All language subtitles for American Greed s12e09 Billion Dollar Fraud Goes Viral

You're watching CNBC On Demand.

In this episode of American Greed,
Carlos Wanzeller and James Merrill

Internet hotshots through videos like
these as they peddle a dream come true

work from home opportunity to people who
are desperate to succeed.

Very poor people, people that had two or
three jobs.

And as these kinds of videos go viral.

So does the scheme.

And it was like a religion.

People wanted to invest every single
last penny they had.

Spreading their message to almost every
country in the world, they conned 1 .8

million believers to shell out $3
billion on their bogus business.

We put another $4 ,500.

And then a couple months later, we said,
oh, gee, the money's coming back.

So we put another $15 ,000.

And back at fraud headquarters, their
victims' money is piling up.

We have stories of people showing up
literally with duffel bags of cash.

And where do investigators find the
stolen millions?

Where else?

In a mattress.

In January 2017, in downtown Boston, at
the Office for Homeland Security, a 28

-year -old man from Brazil named Kleber
Rocha is under arrest.

Earlier, Rocha handed $2 million in cash
to a man he doesn't know is an

undercover federal agent.

He just said that he's not a bad guy.

His interrogators believe the money was
stolen in a $3 billion fraud, and the

agents want Rocha to tell them who he is
working for.

Carlos. Carlos Wanzeller. Carlos
Wanzeller?

Yeah.

That's the name they are looking for.

Carlos Wanzeller, a man who uses videos
like these to attract victims in what is

reportedly the largest pyramid scheme
ever prosecuted in the U .S.

And at this moment, as Rocha sits facing
potential criminal charges,

Wanzeller is more than 4 ,000 miles away
in Vitoria on the southeast coast of

Brazil.

It's a sort of homecoming for Wanzeller.

He grew up in Vitoria, but left in the
late 80s looking for a better life in

America.

His father had died. He felt like he had
to support his mother and his family.

He literally goes from one dishwashing
job, like, you know, literally leaves

and goes to another.

When his family arrives in Boston a few
years later, he finds a company called

Cleaner Images in the Yellow Pages that
will hire all of them.

It is owned by a man named James
Merrill.

By all accounts...

sort of a average family man living in
central Massachusetts, sort of a serial

entrepreneur.

Merrill and Wanzeller hit it off.

Eventually, Merrill asked Wanzeller to
become his partner in the business.

I think Mr. Merrill would say that he
trusted Carlos Wanzeller to the end.

And that trust takes Merrill down a
dangerous path.

when he and Wanzeller launch a company
that sells a software package that

people to make international calls over
the Internet.

It is called TelexFree.

It was a voice -over Internet phone
service, sort of like Skype.

So you would pay a flat fee each month,
and you would get unlimited calls to

Central and South America over the
Internet.

From its marketing, it seems tailor
-made for immigrants who want to call

cheaply.

But Telex Free actually offers much
more, as Juan Zeller explains in this

video.

Telex Free is about changing people's
lives.

That's right. As these ads show, Telex
Free promises to transform lives, to

dreams come true.

If I sell my company to Facebook or
somebody else, I know they're going

to stop my dream.

Your dream.

It's a message that is repeated in
dozens of online videos selling Telex

Every so often, something big happens.

Telex Free is not about phone calls.

Something is coming that will put a
whole new meaning to money at your

fingertips.

It is about making millions of dollars
working from home.

Making money has never been easier.

And how can Telex Free make such an
offer?

Because Telex Free is structured as a
multi -level marketing company, an MLM.

That means its sales force is made up of
people who get bonuses.

for recruiting other salespeople.

But here's the catch.

Telex Free is not a legitimate MLM.

It is a pyramid scheme.

There are legitimate multi -level
marketing companies, like Amway, for

which has been around for a long time.
The difference is that a legitimate

company makes its revenue from the
actual sale of a product.

A pyramid scheme does not.

Telex Free does have a product, but no
one is required to sell it.

Instead, members can make money by
recruiting others to join or by simply

cutting and pasting ads for Telex Free
in online classifiers.

Telex Free looked like they were selling
a product, but if you looked at the

program itself, it was much easier to
make money from putting those ads in and

from recruitment.

And so the product just sits there
rarely sold, rarely used, while people

TelexFree to make money posting ads.

So it was just busy work.

And no one ever responded to the ads,
and no one ever bought these phone

packages through the ads.

But there is big money in this busy
work.

For $1 ,425...

People can join TelexFree and have the
chance to be paid for placing five ads

every day of the week.

At the end of that week, TelexFree gave
you $100.

At the end of a month, $400.

At the end of a year, $5 ,200.

That's a return of more than 200%. And
that enticing offer is at first being

sold to people who left their home
countries to find a better life in

They are people for whom life is not
easy.

It's very hard to be, at times, an
immigrant, working two or three jobs in

for you to save that little money, in
order for you to sort of like pay food

families that are living abroad.

Gladys Vega runs a community
organization, the Chelsea Collaborative,

Chelsea, Massachusetts, a city largely
comprised of immigrants.

We're very easy targets sometimes
because we trust people sometimes

think that when we come to this country,
we come to the country of opportunity.

And people really think that
opportunities come that easy.

And as prospective customers explore the
Telex Free website, they see these

photographs of the founders, James
Merrill and Carlos Wanzeller, addressing

audience. The images help sell the
scheme.

Merrill is described as an American
businessman, a man of great vision.

And Wanzeller, an immigrant himself, is
presented in online videos like this one

as a successful, confident businessman.

He basically said, look, I was an
immigrant. I was a dishwasher. I did

was in your shoes. And look how big I
am.

And through videos posted online, he can
reach thousands of targets in their own

language.

He was able to explain the whole scheme
in Portuguese.

If it was an American doing it, not as
many Brazilians would get involved.

Tissa Hartman's mother, Maria Murdoch,
left Brazil 20 years ago looking for a

chance of a better life.

And, as a video like this shows, Telex
Free is sold as the opportunity

Brazilians like Murdoch have been
waiting for.

A godsend.

An answer to prayers.

It was like a religion. That's all they
talked about.

That's all they wanted to know. And it
kind of became like a cult, you know.

People wanted to invest every single
penny they had.

And that's what Maria Murdoch does.

She puts in $30 ,000, all of her
savings.

And soon, Telex Free is spreading out of
the Brazilian community like a virus,

from one immigrant group to another.

That was the talk of the town. That was
sort of like the quiet news of making

money on the side and getting your
family members to join.

Mario Caralan, originally from
Guatemala, is a construction worker for

of Cambridge.

I find out with my brother's friends,
and they explain to me how everything

works.

He is a perfect target for Telex Free.

Eager to secure a better life for his
wife and daughter, he takes out a loan

$10 ,000.

I received the money for the bank, and I
went and gave it to my brother's friend

in the hand, the whole cash.

In a town west of Boston, Rosemary
Tirico is a dental hygienist, originally

Bolivia, who says she is careful with
her money.

I was always thinking about saving for
the future of my son.

I can go out and enjoy a good meal or a
dinner with my friends, or I can save

them money.

And then she's invited to a dinner
party.

People were talking about Telex Free,
and I'm always being curious.

And I asked them, what are you guys
talking about? What is Telex Free?

She is told that it is an amazing
opportunity.

They said three months later they got
money back without doing anything other

than just posting for 20 minutes in the
computer, and that was that.

Tirico is convinced and invests $4 ,500.

And then every day she dutifully posts
her ads online, just as hundreds...

And then thousands of people are doing
in houses and apartments in communities

throughout Massachusetts.

They thought that they were working for
this company.

They were Telex Free employees.

That's how they thought themselves, that
they had a job where they change a few

ads in this computer and they will
receive money in the bank.

And Tirico says it's not hard to find
people claiming to get rich from Telex

Free.

Well, someone said, my God, they're
loaded now because they have the money

Telex Free.

They bought a house in New Hampshire.

I said, oh, my God. And everyone were
thinking, if they can do it, why can we

not?

But she is falling for an old trick
because the money people are making is

coming from new people joining.

And that makes Telex Free not just a
pyramid scheme.

There's no actual product being sold.

There's no real revenue coming in. It's
just money going around in circles,

which is basically a Ponzi scheme.

As TelexFree gains traction, James
Merrill and Carlos Wanzeller move into

view through videos posted online.

And to federal prosecutors, the videos
reveal how different these two partners

are. Wanzeller, a real extrovert,
handsome guy, kind of charming.

comfortable in front of crowds, very
effusive and emotional.

James Merrill, much quieter, appeared to
dislike crowds, wanted to be more

focused on the business side of his
ventures and less on the social side.

But their biggest difference may be in
how they perceive their business.

It appears to us that as to Carlos
Wanzeller, yes.

I think he knew from the beginning that
it was one big scam.

But for James Merrill?

There was this belief, this delusional
optimism that things would be okay, that

they'd just grow more and more. And the
more they grew, the more money would

come in to pay their obligations.

But neither could know what a monster
they've created.

Next on American Greed, the scam
explodes.

These storefronts would pop up in towns
with large immigrant communities where

people would come in with bags of cash.

In early 2013, just a few months after
she joins Telex Free.

Rosemary Tirico has every reason to
believe she is making big money.

Every day, she signs into the TelexFree
website and checks her balance. And,

just as promised, her bottom line, her
credits, continue to grow.

That is how TelexFree pays its members,
in credits.

They are like reward points programs.

For TelexFree, 100 credits equals $100.

You could cash out these credits for
dollars. You'd ask TelexFree, and they

would send you a check.

But TelexFree strongly encouraged people
to leave the money in the system in the

form of credits.

And that's what Tirico does.

She not only leaves her money in
TelexFree, she adds more and more.

We put another $4 ,500, and...

Then a couple months later, we said, oh,
gee, the money is coming back.

So we put another $15 ,000.

Eventually, she turns over $60 ,000 to
Telex Free, all of her savings.

And each time she makes a deposit, she
takes cash to a couple in a nearby town.

The amount of money they were getting in
cash every day, it was crazy

ridiculous.

They are TelexFree recruiters.

And recruiting is where the real money
is in TelexFree. Because recruiters get

paid a bonus for every person they
recruit and a bonus for every person

person recruits. And that continues down
six levels.

It's a way that you can exponentially
increase the money that is coming in for

virtually no effort on your part other
than your initial recruiting of the

people directly below you.

And recruiters all have one requirement.

You cannot write a check. You cannot use
a credit card.

It had to be cash.

And why cash only?

Because recruiters have figured out how
to game telex free.

When a new member comes to a recruiter,
they often pay thousands of dollars to

open multiple accounts.

Once the accounts are open, the
membership fee for those accounts needs

paid to TelexFree.

But the recruiters do not pay TelexFree
with the new members' cash.

Instead, they pay using credit that they
accumulate by recruiting new members.

And they pocket the cash.

Ultimately, a lot of the money didn't
actually go to TelexFree. It was going

the high promoters.

There were promoters at the very top of
the pyramid who were making a lot of

money out of the scheme.

And with so much money to be made
signing up people for Telex Free,

begin to open their own offices in
storefronts, welcoming people off the

It was truly a secondary market in which
these storefronts would pop up in towns

with large immigrant communities where
people would come in with bags of cash.

and just pay these pre -existing members
of TelexFree to sign them up.

But to make these transactions work,
recruiters need lots of credits.

And suddenly, credits are in high
demand.

They become a form of underground
currency.

People were paying lots of cash for
these credits because those credits were

key to future compensation.

Rosemary Tirico is shocked when a
recruiter shows up at her door and wants

buy her credits.

He brought to my house $60 ,000 in cash.

I said, I don't have that amount, you
know. I said, I wish I would have that

amount.

And while there are thousands of people
capitalizing on the Telex free credit

boom, there is one person with a
particular advantage, Carlos Wanzeller.

According to federal prosecutors, he is
running a kind of insider's club where

he manually adds credits to friends'
accounts.

They collect cash from new members and
deliver it to him.

It was almost a way to embezzle money
out of the company.

And we have stories of people showing up
at Telex Free literally with duffel

bags of cash.

And it appears that Juan Zeller was able
to extract from Telex Free.

millions upon millions of dollars.

Up next, like rock stars on a world
tour, Merrill and Wanzeller showcase

popularity around the globe.

In the old days, before the Internet,
predatory frauds like Telex Free relied

personal relationships to spread the
word of the scheme.

But that was then, and this is now.

Right from the start, James Merrill and
Carlos Wanzeller turned to social media

to promote their amazing opportunity.

This is truly a 21st century fraud.

When we first started, Looking at this
scheme, we went online and looked, typed

Telex Free into YouTube, and there were
just thousands of videos.

So YouTube, Facebook, Twitter had the
ability to just exponentially increase

awareness of this scheme overnight
almost.

Some of the videos are made by Telex
Free, designed to explain how the

works.

Others keep members updated on changes
in the company.

But it is not long before people
watching the videos realize they can

the company, too.

All they have to do is set up their own
telex -free website, like this one.

They would walk through what the
compensation plan was, walk through how

was to post the ads, and then try to get
other people to sign up for them.

Their sites are the online version of
the storefronts in immigrant

neighborhoods, set up by people who see
a chance to make easy money with

TelexFree.

And through these sites, the TelexFree
message takes on a life of its own.

YouTube will make you famous overnight,
but now we can see that YouTube can also

make fraudsters rich overnight as well.

Just months after its launch, TelexFree
promoters show potential members in

Internet videos that it has a staggering
following.

Designed to attract new members, the
videos document popular TelexFree events

called extravaganzas.

This video shows an event held in Brazil
in 2012, but they are all strikingly

similar.

Interviews with big winners offer
evidence of money being made.

And Marilyn Wanzeller are portrayed as
hugely admired celebrity businessmen.

Can you people do me a favor? You did
the wave earlier today. Can we do one

of those waves? Can you people get up?

And when you watch the video, it really
strikes you how pulled in

to Telex 3 all of these people are. They
view Marilyn Wanzeller as their

champion.

We're going to help them change their
lives, and everyone's going to make a

of money.

In almost no time, the videos posted
online fueled Telexfree's expansion

the entire globe.

To Russia.

To China.

To Malaysia.

To 248 countries.

And it got out of control, because it
wasn't just them talking about

It was entire communities.

While some online recruiters are
generating big bucks for themselves, at

of the day, according to federal
investigators, there is no one who is

more money than Carlos Wanzeller, who is
shown in online videos as the picture

of success.

By all appearances, his dreams are
coming true.

In addition to the duffel bags of cash
being delivered to him, Court records

show he is sending millions of dollars
overseas.

And he and his wife are creating a small
real estate empire with 30

different properties, including his
million -dollar house in Massachusetts

several houses in Florida.

Wanzeller, of course, was, in addition
to buying real estate, he was buying

and boats, including a yacht.

He bought Ferraris, he bought three
BMWs, he bought a Porsche.

A lot of money to burn.

Up next, Carlos Wanzeller shows his
compassion for his victims.

They started to cry.

Derrick and Merrill, knowing that he was
stealing money from these people.

Telex Free begins in Brazil.

At its peak, it has one million members
there.

And as the YouTube videos show, those
members are as enthusiastic as any can

possibly be.

That is, until June 2013, when a court
decision makes the news.

A Brazilian court.

issues an injunction freezing telex
free's assets and shutting it down in

country because the brazilian court has
concluded that telex free is probably a

pyramid scheme immediately merrill posts
a reassuring message online

At an event in July, later turned into
this online marketing, it is Juan

Zeller's turn.

And so far, they can't find anything
wrong with us.

Trust in God and trust the law.

We're very close to this get -fixed.

And then he does something his audience
loves.

A demonstration of his compassion for
the members in Brazil.

He breaks down.

If you guys don't mind, I want to give a
message in Portuguese for all those

people. Yes.

Okay.

They started to cry.

They're at Jim Merrill, knowing that he
was stealing money from these people,

and this is going to fail, and it's
going to be in the back of people from

own community.

And also knowing that Telex Free's own
lawyer is so concerned.

He has asked that his name be taken off
the website.

And a new lawyer is definitely not more
encouraging.

New lawyer comes back within a matter of
weeks and says, you're running a

pyramid scheme.

He doesn't mince words. He says, your
company is illegal. You are exposed to

civil and criminal liability.

Needs changes.

But they make no changes.

Instead, as this online video shows,
They continue to stand before members

convince them to bring in more people.

So Telex Free will be here today,
tomorrow, many, many years from now.

And thousands of people like Elirides
Arikas believe that message.

She thinks Telex Free will not just
change her life, it could save her life.

She has learned that she has heart
trouble.

I have coronary artery disease, 90 %
clot,

160 % and another 140%. She has

no health insurance, but she does have
savings that could pay part of needed

surgery.

And then she hears about Telex Free.

And I think, oh, this is going to help
me.

I can work at home to make money enough
to make my surgery.

In three days, she empties her savings
account and puts $20 ,400 into

Telex Free.

And they count the money, and then they
say, yo, everything's okay.

You're great. You did great.

I trust them very much.

And I'm happy.

At the end of 2013, as people like
Eloita's Eriques turn over their life

to Telexfree, Meryl and Wanzeller decide
to give themselves a Christmas bonus.

Three million dollars each.

Up next, when the going gets tough.

The very day that the agents search
Telexfree's offices,

Carlos Wondeller hops in a car, gets on
a plane to Rio, and he's gone.

See how a million -dollar lottery winner
gets taken by Telex Free at

AmericanGreed .CNBC .com.

Want inside information from the show?

Join the Greed social network.

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page.

We'll be right back.

In December 2013, six months after Telex
Free Brazil is shut down, video

captures a Telex Free extravaganza to
beat all extravaganzas. This one is on a

cruise ship in Brazil.

The video appears to offer evidence that
Telex Free is thriving. And despite

serious red flags, the message from its
founders is consistent.

This company is just beginning.

Through events like this promoted
online, even a skeptic like Edivaldo

starting to change his mind.

When Ruiz came to the U .S. from Brazil,
he was hired by Whole Foods to clean a

store outside of Boston.

I was young at the time, and I started
to work hard.

And now that cleaning job has grown.

Reese owns USG, a concrete polishing
company. His biggest client is Whole

For more

than a year, he has listened to the
stories of people making money in Telex

Free.

And at the start of 2014, he is finally
convinced.

I didn't want to go and do it.

But the way they promote it, and a lot
of people was making money.

I said, why not?

And that is how effective the Telex Free
video messaging has become.

That a cautious businessman decides to
refinance a house and put $400 ,000

into Telex Free.

Unfortunately for Reese, his timing
could not be worse.

At Telex Free headquarters, James
Merrill and Carlos Wanzeller have just

received news that the Massachusetts
Secretary of State is preparing to file

complaint against Telex Free.

And at that point, they decide to make
some changes.

As Merrill shares with the public in a
video posted online.

We're working with our attorneys and
marketing people to create a brand new,

more compliant program, and we're going
to knock this to the moon. In

March, Telex Free announces a new
program, and now the members are

actually sell the product.

A lot of Telex Free's members are
extremely angry about this.

They want their money back.

They think it's a bait and switch.

They descend on the Telex Free
headquarters office.

The police are called.

This and other videos of the meeting are
posted online to draw attention to

their complaints.

At this point, the company owes $5
billion to 1 million people, and it

only has $105 million in the bank.

They take an obvious option.

declaring bankruptcy.

When most pyramid schemes collapse, they
collapse and the people running it run

away. This pyramid scheme collapsed in
plain sight. It declared bankruptcy,

which lent this veneer of legitimacy to
the company.

But it means that members around the
world log into a system that is shut

I remember I came back from a trip and I
got a phone call.

And she asked me, she said, hey, have
you heard about what's going on with

Deluxe Free?

The accounts are frozen.

And as the news gradually becomes real,
the truth sinks in.

It was weeks and months I couldn't
sleep.

And I'm thinking, what the heck did you
do?

How could you be so stupid? I mean, how
could you be so naive?

To think this is great, this is the
opportunity of your life.

One friend called me and say, you know,
Eloise, what happened with Telex Free?

I say, no, what happened?

And they say, they stolen everybody
money.

I say, what?

That's the only money I have for fix my
problems.

It's a big problem.

That's my life.

Within 24 hours of the bankruptcy
filing, agents from Homeland Security

Telex Free headquarters.

They seize hard drives that contain
every transaction made in the two years

the company's short life.

It is clear that the deception will soon
be discovered.

And then Carlos Wanzeller makes a move.

The very day that the agents search
Telex Free's offices, Carlos Wanzeller

meets his daughter, who's an adult, at a
local mall.

He packs a bag, hops in a car, and has
her drive him over the Canadian border

Montreal, where the next day he gets on
a plane to Rio, and he has not left

Brazil yet.

Next on American Greed, a stunning
secret inside a mattress.

That was staggering.

That much cash out there.

In little more than two years, 170 ,000
people in the U .S. joined Telex Free.

And additional victims can be found in
every corner of the globe.

There are 17 ,000 in Uganda, close to 3
,000 in Afghanistan, 26

,000 in Russia, China, more than 90
,000.

We had a number of farmers in the
Dominican Republic who not only

their farms to participate, but they
pledged their future cops.

to participate in this scheme.

And the only person in the U .S. facing
criminal charges for all this damage is

James Merrill.

His defense?

He actually wanted the company to
succeed.

He tried to fix it.

But that doesn't fly with the
prosecutors, who point to Merrill's

appearances like these as evidence
against him.

What James Merrill needed to do was walk
out the door.

And he chose not to do that. And at that
moment is when he decided that he'd

rather run a criminal enterprise and not
tell anybody it's a criminal enterprise

instead of simply leaving.

And so he pleads guilty to charges of
wire fraud and is sentenced to six years

in prison.

He finally acknowledges that Telex Free
is a pyramid scheme.

In this case, Mr. Merrill acknowledged
that he was willfully blind and

that in the face of obvious facts, he
wasn't paying attention to them.

And his friend, Carlos Wanzeller, had a
different idea about where this was

going. And to a large degree, Carlos
Wanzeller used Jim Merrill to accomplish

his goals.

Through their attorneys, both James
Merrill and Carlos Wanzeller...

decline interview requests from American
Greed.

At this point, Wanzeller is still in
Brazil.

Well, he seems to be doing just fine.
He's not in custody.

It appears that he is under indictment
in Brazil for running the telex -free

pyramid scheme, so he will be prosecuted
there.

But he appears to live in a high -rise
in Vitoria, Brazil, and just go about

business day -to -day.

But what Wanzeller does not know is that
federal agents in Brazil are listening

to his phone calls.

From his conversations, U .S.
authorities learn that Wanzeller is

courier to pick up money he has left in
the U .S.

And so Homeland Security Investigation
sets up a sting.

The handoff of the cash is to take place
in a parking lot.

And so it was on that night, January
4th, 2017, that they set up surveillance

and they waited for a person to show up.

And lo and behold, the person showed up
in a red SUV and delivered a bag

put in the trunk of the car along with
an undercover agent of $2 .2 million.

Shortly after, the person delivering the
cash is arrested.

He is Kleber Rocha, who was once a
promoter for Telex Free in Brazil.

And now he is doing Wanzeller's dirty
work.

It turns out that Rocha has been here
twice before, helping Wanzeller collect

his cash.

Now, with the potential of criminal
charges, Rocha decides to stop helping

Carlos Wanzeller.

He provides the address of the apartment
where he says there is some cash, but

no one could imagine just how much.

When the agents search the apartment,
they find a box spring mattress stuffed

with money.

approximately $20 million in cash.

And we thought that there might be a
couple million dollars out there, but it

was staggering that there'd be that much
cash out there.

But those millions of dollars do not
belong to Carlos Wanzeller.

That money belongs to these people.

Every few months, the Chelsea
Collaborative holds a meeting to update

-free victims.

I'm Stephen Darr. I'm the court
-appointed trustee.

The bankruptcy trustee informs them that
so far he has recovered $168 million

and that he is also going after the top
recruiters who made off with the bulk of

the money.

We're trying to recover money from the
winners.

the people who took more money out than
they put in.

But what concerns many in this room is
not just the money they lost, but also

the people they brought into the scheme.

And for that, they place blame on
themselves.

It's hard for me because, you know, I'm
a man of the family, and it's hard to

look at my wife and daughter and see.

And all the investment, all the hard
work we did, it goes to the drain.

And it was so sad.

On the day that James Merrill is
sentenced, Gladys Vega represents his

and gets a chance to speak to him
directly.

And I basically looked at his face and I
said, you stole the dreams and

the hopes of these people.

You don't deserve six years or whatever
they're negotiating. You deserve to be

in jail for life. For me, it was one of
those emotional moments

because these people really, really care
about this company, and they

literally gave all they had.

And for the prosecutors, the telex -free
fraud is one for the record books.

The success...

Of the pyramid scheme and the speed with
which it grew and took over the world

is unlike any other broad case I've done
in about 15 years as a fraud

prosecutor. To do that much damage in
that short a period was really amazing

and just showed you how dangerous these
kinds of scams are.