a s t a t e d., "We don' t ima gine t h e big a mou nt of income we wil l ma ke on t h e
cu s t ome r s ide . It ' s e a s y."
93. De La Ros a ca n be h e a rd in a vide o t 17a t wa s p os t e d on You Tu be on A p ril 1, ? 01.4
wit 11 t h e t it l e "A p ril 1 Te l e xFre e Up da t e C a l l (No Joke ) Ol d C ont ra ct s Ge t You r C u s t ome rs ." In
t h e vide o, De La Ros a t rie d t o re a s s u re inve s t ors de s p it e t h e ch a nge t o t h e comp e ns a t ion p l a n:
Th e comp a ny wil l p a y you u nt il you r cont ra ct s e xp ire .
Eve rybody be s u re t h a t nobody gonna l os e t h e ir mone y.
Eve rybody' s going t o be h a p p y.
94. De La Ros a kne w t h a t inve s t ors we re s t rongl y e ncou ra ge d t o re cru it ne w inve s t ors
a nd we re not re q u ire d t o s e l l t h e VoIP s e rvice . Give n h is "ba ck of f ice " a cce s s t o inf orma t ion
a bou t p u rch a s e s of A dC e nt ra l me mbe rs h ip s a nd t h e VoIP s e rvice by me mbe rs of h is ne t woz• k, De
La Ros a kne w, wa s re ckl e s s in not knowizig, oi° wa s ne gl ige nt a bou t t h e f a ct t h a t Te l e xFre e
34
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 34 of 54
d e r i v e d v e r y l i t t l e r e v e nue f r o z e r e t a i l Vo IP s a l e s , whi l e v i r t ua l l y a l l o f i t s i nco me ca me f r o m
i nv e s t o r s i n ~ d C e i l t r a l . As a r e s ul t , De La Ro s a l cne ~ v , wa s r e ck l e s s i n no t k no wi ng, o r wa s
ne gl i ge nt a bo ut t he f a ct t ha t hi s p ubl i c s t a t e me nt s p r o mo t i ng Te l e xFr e e , i ncl ud i ng t ho s e quo t e d
i n t he p r e v i o us p a r a gr a p hs , we r e ma t e r i a l l y f a l s e a nd mi s l e a d i ng a 7 z d , mo r e ge ne r a l l y, t ha t hi s
p r o mo t i o na l a ct i v i t i e s o n be ha l f o f Te l e xl ' r e e we r e f r a ud ul e nt a nd d e ce p t i v e , be ca us e Te l e YFr e e
wa s a Po nz i a nd p yr a mi d s che me t ha t wa s d e s t i ne d t o co l l a p s e , t he r e by p r e v e nt i ng i t f i o m
ma k i ng t he p a yme nt s p r o mi s e d t o i nv e s t o r s .
Ra nd y C r o s by
95. C r o s by s t ~ u~ e d wi t h Te l e xFr e e i n De ce mbe r - 2012 a nd be ca me a ~ r o mi ne i l t
p r o mo t e r . Dur i ng o i l e co r p o r a t e up d a t e , La br i o l a d e s cr i be d C r o s by a s "o ne o f o t u• t o p l e a d e r s "
a nd . a d d e d , "Yo u he a r f r o m Ra nd y a l l t he t i me . " C r o s by ma d e d a i l y ma r k e t i ng p r e s e nt a t i o ns a nd
a p p e a r e d i n p r o mo t i o na l v i d e o s t ha t we r e p o s t e d o n Yo uTube . He a l s o t o ut e d Te l e xFr e e t l l r o ugl i
a we bs i t e ca l l e d "e v e r ybo d yge t s p a i d we e k l y. bi z".
96. C r o s by p r o v i d e d t he v o i ce o v e r f o r a s l i d e p r e s e nt a t i o n. t ha t wa s p o s t e d o n
Yo uTube o n Ap r i l 20, 2013 wi t h t he t i t l e "Te l e xFr e e We bi na r Pr e s e nt a t i o n +Le a d e r s i i i HD. "
Iz 1 t he v i d e o , C r o s by s t a t e d , "I gi v e t hi s p r e s e nt a t i o n e v e r y d a y, s e v e r a l t i me s a d a y. " He
e mp ha s i z e d ho w e a s y i t wa s t o p l a ce Int e r ne t a d s :
Whe n I go t i nt o t hi s co mp a ny ba ck i n De ce mbe r I d i d n' t
l c~ i o w ho w t o a d v e r t i s e , but s i l 7 ce i t wa s s o s i mp l e a 5-ye a r -
o l d co ul d d o i t . . . We co p y, p a s t e , a nd v a l i d a t e . It ' s j us t
t ha t ' s s i mp l e . Ev e r ybo d y ca n cut a nd p a s t e .
It ' s r e a l s i mp l e o n ho w t o ge t s t a r t e d . Ev e r yo ne be co me s
a n a s s o ci a t e wi t h t he co mp a ny wi t h $50 co s t . The r e i s no
mo nt hl y co s t . Yo u wi l l l e a r n t he ba s i cs . Yo u p l a ce a n a d
a bo ut t he Te l e xFr e e s e r v i ce . The a d s a r e a l r e a d y wr i t t e n,
35
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 35 of 54
You simply copy and past e t h e ads nn f r e e adv e r t ising sit e s.
We e v e n pr ov ide you w it h a list of f r e e adv e ~ - t isillg sit e s.
I t ' s t h at simple .
I t t ak e s le ss t h a~ ~ 30 se conds t o place e ach ad. Most pe ople
do it in 15 t o 20 se conds.
He e x plaine d t h at inv e st or s w e r e paid t o h e lp Te le x Fr e e "g e t not ice d":
Ev e r ybody k now s t h at come s int o t h is company t h at
be cause t h e y' r e adv e r t ising , and h e lping t h e company
build, az id h e lping t h e company be not ice d, as a pr onlo~ e r
t h e y ar e now put t ing t h e mse lv e s in a posit ion t o simply
r e ce iv e income by h e lping t h e company g e t not ice d.
Th e y' r e paying us t o adv e r t ise t h e se r v ice . I t ' s j ust t h at
simple .
He e x plaine d. t h at inv e st or s did not ne e d t o se ll anyt h ing t o g e t paid:
You can snak e mone y e v e r y w e e k e v e n i f you didn' t snak e
a sale t h at w e e k .
if it [a VoI P pack ag e ] doe sn' t se ll t o t h e public, t h e n you
can se ll t h e m [sic] back t o t h e company f or $ 20. . . Eit h e r
w ay, you w ill e ar n income .
Your cont r act s ar e not de pe nde nt on some body e lse saying
ye s or no, and t h at mak e s you ii1 t h e dr iv e r ' s se at be cause
you ar e in cont r ol.
We don' t h av e pe ople t h at j oin and can' t mak e mone y
be cause t h e y can' t r e cr uit or can' t se ll. t o t h e public.
Ev e r ybody g e t s paid w e e k ly.
He also w ax e d e loque nt on h ow e asy it w as t o mak e lot s of mone y t h r oug h Te le x Fr e e w h ile
doing v ir t ually not h ing :
We ar e t h e pione e r s in t h is indust r y and w e h av e cause d
mor e pe ople t o be come succe ssf ul, doz e ns and doz e ns of
millionair e s be cause of t h is.
36
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 36 of 54
C o r l 7 p e n s a t i o n p l a n i s t o p o f t h e l i n e j u s t l i k e a Be n t l e y
c a l • — p a yi n g u p t o $15,360 p e r da y.
Do e s n 't m a t t e r wh a t p l a n yo u s i gn t l ~ e c u s t o m e r u p fo r ,
e i t h e r AdC e n t r a l o r AdC e n t r a l Fa m i l y c o n t r a c t , t h e m o r e
c o n t r a c t s yo u o wn t l 7 e m o r e i n c o m e yo u c a n m a k e , wi t h o u t
s p o n s o r i n g o r r e c r u i t i n g o r wo 1- ~ y a bo u t s e l l i n g t o p u bl i c ,
yo u k n o w wh a t yo u 'r e go i n g t o m a k e .
Mo s t p e o p l e c a n 't L m de r s t a ~ l d t h e t yp e o f i n c o m e yo u c a n
e a r n .
97 . C r o s by c a n be s e e n i n a vi de o t h a t Sl o a n p o s t e d o n Yo u Tu be o n Ma y 17 , 2013
~ ~ i t h t h e t i t l e "Te l e xFr e e Su p e r we e k e n d Or 1~ 7 do (Ma y 1 1, 2013) ~ ~ ~ i t h Ra n dy C r o s by o n t h e
o p p o r t u n i t y." I n t h e vi de o , C r o s by s t a t e d:
Al l we do i s p l a c e a ds . I t 's s i m p l e . (Th e c a m e r a p a i u l e d t o
a s l i de s h o wi n g "Pl a c e Yo u r Ads Da i l y a n d Ge t Pa i d ...
SI MPL E".)
Ho w m a n y p e o p l e wo u l d l i k e t o t a k e $1,37 5 a n d p u t i t i n
t h e i r c l o s e t a n d c o m e ba c k a ye a r fr o m n o w, a l l yo u h a ve t o
do i s o p e n yo u r c l o s e t do o r e ve r y da y. Ri gh t ? Fo r 365
da ys a n d wa l k ba c k . i n n o w a n d t h a t $1,37 5 i s $5,200.
Wo u l d e ve r ybo dy l i k e a p o l i c y l i k e t h a t ? Gu ys , we do 11't
n e e d a p o l i c y, we 've go t Te l e xFr e e .
C r o s by c a n be s e e n i n a n o t h e r vi de o fr o m t h e s a m e e ve n t t 11a t Sl o a n p o s t e d o n Yo u Tu be o n
Ma y 21; 2013 wi t h t h e t i t l e "Te l e xFr e e Or l a n do , ~ L (Ma y 11, 2013) Su p e r we e k e n d Pa n e l ."
(Aft e r t h e C o m m i s s i o n fi l e d t h i s a c t i o n , Sl o a n r e m o ve d bo t h vi de o s fr o m Yo u Tu be .) I n t h i s
vi de o , C r o s by i s s h o wn . i n t r o du c i n g a n u m be r o f o t h e r t o p Te l e xFr e e p r o m o t e r s , i n c l u di n g
Ro dr i gu e s , De L a Ro s a a n d Sl o a n , t o t 11e a u di e n c e .
98. C r o s by p r o vi de d t h e vo i c e o ve r fo r a s l i de p r e s e n t a t i o n t h a t wa s p o s t e d a n
Yo u Tu be o n Oc t o be r 3, 2013 wi t h t h e t i t l e "Te l e xFREE e n En gl i s h Pr e s e n t a t i o n We bi n a l ~ wi t h
Ra n dy C r o s by." I n t h e vi de o , C r o s by e n c o u r a ge d vi e we r s t o r e gi s t e r t h r o u gh h i s we bs i t e . On c e
37
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 37 of 54
abain, he spoke at l en~ t l ~ about l ow AdCent ral inv est ors coul d make l ot s of money wit hout
se1 1 ii1 g t he VoTP serv ice:
We're sharing an opport unit y t hat is not hing l ike anyt hing
el se out t here.
This is not l ike anyt hing you ev er t ried before.
Tel exFree has produced t he sol ut ion t o ev erybody's
probl ems.
I nst ead of 80-90% of peopl e not maki~ l g money in ot her
sal es conl pa~ 7 ies, you hav e t his company where 1 00% of
t he peopl e earn income wit hout sponsoring or- wit hout
sel l ing t o t he publ ic.
You wil l st il l profit weekl y wit h t his company ev en iF
ev erybody said NO t o your product or serv ice, or if t hey
say NO t hey don't want t o join t his opport unit y rig ht now.
Company is simpl e, you pl ace ads ov er t he I nt ernet and you
g et paid.
I f t he one new Tel exFree99 packag e each week doesn't sel l
t o t he publ ic, t hen you can sel l it back t o t he company and
eaxn 40% of t he ret ail price, t 1 1 at is $20 per week t imes 52
weeks equal s $1 ,040 a yeal -.
What 's so unique is t hat you hav e al l t he cont rol . . See I
didn't say anyt hing about recruit ing peopl e, or how many
sol d t o t he publ ic. I g av e you worst case scenario, wit h you
just pl acing your ads per day, it put s you in l ine t o earn t ons
of income.
99. On March 9, 201 4, Crosby appeared onst ag e at t he ev ent in Bost on where
Tel exFree ai~ noui~ ced t he new compensat ion pl an t hat required each inv est or t o hav e fiv e VoI P
cust omers. He can be seem in t 1 1 e v ideo ident ified abov e t hat was post ed on April 7 , 201 4, I n t he
v ideo, Crosby st at ed:
38
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 38 of 54
I ~n n1 o 1 - e e x c i t e d abo ut Te le x Fre e t o d ay t h an wh i n I ~z • s t
go t s t art e d .
I ~o w many pe o ple wo uld li k e t o mak e mo re mo ne y? . . . I
d o 1 1 ' t t h i nk t 1 1 e y u~~d e rs t and t h e amo lult o f i nc o me po t e lat i al
t h at t h e c us t o me rs are go i ng t o bri ng.
Pe o ple are go i ng t o want wh at yo u h ave be c aus e o f t h e
po we r o f wh at t h e s e rvi c e d o e s .
T pro mi s e yo u, yo u c anno t i magi ne h o w many pe o ple wi ll
s i g~1 up a~~d be c o me yo ur c us t o me r ant i t e 1 1 t h e i r fi ~i e i i d s t o
be c o me yo i u• c us t o me r.
I n t h e vi d e o , De La Ro s a c re d i t e d Cro s by wi t h c o mi ng up wi t h . t h e s lo gan, "Eve rybo d y ge t s pai d
we e k ly. "
1 0 0 . _ Cro s by pro vi d e d t 1 ~1 e vo i c e o ve r fo r a s li d e pre s e nt at i o n t h at was po s t e d o n
Yo uTube o n Marc h 20 , 20 1 4 wi t h t h e t i t le "Rand y Cro s by Ne w Co n1 p Plan 30 Mi n 3- 20 - 20 1 4. ' '
I n t h e vi d e o , Cro s by s t at e d t h at , wh e n h e s t art e d wi t h Te le x Fre e i n De c e mbe r 20 1 2, h e was
bro k e and be i l~g h o und e d by c re d i t o rs . He t h e n pro c e e d e d t o t o ut t h e ad vant age s o f Te le x Fl- e e :
Th e re ' s be e n a lo t o f pe o ple wh o h ave mad e a lo t o f mo ne y
i n t h i s c o mpany.
I t j us t d o e s n' t mat t e r t h at yo u we re i n fi rs t .
We po s t ad s . . . We s pe nd j us t a fe w mi nut e s a d ay,
c o pyi ng ad s t h at are alre ad y wri t t e n. , s o we d o n' t h ave t o
t h i nk . abo ut wh at t o s ay, and we pas t e t h e m o n fre e we bs i t e s
o ut t h e re , c las s i fi e d s i t e s , t o d raw mo re pe o ple t o ge t and
by t h e s e rvi c e .
1 0 1 . Cro s by c an. be s e e n i n t h e vi d e o i d e nt i fi e d abo ve t h at was po s t e d o n Yo uTube o n
A pri l 1 , 20 1 4. I n t h e vi d e o . Cro s by t ri e d t o re as s ure i nve s t o rs abo ut t h e ne w c o mpe ns at i o n plan:
`Bo t t o m li ne — no bo d y lo s e s a d i me . "
~~
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 39 of 54
102. Crosby knew t h a t i 7 ~ v est ors ~ ~ ere st rong l y encoura g ed t o recrui t new i nv est ors a nd
were i l ot req ui red t o sel l t h e Vo1P serv i ce. Gi v en h i s "ba ck of f i ce" a ccess t o i nf orm a t i on a bout
purch a ses oFAdCent ra l m em bersh i ps a nd t h e VoIP serv i ce by m em bers of h i s net work, Crosby
knew, wa s reckl ess i n not knowi ng , oi - wa s neg l i g ent a bout t 11e f a ct t h a t T el ex Fi • ee deri v ed v ery
l i t t l e rev enue f rom ret a i l VoIP sa l es, wh i l e v i rt ua l l y a l l of i t s i ncom e ca m e f rom i nv est ors i n
AdCent i° a l . As a resul t , Crosby knew, wa s reckl ess i n not knowi ng , or era s neg l i g el ~ t a bout t h e
f a ct t h a t h i s publ i c st a t em ent s prom ot i ng T el ex Free, i ncl udi ng t h ose q uot ed i n t 11e pt° ev i ous
pa ra g ra ph s, were m a t eri a l l y f a l se a nd n7 i sl ea di ng a nd, m ore g enes° a l l y, t h a t h i s prom ot i ona l
a ct i v i t i es on beh a l f of T el ex Free were f ra udul ent a i l d decept i v e, beca use T el ex Free wa s a Ponzi
a nd pyra m i d sch em e t h a t wa s dest i ned t o col l a pse, t h ereby pi° ev ent i ng i t f rom m a ki ng t h e
pa ym ent s prom i sed. t o i nv est ors.
Fa i t h Sl oa n
1.03 . Sl oa n wa s a prom i nent prom ot er of T el ex Free. Sh e ref erred t o h ersel f a s "one of
t h e T el ex Free l ea ders," a nd duri ng one corpora t e upda t e, La bl° i ot a descri bed h er a s a "g rea t
l ea der" wh o "i s on a l l t h e [upda t e] ca l l s." Sh e opera t ed websi t es t out i ng T el ex Free, usi ng na m es
such a s "t el ex f reepower.coi n", "t el ex f reeprog ra m .com", a nd "t el ex f ree.f a i t h sl oa n.conl". Sh e
a l so a ppea red i n prom ot i ona l v i deos t h a t were post ed on YouT ube.
104. ~ n Int ernet sea rch f or "t el ex f i - eepower.com " a nd "t el ex f ree.f a i t h sl oa n.com "
current l y l ea ds t o t h e sa ne websi t e.
a . T h e "HOME" pa g e of t h e websi t e st a t es:
T el ex FREE Gl oba l T ea m pri des i t sel f on prov i di ng you
st el l a r support , t ool s, a nd a pl a ce t o m eet new peopl e wh i l e
ea rni ng MASSIVE Incoi zl e! Cont a ct t h e Person Wh o Se~ 1t
Q 17
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 40 of 54
you ~ - I e i - e or C a 1 1 me a t 1 - 800 670 3202. skype : f ~ i t h sl oa n .
e ma i l : t e l e x f i- e e g l ob ~ l t e a i n @b ma i Lcon ~ 1 To JOI N
TELEXFREE.
b . Tl ~ e "ABOUT' TELEXFREE" pa g e o~ t h e w e b si t e st a t e s, "Te l e x f re e ML~ M
[ n n i l t i - l e v e l ma rke t i n g ] b usi n e ss w a s l a un ch e d i n Bra z i l 201 2. T1 7e y h a v e ov e n 1 mi l l i on
cust ome rs a n d di st ri b ut ors." Th e pa g e a l so con t a i n s a v i de o b y C a rl os C ost a , w h o i de n t i f i e d
l ~ i z n se l f ~ a s t h e compa n y's D i re ct or- of Ma 1 - ke t i n g . Th e v i de o ( i n Port ub ue se w i t h si ml z l t a ~ 7e ous
~ Ex z g l i sh t ~ - a i l sl a t i ol ~ ) w a s a ppa re n t l y f i l me d soon a f t e r Te l e XPre e 's a f f i l i a t e i i 1 Bra z i l v a s sh ut
dow n . i n Jun e 201 .3. I n t h e v i de o, C ost a t ri e d t o re a ssure i n v e st ors:
We a re w orki n g i n a se ri ous ma n n e r, i n a n h on e st ma m~ e r.
You a re doi n g a ma rv e l ous job , a job t h a t h a s n e v e r b e e n
se e n b e f ore i n a n y compa n y i n t h e I n t e rn e t or n n z l t i - l e v e l
i l z a rke t i i i g .
You, promot e r of Te l e x Fre e , you do n ot n e e d t o b e w orri e d
a b out a n yt h i n g . We a re h e re t o w ork w i t h . a n d f or you.
c. Th e "C OMPENSATI ON PLAN" pa g e of t h e w e b si t e con t a i n s comme n t s
b y Sl oa n , a sl i de pre se n t a t i on . a b out t h e n e w pl a n a n n oun ce d on Ma rch 9, 201 4, a n d a n i n v i t a t i on
t o "con t a cf me , Ta i t h Sl oa n , i f you a re t ryi n g t o g e t your mon e y out of t h e OLD PLAN." Th e
pa g e a l so con t a i n s e ma i l s b e t w e e n . Sl oa ~ l a n d. i n v e st ors g oi n g b a ck t o Fe b rua ry 1 2, 201 3. I n a n
e ma i l da t e d Fe b rua ry 24, 201 3, Sl oa n t ol d a corre spon de n t , "Th e n e t w ork ma rke t e rs a n d b ui l de rs
such a s myse l f pl a ys [ si c] a n a ct i v e 1 • ol e b e ca use w e se e t h e mon e y i n t h e compe n sa t i on pl a n a n d
t h e product s." S1 1 e a l so w rot e , "You ca n come a b oa rd a n d just pl a ce your a ds da i l y a n d. st i l l ca n
ma ke up t o $1 00 a w e e k b y doi n g t h a t sma l l t a sk." La t e r t h a t da y, sh e t ol d a corre spon de n t w h o
h a d i n v e st e d a ~ a t h re e AdC e n t ra l Fa mi l y pa cka g e s, "[ T]h e b a re mi n i mua n you w i l l re ce i v e just f or
41
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 41 of 54
placing ads is $300 a week for 52 weeks = $1x;000. I n 14.25 weeks, you « gill have your
$427 .00 back in your hands! The rest is gravy for doing t he market ing."
d. The "I :I OW TO" pat e of t he websit e st at es:
Place Ads —Earn Weekly CASH
OR
Build a Team and Earn MUCH More!
TelexFree Has Creat ed Millionaires
I n Braz il I n J ust 15 Mont hs!
TelexFree Now accept ing USA/Canada and I nt ernat ional mel~ ~ 7bers.
FREE Act Pub1is11ing sit es. See Menu Above.
105. Sloan can be seen in a video t hat she post ed on YouTube on J une 12, 2013 wit h
t he t it le "TelexFree Fait h Sloan TelexFree Global Power Teain Webii~ ar." (Aft er t he
Commission filed t his act ion, Sloan removed t he video from YouTube.) I n t he video, she st at ed:
Everybody in TelexFree get s paid weekly. Everybody.
You post your ads. Take you a mimit e and a hal£ T1~ ~ ee
minut es. Five minut es max.
Place your ads, and you go about your day. You do t hat for
seven days a week, you get paid every single week.
You don't have t o build. You don't have t o sell.
There's not hing out t here like t his.
106. Sloan. knew t hat invest ors were st rongly encouraged. t o recruit new invest ors and.
were not req uired t o sell. t he VoI P service. Given her "back office" access t o informat ion about
purchases of AdCent ral memberships and t he VoI P service by members of her net work, Sloan.
knew, was reckless in not knowing, or was negligent about t he fact t } lat TelexFree derived very
lit t le revenue iron? ret ail VoI P sales, while virt ually all of it s income caxa~ e from invest ors in
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 42 of 54
A d C e n t ~ - a 1 . A s a r e su l t , " Sl oa n kn e w, wa s r e c kl e ss i n n ot kn owi n g, oi - wa s n e gl i ge n t a bou t t h y ,
f a c t t h a t h e r p u bl i c st a t e m e n t s p 1 • oi n ot i n g Te l e xFr e e , i n c l u d i n g t h ose qu ot e d i i 1 t l ~ e p r e vi ou s
p a r a gr a p h s, we r e m a t e r i a l l y f a l se a n d m i sl e a d i n g a n d , m or e ge n e r a l l y , t h a t h e r p r om ot i on a l
a c t i vi t i e s on be h a l f of Te l e YFr e e we r e f r a u d u l e n t a n d d e c e p t i ve , be c a L i se Te l e xFr e e wa s a Pon zi
a n d p y r a m i d sc h e m e t h a t wa s d e st i n e d t o c ol l a p se , t h e r e by p r e ve n t i n g i t f r om m a ki n g t h e
p a y m e n t s p r om i se d t o i n ve st or s.
Di ve r si on of In ve st or Fu n d s
1 07. Th e i n f or m a t i on a va i l a bl e t o d a t e i n d i c a t e s t h a t M e r r i l l a n d Wa n ze l e r , wh o h a d
sol e a u t h or i t y t o t r a n sf e r Te l e xFr e e c or p or a t e f i e n d s u n t i l t h e ba n kr u p t c y f i l i n g, c a u se d m or e t h a n
$33 m i l l i on t o be t r a n sf e r r e d f r om Te l e xFr e e a c c ou n t s t o t h e m se l ve s, t o f a m i l y m e m be r s, t o t h e
ot h e r i ~ ~ d i vi d u a l d e f e n d a n t s, or t o c om p a n i e s u n d e r t h e i r c on t r ol ( i n c l u d i n g t h e r e l i e f d e f e n d a n t s) .
Ja m e s M e r r i l l
1 08. Th e i n f or m a t i on a va i l a bl e t o d a t e i n d i c a t e s t h a t , be t we e n Se p t e m be r 201 2 a n d
De c e m be r 201 3, M e r r i l l r e c e i ve d m or e t h a sl $3. 2 m i l l i on f i om Te l e xFr e e .
On De c e r ~ l be r 27, 201 3, Te l e xFr e e p a i d $3 m i l l i on t o a n a c c ou n t j oi n t l y
M e l d by M e r r i l l a n d h i s wi f e .
b. On De c e m be r 26, 201 3, Te l e xFr e e p a i d $1 36, 200 t o M e r r i l l .
c . Be t we e n Se p t e m be r 201 2 a n d Fe bl ~ i a r y 201 3, Te l e xFr e e p a i d a t ot a l of
$85, 000 t o M e r r i l l , p r i m a r i ] y i n m on t h l y p a y m e n t s of $7, 500.
43
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 43 of 54
Carlos Wanzeler
109. Tne information av ailab le to date iladic ates th at, b etween Nov emb er° 2012 and
Feb ruary 2014, Wanzeler and memb ers of h is family rec eiv ed almost $ 13 .7 111illion from
TelexFree.
$ 3 .8 million.
$ 2.5 million.
a. On Apri13 , 2014, Wanzeler ob tained a c ash ier' s c h ec k for nearly
b . On Feb rL iary 28, 2014, Katia Wanzeler, th e defendant' s wiFe, rec eiv ed
c . On Dec emb er 26 and 27 , 201.3 , Wanzeler rec eiv ed. a total of $ 7 ;3 17 , 800.
d. Between Nov emb er 2012 and April 2013 , Fa~ b io W~ lzelel- , th e
defendant' s b roth er, rec eiv ed more th an $ 53 , 000.
e. In addition, on April 1 1, 2014 —two days b efore th e b ankruptc y filing s —
Katia Wanzeler and M errill v isited a b ank wh ere TelexFree, L L C h ad an ac c ount aild ob taiX ied
c ash ier' s c h ec ks fo7 • more th an $ 25 million. One c h ec k, in th e amount of $ 2, 000, 63 4, was
payab le to Katia Wanzeler. Th at c ash ier' s c h ec k is one of th e items seized b y federal ag ents at
TelexFree' s offic e on April 15, 2014.
110. Wanzeler transferred a sig nific ant portion of th e money h e rec eiv ed from
TelexFree to at least one b ank outside th e United S tates.
a. On Nov emb er 25, 2013 , h e sent $ 50, 000 to an ac c ount at th e Ov ersea-
Ch inese Banking Corporation in S ing apore.
same b ank.
b . On January 2, 2014, h e sent an additional $ 3 .5 million to an ac c o~ .~ nt at th e
44
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 44 of 54
111. W a i l z e l e r use d i n v e st o r f i e n ds t o b ui l d a sma l l r e a l e st a t e e mpi r e .
a . He ma de ho st o f t he a c q ui si t i o n s usi n g c o mpa n i e s ui l de l= ~ l i i s c o n t r o l ,
i n c l udi n g : ( i ) JC Re a l E st a t e Ma n a g e me n t Co mpa n y LLC, a Ne v a da l i mi t e d l i a b i l i t y c o mpa n y
t ha t wa s f o t • me d i n Jul y 2012 wi t h W a n z e l e i • a n d Me r r i l l a s ma n a g e r s; ( i i ) Ab o v e &Be yo n d t he
Li mi t , LLC ("Ab o v e &Be yo n d") , a Ne w Me xi c o l i mi t e d l i a b i l i t y c o mpa n y t ha t Cr a f t f o r me d f o r
W a n z e l e r i n Se pt e mb e r • 2012, ( i i i ) CNW Re a l t y St a t e , LLC, a Ne v i s c o r po r a t i o n t ha t wa s f o l - me d
i z ~ Oc t o b e r 2012 wi t h Ab o v e &Be yo n d a s ma n a g e r ; ( i v ) KC Re a l t y St a t e LLC, a F l o r i da l i mi t e d
l i a b i l i t y c o mpa n y t ha t Cr a f t f o r n ~ e d i n Oc t o b e r 2012 wi t h Ka t i a W a n z e l e r a s ma n a g e r ;
( v ) Ac c e r i s Re a l t y E st a t e , LLC, a Ma ssa c huse t t s l i mi t e d l i a b i l i t y c o mpa n y t r e a t Cr a f t f o r me d i n
I ~ e b r ua l y ? 01.3 wi t h Ka t i a W a n z e l e r a s ma n a g e r ; a n d ( v i ) Ma ke o v e r I n v e st me n t s LLC, a F l o r i da
l i mi t e d l i a b i l i t y c o mpa n y t ha t wa s f o r me d i n Jul y 20l i wi t h Ma r i l z a W a n z e l e r , W a n z e l e r 's 6~ -
ye a r- o l d mo t he r , a s a ma n a g e r .
b . The i n f o r ma t i o n a v a i l a b l e t o da t e i n di c a t e s t ha t , b e t we e n Jul y ? 01.2 a n d
F e b r ua r y ? 014, W a n z e l e r pa i d a ppr o xi ma t e l y $6.3 mi l l i o n — pr i ma r i l y i n c a sh —f o r • 3 4 pr o pe r t i e s
i i i Ma ssa c huse t t s a n d F l o r i da , i n c l udi n g a $950, 000 ho use f o r hi mse l f a ~ 7 d hi s wi f e i n
No r t hb o r o ug l l , Ma ssa c huse t t s, a n d. a $450, 000 ho use f o r hi s so n i n Co c o n ut Cr e e k, F l o r i da .
112. W a n z e l e r a l so use d i n v e st o r f un ds t o b uy e xpe n si v e c a r s a n d b o a t s.
He a c q ui r e d a f l e e t o f f a n c y a ut o mo b i l e s. He pa i d $192, 8b 8 f o r t wo
F e r r a r i F 3 40 Spi de r s i n Ma r c h 2013 a n d $56, 610 f o r a Po r sc he i n F e b r ua r y 2013 . He a l so
b o ug ht t hr e e BMW 's a n d a To yo t a Hi g hl a n de r .
b . He b o ug ht t hr e e b o a t s, i n c l udi n g a 40- f o o t ya c ht f o r whi c h he pa i d
$27 3 , 87 $ i n c a sh i n Oc t o b e r 2013 .
~ 5
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 45 of 54
Steven Labriola
113. The information available to d ate ind ic ates t} lat Labriola rec eived approximately
$$,500 fiom TeleXFree in 2013 and approximately $46,600 fi°om Wanzeler's c ompany above &
Beyond .
Jos eph Craft
1.14. The information available to d ate ind ic ates that, between September 2013 and
Marc h 2014, c ompanies und er Craft's c ontrol (inc lud ing Craft Financ ial Solutions , I 1ze. and Cratt
Trus t Servic es , LLC) rec eived more than $2 million from TeleY ~ 'ree.
Sand erley Roc lriaues
115. Tlie information available to d ate ind ic ates that, between. September 2012 and
Marc h 2013, Rod rigues and c ompanies und er leis c ontrol rec eived $317,220 from TelexFree.
(As noted above, Rod rigues c laims to lave rec eived more than $3 million by promoting
TelexFree.)
a. On February 28 and Marc h 15, 2013, TelexFree paid a total of $231,367 to
W W W Global Bus ines s I nc ., a c orporation that Rod rigues owns .
Rod rigues .
b. I n September and Oc tober 2012, TelexFree paid a total of $82,254 to
c . On Oc tober 9, ?012, TelexFree paid $3,600 to VI CSS, I nc ., a c orporation
that Rod rigues c ontrols .
116. Rod rigues us ed inves tor fund s to buy expens ive automobiles , inc lud ing_ a
Lamborghiiza, a Ferrari, and two Merc ed es Benz.
46
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 46 of 54
Santiago De La Rosa
117. The inf or m ation av ail ab l e to d ate ind ic ates that, b etween Api-i12013 and Apr il
2014, Magic a Med ic a Cor p. ("Magic a Med ic a") , a Massac husetts c or por ation that De La Rosa
f or m ed in Mar c 112013, r ec eiv ed a total of m or e than m or e th~~ $2.2 m il l ion, of whic h up to
$2, 1 m il l ion is b el iev ed to hav e c om e f r om inv estor s, m ost of whom paid $1, 425 eac h f or
Ad Centr al Fam il y m em b er ships. (For r easons that ar e c ul -r entl y unknown, Magic a Med ic a al so
z • ec eiv ed $17, 400 f r om Cr osb y.)
11$. De La Rosa used inv estor f iend s to suppor t his- l if estyl e.
a. He paid $501, 000 in c ash f or a house in Lynn, Massac husetts.
b . He m ad e paym ents to a BMW d eal er ship and a Mer c ed es Benz d eal er ship.
Rand y Cr osb y
119. The inf or m ation av ail ab l e to d ate d oes c l ot id entif y the am ount that Cr osb y
r ec eiv ed f r om Tel exFr ee. I t is appar ent, howev er , that Cr osb y r ec eiv ed a sub stantial am ount
f i~o~z n Tel exFr ee. As noted ab ov e, he pub l ic l y c l aim s to hav e b een b r oke when he b egan
pr om oting Tel exFr ee in Dec em b er 201?. N ev er thel ess, he paid $70, 000 in c as17 f o1• a Por sc he in
Septem b er 2013 and $99, 000 in c ash f or anotl l e7• Por sc he in Dec em b er 2013.
Faith Sl oan
120. The inf or m ation av ail ab l e to d ate ind ic ates that, b etween Mar c h 2013 and Apr il
2014, Sl oan. r ec eiv ed snor e than. $160, 400 f r om . Tel exFr ee inv estor s and $51, 000 f r om Tel exFr ee
itsel f .
47
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 47 of 54
Relief Defendants
121. Tne info r m atio n av ailab le to date indic ates tl~ iat th e r elief defendants r ec eiv ed
m o r e tlaa~ ~ $6.6 m illio n fr o m TelexFr ee in 2013:
a. On Dec em b er 30 and 31, 2013, TelexFr ee p aid a to tal o f $6,005,000 to
TelexFr ee Financ ial.
b . Ac c o r ding to th e financ ial. statem ents fo r 2013 p r ep ar ed b y C r aft,
TelexFr ee, LLC m ade a $2,022,329 "lo an" to TelexE lec tr ic .
c . Ac c o r ding to th e financ ial statem ents fo r 2013 p r ep ar ed b y C r aft,
TelexFr ee, LLC m ade a $500,870 "lo an" to Telex Mo b ile.
Missing Inv esto r Fo nds
122. Th e w h er eab o tr ts and/ o r disp o sitio n o f m uc h o f th e sno r e th an $340 m illio n. o f
inv esto r • funds r aised b y TelexFr ee is p r esently unlc llo w n.
FIRST C LAIM FOR RE LIE F
(Vio latio n o f Sec tio n 10(b ) o f th e E xc h ange Ac t and Rule lOb-5)
123. Th e C o m m issio n r ep eats and inc o r p o r ates b y r efer enc e th e allegatio ns in
p ar agr ap h s 1 -122 o f th e C o m p laint as if set fo r th fully h er ein.
124. Defendants, dir ec tly o r indir ec tly, ac ting intentio nally, kno w ingly o r r ec klessly,
b y th e use o f m eans o z • instr um entalities o f inter state c o m m er c e o r o f th e m ails, in c o nnec tio n.
w ith th e p ur c h ase o r • sale o f sec ur ities: (a) h av e em p lo yed o r ar e em p lo ying dev ic es, sc h em es o r
aa~ tific es to defr aud; (b ) h av e m ade o r ar e m aking untr ue statem ents o f m ater ial. fac t o r h av e
o m itted o r ar e o m itting to state a n7ater ial fac t nec essar y to snake th e statem ents m ade, in th e
:~ ' j
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 48 of 54
l i g h t of t h e ci rcumst ance s unde r wh i ch t h e y we re i ~ nade , not mi sl e adi ng ; or (c) h ave e ng ag e d or
are e ng ag i ng i n act s, p ract i ce s or course s of b usi ne ss wh i ch op e rat e as a fraud or de ce i t up on
ce rt ai n. p e rsons.
12~ . As a re st z i t , de fe ndant s h ave vi ol at e d and, unl e ss e nj oi ne d, wi l l coi 7 t i nue t o vi ol at e
S e ct i on 10(b ) of t h e e xch ang e Act [15 U . S . C . ~ 7 8 j (b )] and Rul e l Ob- 5 t h e re unde r [17 C . 1~ . R.
X240. l Ob- 5] .
S EC OND C LAIM FOR RELIEF
V i ol at i on of S e ct i on 17 (a) of t h e S e curi t i e s Act )
126. Th e C ommi ssi on re p e at s e nd i ncorp orat e s b y re fe re nce t h e al l e g a~ t i oi l s i n
p a1- ag r~ p h s 1- 122 of t h e C omp l ai nt as i f se t fort h ful l y h e re i n.
127 . De fe ndant s, di re ct l y and i ndi re ct l y, act i ng i nt e nt i onal l y, knowi ng l y or re ckl e ssl y,
i n t h e offe r or sal e of se curi t i e s b y t h e use of t h e me ans or i nst rume nt s of t ransp ort at i on or
communi cat i on i 11 i nt e rst at e comme rce or b y t h e ri se of t h e mai l s: (a) h ave e mp l oye d or a~ • e
e mp l oyi ng de vi ce s, sch e me s or art i fi ce s t o de fraud; (b ) h ave ob t ai ne d or are ob t ai ni ng mone y or
p rop e rt y b y me ads of Lul t rue st at e me i 7 t s of mat e ri al fact or omi ssi ons t o st at e a mat e ri al fact
~ l e ce ssary i n orde r• t o make t h e st at e me nt s made , i n t h e l i g h t of t h e ci rcumst ance s unde r wh i ch
t h e y we re made , not mi sl e adi ng ; or (c) h ave e ng ag e d or are e ng ag i ng i n t ransact i ons, p ract i ce s or
course s of b usi ne ss wh i ch op e rat e as a fraud or de ce i t up on p urch ase rs of t h e se curi t i e s.
1. 28 . As a re sul t , de fe ndant s h ave vi ol at e d and, unl e ss e nj oi ne d, wi l l cont i nue t o vi ol at e
S e ct i on 17{a) of t h e S e curi t i e s Act [15 U . S . C . , ~ 7 7 q (a)] .
49
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 49 of 54
THTRll CLAIlY1 FOR RELIEF
( V i o la t i o n o f S e c t i o n 5( a ) o f t he S e c u r i t i e s Ac t by
De fe n da n t s Te le xFr e e , In c . , Te le xFr e e , LLC, M e r r i ll a n d Wa n ze le r )
129. The Co mmi s s i o n r e p e a t s a n d i n c o r p o r a t e s by r e fe r e n c e t he a lle g a t i o n s i n
p a r a g r a p hs 1 -122 o f t he Co mp la i ~ lt a s i f s e t fo r t h fu lly he r e i n .
130. De fe n da n t s Te le YFr e e , In c . a n d Te le xFr e e , LLC ha ve n e ve r be e n r e g i s t e r e d w i t h
t he Co mmi s s i o n , n o r Ha ve t he y e ve r r e g i s t e r e d o r a t t e n 7 p t e d t o r e g i s t e r a n y o ffe r i n g o f s e c u r i t i e s
u n de r t he S e c u r i t i e s Ac t o r a n y c la s s o f s e c u r i t i e s u n de r t he Exc ha n g e Ac t .
13 1. De fe n da n t s Te le xFr e e , In c . a n d Te le xFl° e e , LLC, a n d t he i r o w n e r s , de fe n da n t s
M e r r i ll a n d Wa n ze le r , di r e c t ly o r i n di r e c t ly: ( a ) ha ve ma de o i - a r e ma ki n g u s e o f t he me a n s o i -
i ~ ls t r u me n t s o f t r a n s p o r t a t i o n o r c o mmu n i c a t i o n i n i n t e r s t a t e c o mme r c e o f o f t he ma i ls t o s e ll,
t hr o u g h t he u s e o r me di u m o f a p r o s p e c t u s o r o t he r w i s e , s e c u r i t i e s a s t o w hi c h n o r e g i s t r a t i o n
s t a t e me n t ha s be e n i n e ffe c t a n d fo r w hi c h n o e xe mp t i o n fr o m r e g i s t r a t i o n ha s be e 11 a va i la ble ;
a n d/ o r ( b) ha ve ma de o i • a i e ma ki n g u s e o f t he me a n s o r i n s t n u n e n t s o f t r a n s p o r t a t i o n o r
c o mmu n i c a t i o n i n i n t e r s t a t e c o mme r c e o r o f t he ma i ls t o o ffe r t o s e ll, t lu • o u g h t he u s e o r me di u m
o f a p r o s p e c t u s o r o t he r w i s e , s e c u r i t i e s a s t o w hi c h n o r e g i s t r a t i o n s t a t e me n t ha s be e n fi le d a n d
fo r w hi c h n o e xe mp t i o n fr o m r e g i s t r a t i o n ha s be e n . a va i la ble .
1. 32. As a r e s u lt , de fe n da n t s Te le xFr e e , In c . , Te le xFr e e , LLC, M e r r i ll a n d Wa n ze le r
ha ve vi o la t e d a n d, u n le s s e n j o i n e d, w i ll c o n t i n u e t o vi o la t e S e c t i o n s 5( a ) a n d ( c ) o f t he S e c u r i t i e s
Ac t [15 U. S . G. § ~ 7 7 e ( a ), ( c )] .
50
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 50 of 54
:FOURTH CLAIM FOR 12ELIEF
(Control Person Li a b i li ty under Secti on 20(a ) of the Excha nge Act
a s to Defenda nts Merri ll a nd Wa nzeler)
133. T11e Commi ssi on rep ea ts a nd i ncorp ora tes b y reference the a llega ti ons i n
p a ra g7 ~ a p hs 1-122 of the Comp la i i zt a s i f sef forth fully l~ erei zl.
134. By enga gi ng i n the conduct descri b ed a b ove, defenda nts TelexFree, Inc. a nd
Tele~ Free, LLC 1~ 1a ve, di rectly or i ndi rectly a nd si ngly or i n concert, a cti ng i ntenti ona lly ,
knowi ngly or recklessly , i n colulecti on wi th the p Li rcha se or sa le of securi ti es, b y use of the
mea ns or i nstrumenta li ti es of i ntersta te commerce or the ma i l: (a ) emp loy ed devi ces, schemes,
or a rti fi ces to defra ud; (b ) ma de Untrue sta tements of ma teri a l fa ct or omi tted to sta te n7 a teri a l
fa cts) necessa ry to ma ke sta tements ma de not mi slea di ng i n li ght of the ci rcumsta nces under
whi ch they were ma de; a nd/ or {c) enga ged i n tra nsa cti ons, a cts, p ra cti ces, or• courses of b usi ness
whi ch op era ted or world ha ve op era ted a s a fra ud or decei t up on p urcha sers of securi ti es a nd
up on other p ersons, i n vi ola ti on of Secti on 10(b ) of the Excha nge Act a nd Rule l Ob -5
thereunder.
135. At a ll releva nt ti mes, defenda nts Merri ll a nd Wa nzeler owned a nd Conti° oi led
TelexFree; Inc. a nd TelexFree, LLC.
136. Defenda nts Merri ll a nd Wa nzeler di d not a ct i n good fa i th, a nd they di rectly or
i ndi rectly i nduced the a cts or a cti ons consti tuti ng tl~ e vi ola ti ons of Secti on 10(b ) of the Excha nge
Act a nd Rule I Ob -5 thereunder• b y TelexFree, Inc. a nd TelexFree, LLC.
137 . As a result, p ursua nt to Secti on 20(a ) of the Excha nge Act [15 U.S.C. ~ 7 8 t(a )] ,
defenda nts Merri ll a nd Wa nzeler a re j oi ntly a nd severa lly li a b le wi th, a nd to the sa me extent a s,
51
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 51 of 54
TelexFree, I n c . an d TelexFree, LLC f o r t h ei r v i o lat i o n s o f S ec t i o n 10(b) o f t h e Exc h an ge Ac t
a~ ad Rule l Ob-5 t h ereun der.
FI FTH CLAI M FOR RELI EF
(Un jus t En ri c h men t o f Reli ef Def en dan t s
TelexFree Fi n an c i al, TelexClec t ri c , an d Telex Mo bi le)
138. Th e Co mmi s s i o n rep eat s an d i n c o rp o rat es by ref eren c e t h e allegat i o n s i n
~ az • agrap h s 1 -122 o f t h e Co mp lai n t as i f s et f o rt h Fi i 11y h erei n .
139. TelexFree Fi n an c i al, Telex~ lec t ri c , an d. Telex Mo bi le h av e n o legi t i mat e i n t eres t
i n , o i - ri gh t t o , t h e f i i n c i s t h ey rec ei v ed f ro m T~ I eYFree, I n e. an d Te1~ xFree, LLC, wh i c h rep res en t
t h e p ro c eeds o f t h e f raud alleged abo v e.
140. As a res ult , reli ef def en dan t s TeleaFl-ee Fi n an c i al, TelexElec t ri c , an d Telex
Mo bi le are li able f o r un jus t en ri c h men t ai ld s h o uld be req ui red t o ret urn t h ei r i ll-go t t en gai n s ,
wi t h p re-judgi n ez lt i n t eres t .
PRAYER FOR RELI EF
WHEREFORE, t 11e Co mmi s s i o n req ues t s t h at t h i s Co urt :
A. En t er a p erman en t i n jun c t i o n res t rai n i n g t h e def en dan t s an d eac h o f t h ei r agel~ t s ,
s erv an t s , emp lo yees an d. at t o rn eys an d t h o s e p ers o n s i n ac t i v e c o n c ert o r p art i c i p at i o n . wi t h t h em.
wl~ o rec ei v e ac t ual. n o t i c e o f t h e i n jun c t i o n by p ers o n al s erv i c e o r o t h erwi s e, i n c ludi n g f ac s i mi le
t ran s mi s s i o n o r o v ern i gh t deli v ery s erv i c e, f ro m di rec t ly o r i n di rec t ly en gagi n g i n t h e c o n duc t
des c ri bed abo v e, o r i n c o n duc t o f s i mi lar p urp o rt an d ef f ec t , i n v i o lat i o n o f :
1. S ec t i o n 10(b) o f t h e Exc h an ge Ac t [15 U. S . C. § 7 8j(b)] an d Rule lOb-5
t h ereun der [l7 C. F. R. ~ 240. 1Ob-5] as t o all. def en daai t s ;
52
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 52 of 54
2. S e c t i o n 17(a) o f t he S e c u r i t i e s Ac t [15 U.S .C. ~ 77q (a)~ as t o al l
d e fe n d an t s ; an d
3 . S e c t i o n ~ o f t he S e c u r i t i e s Ac t [15 U.S .C. ~ 7~ e ) as t o d e fe n d an t s
Te l e xFr e e , I n c ., Te l e xFr e e , LLC, M e r r i l l an d Wan ze l e r ;
B. Re q u i r e t he d e fe n d a7l t s an d r e l i e f d e fe n d an t s t o d i s g o r g e t he i 7• i l l - g o t t e n g ai n s ,
p l u s p r e ju d g me n t i n t e r e s t , wi t h s ai d mo n i e s t o be d i s t r i bu t e d as o r d e r e d by t he Co u r t ;
C. Or d e r t he d e fe l ~ d an t s t o p ay ap p r o p r i at e c i v i l p e n al t i e s p u r s u an t t o S e c t i o n 20(d )
o f t he S e c u r i t i e s p c t [15 U.S .C. ~ 77t (d )J an d S e c t i o n 21(d )(3 ) o f t he e xc han g e Ac t [15 U.S .C.
~ 7$ u ~ d )~ ~ )~ ~
D. Re t ai n ju r i s d i c t i o n o v e r - t hi s ac t i o n t o i mp l e me n t an d c ar r y o i zt t he t e r ms o f al l
o r d e r s an d d e c r e e s t hat may be e n t e r e d ; an d
E. Awar d s u c h o t he r an d fi zr t l ~ e r r e l i e f as t he Co u r t d e e ms ju s t an d p r o p e r .
Dat e d .: M ay 27, 2014
Re s p e c t fu l l y s u bmi t t e d ,
~ .~
~ = ~
Fr an k C. Hu n t i n g t o n (M as s . Bar - No . 544045)
S e n i o r Tr i al Co u n s e l
De e n a R. Be r n s t e i n (M as s . I 3 ar No . 558721)
S e n i o r Tr i al Co u n s e l
S c o t t S t an l e y (N.Y. Bar No . X504601)
S t aff At t o r n e y
At t o r n e ys fo r ' P l ai n t i ff
S ECURI TI ES AND EXCHANGE COM M I S S I ON
Bo s t o n Re g i o n al Offi c e
3 3 Ar c h S t r e e t
Bo s t o n , M A 02110
(617) 573- 8960 (Hu n t i n g t o n d i r e c t )
(617) 573- 4590 (fax)
hu n t i n g t o n f@s e c .g o v { Hu i 7t i n g t o n e mai l )
S J
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 53 of 54
C e r t i f i c a t e of Se r vi c e
I , Fr a nk C . Hunt i ngt on, c e r t i f y t h a t oi l Ma y 27, 2014, t h e f or e goi ng f l n~e nde d C o1~~p l a i nt
wa s f i l e d e l e c t r oni c a l l y wi t h t h e C our t . Not i c e wi l l be se nt by e-ma i l t o c ounse l of r e c or d f or t h e
de f e i 7da nt s t kr ough t l ~i e C our t 's e l e c t r oni c f i l i ng sy st e m, a nd t h e f i l i ngs ma y be a c c e sse d t I u-ough
t h e C ouz -t 's sy st e m.
I i i a ddi t i on, a c op y i s be i ng se nt by ove r ni gh t de l i ve r y t o t h e de f e nda nt s wh o a 7• e not
r e p r e se nt e d by c ot mse l :
Sa nde r l e y Rodr i gue s c l e Va sc onc e l os
124 Woodm~u~ C our t
Da ve np or t , FL 33837
Fa i t h R. Sl oa n
14409 I ngl e si de Ave nue
Dol t on, I L 60419
~~
~'~~ ~
i
~~
Fr a nk C . Hunt i ngt on
54
Case 1:14-cv-11858-NMG Document 128 Filed 05/27/14 Page 54 of 54