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You're watching CNBC On Demand.
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In this episode of American Greed,
Carlos Wanzeller and James Merrill
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Internet hotshots through videos like
these as they peddle a dream come true
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work from home opportunity to people who
are desperate to succeed.
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Very poor people, people that had two or
three jobs.
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And as these kinds of videos go viral.
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So does the scheme.
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And it was like a religion.
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People wanted to invest every single
last penny they had.
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Spreading their message to almost every
country in the world, they conned 1 .8
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million believers to shell out $3
billion on their bogus business.
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We put another $4 ,500.
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And then a couple months later, we said,
oh, gee, the money's coming back.
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So we put another $15 ,000.
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And back at fraud headquarters, their
victims' money is piling up.
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We have stories of people showing up
literally with duffel bags of cash.
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And where do investigators find the
stolen millions?
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Where else?
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In a mattress.
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In January 2017, in downtown Boston, at
the Office for Homeland Security, a 28
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-year -old man from Brazil named Kleber
Rocha is under arrest.
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Earlier, Rocha handed $2 million in cash
to a man he doesn't know is an
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undercover federal agent.
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He just said that he's not a bad guy.
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His interrogators believe the money was
stolen in a $3 billion fraud, and the
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agents want Rocha to tell them who he is
working for.
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Carlos. Carlos Wanzeller. Carlos
Wanzeller?
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Yeah.
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That's the name they are looking for.
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Carlos Wanzeller, a man who uses videos
like these to attract victims in what is
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reportedly the largest pyramid scheme
ever prosecuted in the U .S.
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And at this moment, as Rocha sits facing
potential criminal charges, Wanzeller
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is more than 4 ,000 miles away in
Vitoria on the southeast coast of
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It's a sort of homecoming for Wanzeller.
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He grew up in Vitoria, but left in the
late 80s looking for a better life in
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America.
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His father had died. He felt like he had
to support his mother and his family.
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He literally goes from one dishwashing
job, like, you know, literally leaves
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and goes to another.
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When his family arrives in Boston a few
years later, he finds a company called
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Cleaner Images in the Yellow Pages that
will hire all of them.
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It is owned by a man named James
Merrill.
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By all accounts, sort of an average
family man living in central
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sort of a serial entrepreneur.
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Merrill and Wanzeller hit it off.
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Eventually, Merrill asked Wanzeller to
become his partner in the business.
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I think Mr. Merrill would say that he
trusted Carlos Wanzeller to the end.
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And that trust takes Merrill down a
dangerous path.
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when he and Wanzeller launch a company
that sells a software package that
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people to make international calls over
the Internet.
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It is called TelexFree.
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It was a voice -over Internet phone
service, sort of like Skype.
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So you would pay a flat fee each month,
and you would get unlimited calls to
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Central and South America over the
Internet.
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From its marketing, it seems tailor
-made for immigrants who want to call
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cheaply.
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But Telex Free actually offers much
more, as Juan Zeller explains in this
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video.
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Telex Free is about changing people's
lives.
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That's right. As these ads show, Telex
Free promises to transform lives, to
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dreams come true.
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If I sell my company to Facebook or
somebody else, I know they're going to
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my dream.
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Your dream.
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It's a message that is repeated in
dozens of online videos selling Telex
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Every so often, something big happens.
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Telex Free is not about phone calls.
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Something is coming that will put a
whole new meaning to money at your
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fingertips.
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It is about making millions of dollars
working from home.
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Making money has never been easier.
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And how can Telex Free make such an
offer?
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Because Telex Free is structured as a
multi -level marketing company, an MLM.
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That means its sales force is made up of
people who get bonuses.
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for recruiting other salespeople.
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But here's the catch.
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Telex Free is not a legitimate MLM.
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It is a pyramid scheme.
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There are legitimate multi -level
marketing companies, like Amway, for
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which has been around for a long time.
The difference is that a legitimate
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company makes its revenue from the
actual sale of a product.
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A pyramid scheme does not.
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Telex Free does have a product, but no
one is required to sell it.
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Instead, members can make money by
recruiting others to join or by simply
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cutting and pasting ads for Telex Free
in online classifieds.
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Telex Free looked like they were selling
a product, but if you looked at the
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program itself, it was much easier to
make money from putting those ads in and
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from recruitment.
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And so the product just sits there
rarely sold, rarely used, while people
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Telex Free to make money posting ads.
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So it was just busy work.
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And no one ever responded to the ads,
and no one ever bought these phone
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packages through the ads.
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But there is big money in this busy
work.
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For $1 ,425...
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people can join Telex Free and have the
chance to be paid for placing five ads
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every day of the week.
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At the end of that week, Telex Free gave
you $100.
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So at the end of a month, $400.
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At the end of a year, it's $5 ,200.
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That's a return of more than 200%. And
that enticing offer is at first being
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sold to people who left their home
countries to find a better life in
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They are people for whom life is not
easy.
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It's very hard to be, at times, an
immigrant, working two or three jobs in
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for you to save that little money, in
order for you to sort of like pay food
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families that are living abroad.
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Gladys Vega runs a community
organization, the Chelsea Collaborative,
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Chelsea, Massachusetts, a city largely
comprised of immigrants.
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We are very easy targets sometimes
because we trust people sometimes
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think that when we come to this country,
we come to the country of opportunity.
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And people really think that
opportunities come that easy.
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And as prospective customers explore the
Telex Free website, they see these
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photographs of the founders, James
Merrill and Carlos Wanzeller, addressing
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audience. The images help sell the
scheme.
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Merrill is described as an American
businessman, a man of great vision.
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And Wanzeller, an immigrant himself, is
presented in online videos like this one
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as a successful, confident businessman.
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He basically said, look, I was an
immigrant. I was a dishwasher. I did
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was in your shoes. And look how big I
am.
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And through videos posted online, he can
reach thousands of targets in their own
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language.
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He was able to explain the whole scheme
in Portuguese.
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If it was an American doing it, not as
many Brazilians would get involved.
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Tisa Hartman's mother, Maria Murdoch,
left Brazil 20 years ago looking for a
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chance of a better life.
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And, as a video like this shows, Telex
Free is sold as the opportunity
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Brazilians like Murdoch have been
waiting for.
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A godsend. An answer to prayers.
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It was like a religion. That's all they
talked about.
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That's all they wanted to know. And it
kind of became like a cult, you know.
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People wanted to invest every single
penny they had.
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And that's what Maria Murdoch does.
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She puts in $30 ,000, all of her
savings.
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And soon, Telex Free is spreading out of
the Brazilian community like a virus,
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from one immigrant group to another.
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That was the talk of the town. That was
sort of like the quiet news of making
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money on the side and getting your
family members to join.
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Mario Caralan, originally from
Guatemala, is a construction worker for
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of Cambridge.
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I find out with my brother's friends,
and they explain to me how everything
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works.
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He is a perfect target for Telex Free.
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Eager to secure a better life for his
wife and daughter, he takes out a loan
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$10 ,000.
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I received the money for the bank, and I
went and gave it to my brother's friend
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in the hand, the whole cash.
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In a town west of Boston, Rosemary
Tirico is a dental hygienist, originally
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Bolivia, who says she is careful with
her money.
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I was always thinking about saving for
the future of my son.
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I can go out and enjoy a good meal or a
dinner with my friends, or I can save
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them money.
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And then she's invited to a dinner
party.
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People were talking about Telex Free,
and I'm always being curious.
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And I asked them, what are you guys
talking about? What is Telex Free?
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She is told that it is an amazing
opportunity.
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They said three months later they got
money back without doing anything other
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than just posting for 20 minutes in the
computer, and that was that.
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Tirico is convinced and invests $4 ,500.
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And then every day she dutifully posts
her ads online, just as hundreds...
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And then thousands of people are doing
in houses and apartments in communities
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throughout Massachusetts.
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They thought that they were working for
the company.
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They were Telex Free employees.
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That's how they thought themselves, that
they had a job where they changed a few
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apps in this computer and they will
receive money in the bank.
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And Tirico says it's not hard to find
people claiming to get rich from Telex
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Free.
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Well, someone said, my God, they're
loaded now because they have the money
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Telex Free.
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They bought a house in New Hampshire.
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I said, oh, my God. And everyone were
thinking, if they can do it, why can we
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not?
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But she is falling for an old trick
because the money people are making is
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coming from new people joining.
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And that makes Telex Free not just a
pyramid scheme.
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There's no actual product being sold.
There's no real revenue coming in. It's
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just money going around in circles,
which is basically a Ponzi scheme.
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As TelexFree gains traction, James
Merrill and Carlos Wanzeller move into
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view through videos posted online.
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And to federal prosecutors, the videos
reveal how different these two partners
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are. Wanzeller, a real extrovert,
handsome guy, kind of charming.
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comfortable in front of crowds, very
effusive and emotional.
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James Merrill, much quieter, appeared to
dislike crowds, wanted to be more
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focused on the business side of his
ventures and less on the social side.
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But their biggest difference may be in
how they perceive their business.
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It appears to us that as to Carlos
Wanzeller, yes.
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I think he knew from the beginning that
it was one big scam.
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But for James Merrill?
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There is this belief, this delusional
optimism that things would be okay, that
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they'd just grow more and more. And the
more they grew, the more money would
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come in to pay their obligations.
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But neither could know what a monster
they've created.
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Next on American Greed, the scam
explodes.
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These storefronts would pop up in towns
with large immigrant communities where
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people would come in with bags of cash.
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In early 2013, just a few months after
she joins Telex Free.
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00:14:50,080 --> 00:14:54,860
Rosemary Tirico has every reason to
believe she is making big money.
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00:14:56,060 --> 00:15:01,580
Every day, she signs into the TelexFree
website and checks her balance. And,
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just as promised, her bottom line, her
credits, continue to grow.
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00:15:07,500 --> 00:15:11,120
That is how TelexFree pays its members,
in credits.
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00:15:11,460 --> 00:15:14,000
They are like reward points programs.
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00:15:14,500 --> 00:15:18,260
With TelexFree, 100 credits equals $100.
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00:15:19,280 --> 00:15:23,759
You could cash out these credits for
dollars. You'd ask Telex Free, and they
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00:15:23,760 --> 00:15:24,840
would send you a check.
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00:15:25,140 --> 00:15:30,699
But Telex Free strongly encouraged
people to leave the money in the system
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00:15:30,700 --> 00:15:31,750
the form of credits.
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00:15:32,840 --> 00:15:34,660
And that's what Tirico does.
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She not only leaves her money in Telex
Free, she adds more and more.
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We put another $4 ,500, and...
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00:15:45,610 --> 00:15:49,100
Then a couple months later, we said, oh,
gee, the money's coming back.
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00:15:49,330 --> 00:15:51,450
So we put another $15 ,000.
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00:15:53,070 --> 00:15:58,070
Eventually, she turns over $60 ,000 to
Telex Free, all of her savings.
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00:15:58,310 --> 00:16:04,130
And each time she makes a deposit, she
takes cash to a couple in a nearby town.
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00:16:04,910 --> 00:16:10,509
The amount of money they were getting in
cash every day, it was crazy
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00:16:10,510 --> 00:16:11,560
ridiculous.
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00:16:13,040 --> 00:16:15,860
They are TelexFree recruiters.
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00:16:16,480 --> 00:16:21,659
And recruiting is where the real money
is in TelexFree. Because recruiters get
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00:16:21,660 --> 00:16:26,139
paid a bonus for every person they
recruit and a bonus for every person
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00:16:26,140 --> 00:16:30,300
person recruits. And that continues down
six levels.
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00:16:31,360 --> 00:16:36,799
It's a way that you can exponentially
increase the money that is coming in for
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00:16:36,800 --> 00:16:40,519
virtually no effort on your part other
than your initial recruiting of the
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00:16:40,520 --> 00:16:42,220
people directly below you.
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00:16:44,440 --> 00:16:47,340
And recruiters all have one requirement.
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00:16:47,860 --> 00:16:51,280
You cannot write a check. You cannot use
a credit card.
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00:16:51,820 --> 00:16:53,020
It had to be cash.
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00:16:55,220 --> 00:16:57,180
And why cash only?
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00:16:57,780 --> 00:17:01,940
Because recruiters have figured out how
to game telex free.
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00:17:03,120 --> 00:17:07,338
When a new member comes to a recruiter,
they often pay thousands of dollars to
229
00:17:07,339 --> 00:17:08,579
open multiple accounts.
230
00:17:09,920 --> 00:17:14,399
Once the accounts are open, the
membership fee for those accounts needs
231
00:17:14,400 --> 00:17:15,819
paid to TelexFree.
232
00:17:16,420 --> 00:17:20,079
But the recruiters do not pay TelexFree
with the new members' cash.
233
00:17:20,700 --> 00:17:26,040
Instead, they pay using credit that they
accumulate by recruiting new members.
234
00:17:26,800 --> 00:17:28,600
And they pocket the cash.
235
00:17:30,560 --> 00:17:35,099
Ultimately, a lot of the money didn't
actually go to TelexFree. It was going
236
00:17:35,100 --> 00:17:36,150
the high promoters.
237
00:17:36,151 --> 00:17:40,529
There were promoters at the very top of
the pyramid who were making a lot of
238
00:17:40,530 --> 00:17:41,670
money out of the scheme.
239
00:17:43,170 --> 00:17:48,729
And with so much money to be made
signing up people for Telex Free,
240
00:17:48,730 --> 00:17:54,350
begin to open their own offices in
storefronts, welcoming people off the
241
00:17:54,790 --> 00:17:59,429
It was truly a secondary market in which
these storefronts would pop up in towns
242
00:17:59,430 --> 00:18:04,370
with large immigrant communities where
people would come in with bags of cash.
243
00:18:07,240 --> 00:18:11,820
and just pay these pre -existing members
of TelexFree to sign them up.
244
00:18:12,920 --> 00:18:17,920
But to make these transactions work,
recruiters need lots of credits.
245
00:18:18,340 --> 00:18:21,260
And suddenly, credits are in high
demand.
246
00:18:22,100 --> 00:18:25,020
They become a form of underground
currency.
247
00:18:26,000 --> 00:18:30,979
People were paying lots of cash for
these credits because those credits were
248
00:18:30,980 --> 00:18:32,520
key to future compensation.
249
00:18:34,420 --> 00:18:39,299
Rosemary Tirico is shocked when a
recruiter shows up at her door and wants
250
00:18:39,300 --> 00:18:40,700
buy her credits.
251
00:18:41,020 --> 00:18:45,460
He brought to my house $60 ,000 in cash.
252
00:18:46,260 --> 00:18:51,179
I said, I don't have that amount, you
know. I said, I wish I would have that
253
00:18:51,180 --> 00:18:52,230
amount.
254
00:18:52,640 --> 00:18:56,739
And while there are thousands of people
capitalizing on the Telex free credit
255
00:18:56,740 --> 00:19:02,360
boom, there is one person with a
particular advantage, Carlos Wanzeller.
256
00:19:03,620 --> 00:19:09,259
According to federal prosecutors, he is
running a kind of insider's club where
257
00:19:09,260 --> 00:19:11,960
he manually adds credits to friends'
accounts.
258
00:19:12,200 --> 00:19:16,420
They collect cash from new members and
deliver it to him.
259
00:19:17,640 --> 00:19:21,380
It was almost a way to embezzle money
out of the company.
260
00:19:21,381 --> 00:19:25,459
And we have stories of people showing up
at Telex Free literally with duffel
261
00:19:25,460 --> 00:19:27,100
bags of cash.
262
00:19:27,360 --> 00:19:31,640
And it appears that Juan Zeller was able
to extract from Telex Free.
263
00:19:32,280 --> 00:19:34,540
millions upon millions of dollars.
264
00:19:37,560 --> 00:19:43,579
Up next, like rock stars on a world
tour, Merrill and Wanzeller showcase
265
00:19:43,580 --> 00:19:45,660
popularity around the globe.
266
00:20:01,640 --> 00:20:07,559
In the old days, before the Internet,
predatory frauds like Telex Free relied
267
00:20:07,560 --> 00:20:11,380
personal relationships to spread the
word of the scheme.
268
00:20:12,800 --> 00:20:15,800
But that was then, and this is now.
269
00:20:16,720 --> 00:20:21,679
Right from the start, James Merrill and
Carlos Wanzeller turned to social media
270
00:20:21,680 --> 00:20:24,100
to promote their amazing opportunity.
271
00:20:25,040 --> 00:20:28,460
This is truly a 21st century fraud.
272
00:20:29,040 --> 00:20:34,329
When we first started, Looking at this
scheme, we went online and looked, typed
273
00:20:34,330 --> 00:20:37,640
Telex Free into YouTube, and there were
just thousands of videos.
274
00:20:37,870 --> 00:20:44,009
So YouTube, Facebook, Twitter had the
ability to just exponentially increase
275
00:20:44,010 --> 00:20:46,490
awareness of this scheme overnight
almost.
276
00:20:47,950 --> 00:20:53,649
Some of the videos are made by Telex
Free, designed to explain how the
277
00:20:53,650 --> 00:20:54,700
works.
278
00:21:00,410 --> 00:21:03,870
Others keep members updated on changes
in the company.
279
00:21:05,310 --> 00:21:10,529
But it is not long before people
watching the videos realize they can
280
00:21:10,530 --> 00:21:11,580
the company, too.
281
00:21:11,930 --> 00:21:17,430
All they have to do is set up their own
telex -free website, like this one.
282
00:21:17,650 --> 00:21:22,109
They would walk through what the
compensation plan was, walk through how
283
00:21:22,110 --> 00:21:26,950
was to post the ads, and then try to get
other people to sign up for them.
284
00:21:28,270 --> 00:21:32,149
Their sites are the online version of
the storefronts in immigrant
285
00:21:32,150 --> 00:21:37,109
neighborhoods, set up by people who see
a chance to make easy money with
286
00:21:37,110 --> 00:21:38,160
TelexFree.
287
00:21:38,830 --> 00:21:43,970
And through these sites, the TelexFree
message takes on a life of its own.
288
00:21:44,870 --> 00:21:49,489
YouTube will make you famous overnight,
but now we can see that YouTube can also
289
00:21:49,490 --> 00:21:51,490
make fraudsters rich overnight as well.
290
00:21:53,840 --> 00:21:59,199
Just months after its launch, Telex Free
promoters show potential members in
291
00:21:59,200 --> 00:22:02,500
Internet videos that it has a staggering
following.
292
00:22:03,340 --> 00:22:08,419
Designed to attract new members, the
videos document popular Telex Free
293
00:22:08,420 --> 00:22:10,840
called extravaganzas.
294
00:22:12,080 --> 00:22:18,819
This video shows an event held in Brazil
in 2012, but they are all strikingly
295
00:22:18,820 --> 00:22:19,870
similar.
296
00:22:20,750 --> 00:22:24,510
interviews with big winners offer
evidence of money being made.
297
00:22:24,810 --> 00:22:30,550
And Merrill and Wanzeller are portrayed
as hugely admired celebrity businessmen.
298
00:22:30,990 --> 00:22:36,629
Can you people do me a favor? You did
the wave earlier today. Can we do one
299
00:22:36,630 --> 00:22:38,920
of those waves? Can you people get up
and die?
300
00:22:39,810 --> 00:22:46,709
And when you watch the video, it really
strikes you how pulled in to Telex
301
00:22:46,710 --> 00:22:48,090
3 all of these people are.
302
00:22:48,560 --> 00:22:54,339
They view Marilyn Wanzler as their
champion, who are going to help them
303
00:22:54,340 --> 00:22:57,170
their lives, and everyone's going to
make a lot of money.
304
00:22:57,740 --> 00:23:03,799
In almost no time, the videos posted
online fuel Telex Free's expansion
305
00:23:03,800 --> 00:23:04,960
the entire globe.
306
00:23:05,880 --> 00:23:07,020
To Russia.
307
00:23:07,480 --> 00:23:08,540
To China.
308
00:23:09,200 --> 00:23:10,260
To Malaysia.
309
00:23:10,880 --> 00:23:13,680
To 248 countries.
310
00:23:14,920 --> 00:23:18,470
And it got out of control because it
wasn't just them talking about tax
311
00:23:18,600 --> 00:23:19,920
It was entire communities.
312
00:23:20,740 --> 00:23:26,839
While some online recruiters are
generating big bucks for themselves, at
313
00:23:26,840 --> 00:23:30,439
of the day, according to federal
investigators, there is no one who is
314
00:23:30,440 --> 00:23:36,859
more money than Carlos Wanzeller, who
was shown in online videos as the
315
00:23:36,860 --> 00:23:37,910
of success.
316
00:23:38,120 --> 00:23:41,740
By all appearances, his dreams are
coming true.
317
00:23:42,620 --> 00:23:47,499
In addition to the duffel bags of cash
being delivered to him, court records
318
00:23:47,500 --> 00:23:50,120
show he is sending millions of dollars
overseas.
319
00:23:52,140 --> 00:23:59,019
And he and his wife are creating a small
real estate empire with 30
320
00:23:59,020 --> 00:24:03,679
different properties, including his
million -dollar house in Massachusetts
321
00:24:03,680 --> 00:24:05,580
several houses in Florida.
322
00:24:05,581 --> 00:24:10,219
Wanzeller, of course, was, in addition
to buying real estate, he was buying...
323
00:24:10,220 --> 00:24:11,980
Cars and boats, including a yacht.
324
00:24:12,560 --> 00:24:16,220
He bought Ferraris. He bought three
BMWs. He bought a Porsche.
325
00:24:17,080 --> 00:24:18,400
A lot of money to burn.
326
00:24:21,220 --> 00:24:26,740
Up next, Carlos Wanzeller shows his
compassion for his victims.
327
00:24:27,360 --> 00:24:28,500
They started to cry.
328
00:24:29,300 --> 00:24:33,090
Derrick and Merrill, knowing that he was
stealing money from these people.
329
00:24:47,790 --> 00:24:50,150
Telex Free begins in Brazil.
330
00:24:50,570 --> 00:24:53,570
At its peak, it has one million members
there.
331
00:24:55,450 --> 00:25:01,849
And as the YouTube videos show, those
members are as enthusiastic as any can
332
00:25:01,850 --> 00:25:02,900
possibly be.
333
00:25:05,750 --> 00:25:12,330
That is, until June 2013, when a court's
decision makes the news.
334
00:25:13,030 --> 00:25:16,710
A Brazilian court.
335
00:25:17,240 --> 00:25:22,139
issues an injunction freezing telex
free's assets and shutting it down in
336
00:25:22,140 --> 00:25:27,019
country because the brazilian court has
concluded that telex free is probably a
337
00:25:27,020 --> 00:25:33,320
pyramid scheme immediately merrill posts
a reassuring message online
338
00:25:49,870 --> 00:25:54,629
At an event in July, later turned into
this online marketing, it is Juan
339
00:25:54,630 --> 00:25:55,680
Zeller's turn.
340
00:25:55,810 --> 00:26:01,390
And so far, they can't find anything
wrong with us.
341
00:26:03,510 --> 00:26:08,690
Trust in God and trust the law.
342
00:26:10,950 --> 00:26:15,110
We're very close to this get -fixed.
343
00:26:16,230 --> 00:26:19,150
And then he does something his audience
loves.
344
00:26:19,660 --> 00:26:22,920
A demonstration of his compassion for
the members in Brazil.
345
00:26:23,760 --> 00:26:24,940
He breaks down.
346
00:26:25,620 --> 00:26:29,639
If you guys don't mind, I want to give a
message in Portuguese for all those
347
00:26:29,640 --> 00:26:30,720
people. Yes.
348
00:26:31,240 --> 00:26:32,290
Okay.
349
00:26:33,060 --> 00:26:34,280
They started to cry.
350
00:26:34,281 --> 00:26:38,479
They're at Jim Merrill, knowing that he
was stealing money from these people,
351
00:26:38,480 --> 00:26:41,819
and this is going to fail, and it's
going to be in the back of people from
352
00:26:41,820 --> 00:26:42,870
own community.
353
00:26:44,300 --> 00:26:48,720
And also knowing that Telex Free's own
lawyer is so concerned.
354
00:26:49,440 --> 00:26:52,400
He has asked that his name be taken off
the website.
355
00:26:52,800 --> 00:26:56,940
And a new lawyer is definitely not more
encouraging.
356
00:26:57,820 --> 00:27:02,219
New lawyer comes back within a matter of
weeks and says, you're running a
357
00:27:02,220 --> 00:27:03,259
pyramid scheme.
358
00:27:03,260 --> 00:27:06,799
He doesn't mince words. He says, your
company is illegal. You are exposed to
359
00:27:06,800 --> 00:27:08,300
civil and criminal liability.
360
00:27:08,920 --> 00:27:09,970
Needs changes.
361
00:27:10,880 --> 00:27:12,500
But they make no changes.
362
00:27:13,060 --> 00:27:18,019
Instead, as this online video shows,
They continue to stand before members
363
00:27:18,020 --> 00:27:20,600
convince them to bring in more people.
364
00:27:21,220 --> 00:27:27,560
So Telex Free will be here today,
tomorrow, many, many years from now.
365
00:27:30,500 --> 00:27:35,260
And thousands of people like Elirides
Arikas believe that message.
366
00:27:36,000 --> 00:27:41,340
She thinks Telex Free will not just
change her life, it could save her life.
367
00:27:41,540 --> 00:27:43,710
She has learned that she has heart
trouble.
368
00:27:45,070 --> 00:27:51,310
I have coronary artery disease, 90 %
clot,
369
00:27:51,670 --> 00:27:58,489
160 % and another 140%. She has
370
00:27:58,490 --> 00:28:03,629
no health insurance, but she does have
savings that could pay part of needed
371
00:28:03,630 --> 00:28:04,680
surgery.
372
00:28:04,950 --> 00:28:07,570
And then she hears about Telex Free.
373
00:28:08,690 --> 00:28:12,530
And I think, oh, this is going to help
me.
374
00:28:13,040 --> 00:28:19,220
I can work at home to make money enough
to make my surgery.
375
00:28:20,960 --> 00:28:27,639
In three days, she empties her savings
account and puts $20 ,400 into
376
00:28:27,640 --> 00:28:28,690
Telex Free.
377
00:28:29,720 --> 00:28:36,540
And they count the money, and then they
say, yo, everything's okay.
378
00:28:37,180 --> 00:28:39,260
You're great. You did great.
379
00:28:39,700 --> 00:28:42,140
I trust them very much.
380
00:28:43,440 --> 00:28:44,500
And I'm happy.
381
00:28:46,240 --> 00:28:52,299
At the end of 2013, as people like
Eloita's Eriques turn over their life
382
00:28:52,300 --> 00:28:58,160
to Telexfree, Meryl and Wanzeller decide
to give themselves a Christmas bonus.
383
00:28:58,920 --> 00:29:01,200
Three million dollars each.
384
00:29:02,980 --> 00:29:06,620
Up next, when the going gets tough.
385
00:29:07,260 --> 00:29:12,200
The very day that the agents search
Telexfree's office,
386
00:29:13,160 --> 00:29:18,300
Carlos Wondella hops in a car, gets on a
plane to Rio, and he's gone.
387
00:29:19,880 --> 00:29:24,979
See how a million -dollar lottery winner
gets taken by Telex Free at
388
00:29:24,980 --> 00:29:27,720
AmericanGreed .CNBC .com.
389
00:29:28,580 --> 00:29:30,740
Want inside information from the show?
390
00:29:31,100 --> 00:29:33,080
Join the Greed social network.
391
00:29:33,600 --> 00:29:36,260
Like us on American Greed's Facebook
page.
392
00:29:36,700 --> 00:29:37,940
We'll be right back.
393
00:29:48,170 --> 00:29:54,249
In December 2013, six months after Telex
Free Brazil is shut down, video
394
00:29:54,250 --> 00:30:00,089
captures a Telex Free extravaganza to
beat all extravaganzas. This one is on a
395
00:30:00,090 --> 00:30:01,310
cruise ship in Brazil.
396
00:30:03,510 --> 00:30:09,089
The video appears to offer evidence that
Telex Free is thriving. And despite
397
00:30:09,090 --> 00:30:13,470
serious red flags, the message from its
founders is consistent.
398
00:30:14,070 --> 00:30:16,550
This company is just beginning.
399
00:30:18,830 --> 00:30:24,829
Through events like this promoted
online, even a skeptic like Edivaldo
400
00:30:24,830 --> 00:30:26,230
starting to change his mind.
401
00:30:27,030 --> 00:30:32,909
When Ruiz came to the U .S. from Brazil,
he was hired by Whole Foods to clean a
402
00:30:32,910 --> 00:30:34,190
store outside of Boston.
403
00:30:35,270 --> 00:30:41,810
I was young at the time, and I started
to work hard.
404
00:30:42,510 --> 00:30:45,490
And now that cleaning job has grown.
405
00:30:46,300 --> 00:30:53,060
Reese owns USG, a concrete polishing
company. His biggest client is Whole
406
00:30:53,620 --> 00:31:00,299
For more
407
00:31:00,300 --> 00:31:06,559
than a year, he has listened to the
stories of people making money in Telex
408
00:31:06,560 --> 00:31:07,610
Free.
409
00:31:08,080 --> 00:31:12,400
And at the start of 2014, he is finally
convinced.
410
00:31:13,550 --> 00:31:15,930
I didn't want to go and do it.
411
00:31:16,430 --> 00:31:23,050
But the way they promote it, and a lot
of people was making money.
412
00:31:24,030 --> 00:31:25,350
I said, why not?
413
00:31:27,390 --> 00:31:31,910
And that is how effective the TelexFree
video messaging has become.
414
00:31:32,470 --> 00:31:38,969
That a cautious businessman decides to
refinance a house and put $400 ,000
415
00:31:38,970 --> 00:31:40,310
into TelexFree.
416
00:31:41,729 --> 00:31:45,190
Unfortunately for Reese, his timing
could not be worse.
417
00:31:47,130 --> 00:31:51,569
At Telex Free headquarters, James
Merrill and Carlos Wanzeller have just
418
00:31:51,570 --> 00:31:56,629
received news that the Massachusetts
Secretary of State is preparing to file
419
00:31:56,630 --> 00:31:58,350
complaint against Telex Free.
420
00:31:59,650 --> 00:32:02,890
And at that point, they decide to make
some changes.
421
00:32:03,870 --> 00:32:07,890
As Merrill shares with the public in a
video posted online.
422
00:32:09,550 --> 00:32:14,770
We're working with our attorneys and
marketing people to create a brand new,
423
00:32:14,910 --> 00:32:21,689
more compliant program, and we're going
to knock this to the moon. In
424
00:32:21,690 --> 00:32:26,889
March, Telex Free announces a new
program, and now the members are
425
00:32:26,890 --> 00:32:28,830
actually sell the product.
426
00:32:29,390 --> 00:32:33,050
A lot of Telex Free's members are
extremely angry about this.
427
00:32:33,290 --> 00:32:34,630
They want their money back.
428
00:32:34,930 --> 00:32:36,550
They think it's a bait and switch.
429
00:32:37,770 --> 00:32:40,770
They descend on the Telex Free
headquarters office.
430
00:32:43,590 --> 00:32:45,150
The police are called.
431
00:32:45,470 --> 00:32:50,729
This and other videos of the meeting are
posted online to draw attention to
432
00:32:50,730 --> 00:32:51,780
their complaints.
433
00:32:53,250 --> 00:33:00,169
At this point, the company owes $5
billion to 1 million people, and it
434
00:33:00,170 --> 00:33:02,710
only has $105 million in the bank.
435
00:33:04,690 --> 00:33:06,470
They take an obvious option.
436
00:33:07,500 --> 00:33:08,720
declaring bankruptcy.
437
00:33:09,080 --> 00:33:14,079
When most pyramid schemes collapse, they
collapse and the people running it run
438
00:33:14,080 --> 00:33:18,560
away. This pyramid scheme collapsed in
plain sight. It declared bankruptcy,
439
00:33:18,700 --> 00:33:22,020
which lent this veneer of legitimacy to
the company.
440
00:33:23,460 --> 00:33:28,900
But it means that members around the
world log into a system that is shut
441
00:33:31,480 --> 00:33:35,940
I remember I came back from a trip and I
got a phone call.
442
00:33:37,450 --> 00:33:42,689
And she asked me, she said, hey, have
you heard about what's going on with
443
00:33:42,690 --> 00:33:43,740
Deluxe Free?
444
00:33:44,150 --> 00:33:45,430
The accounts are frozen.
445
00:33:46,750 --> 00:33:51,790
And as the news gradually becomes real,
the truth sinks in.
446
00:33:52,290 --> 00:33:55,290
It was weeks and months I couldn't
sleep.
447
00:33:56,110 --> 00:33:58,280
And I'm thinking, what the heck did you
do?
448
00:33:58,490 --> 00:34:02,290
How could you be so stupid? I mean, how
could you be so naive?
449
00:34:03,360 --> 00:34:08,139
to think this is great, this is the
opportunity of your life.
450
00:34:08,480 --> 00:34:13,679
One friend called me and say, you know,
Eloise, what happened with Telex Free?
451
00:34:13,960 --> 00:34:15,800
I say, no, what happened?
452
00:34:16,139 --> 00:34:20,400
And they say, they stolen everybody
money.
453
00:34:20,620 --> 00:34:21,840
I say, what?
454
00:34:23,280 --> 00:34:29,400
That's the only money I have to fix my
problems.
455
00:34:30,020 --> 00:34:31,500
It's a big problem.
456
00:34:32,400 --> 00:34:33,659
That's my life.
457
00:34:35,260 --> 00:34:40,939
Within 24 hours of the bankruptcy
filing, agents from Homeland Security
458
00:34:40,940 --> 00:34:42,200
Telex Free headquarters.
459
00:34:42,360 --> 00:34:47,738
They seize hard drives that contain
every transaction made in the two years
460
00:34:47,739 --> 00:34:48,999
the company's short life.
461
00:34:50,739 --> 00:34:54,760
It is clear that the deception will soon
be discovered.
462
00:34:55,780 --> 00:34:58,920
And then Carlos Wanzeller makes a move.
463
00:35:00,560 --> 00:35:07,339
The very day that the agents search
Telex Free's offices, Carlos Wanzeller
464
00:35:07,340 --> 00:35:11,600
meets his daughter, who's an adult, at a
local mall.
465
00:35:12,700 --> 00:35:19,119
He packs a bag, hops in a car, and has
her drive him over the Canadian border
466
00:35:19,120 --> 00:35:24,679
Montreal, where the next day he gets on
a plane to Rio, and he has not left
467
00:35:24,680 --> 00:35:25,730
Brazil yet.
468
00:35:29,420 --> 00:35:34,860
Next on American Greed, a stunning
secret inside a mattress.
469
00:35:35,460 --> 00:35:36,510
That was staggering.
470
00:35:36,740 --> 00:35:38,760
That much cash out there.
471
00:35:51,320 --> 00:35:57,960
In a little more than two years, 170
,000 people in the U .S. joined Telex
472
00:35:59,080 --> 00:36:03,220
And additional victims can be found in
every corner of the globe.
473
00:36:04,580 --> 00:36:11,079
There are 17 ,000 in Uganda, close to 3
,000 in Afghanistan, 26
474
00:36:11,080 --> 00:36:15,240
,000 in Russia, China, more than 90
,000.
475
00:36:16,180 --> 00:36:22,599
We had a number of farmers in the
Dominican Republic who not only
476
00:36:22,600 --> 00:36:26,720
their farms to participate, but they
pledged their future cops.
477
00:36:27,130 --> 00:36:29,110
to participate in this scheme.
478
00:36:30,730 --> 00:36:35,589
And the only person in the U .S. facing
criminal charges for all this damage is
479
00:36:35,590 --> 00:36:36,710
James Merrill.
480
00:36:37,630 --> 00:36:38,680
His defense?
481
00:36:38,930 --> 00:36:41,230
He actually wanted the company to
succeed.
482
00:36:41,650 --> 00:36:43,270
He tried to fix it.
483
00:36:43,650 --> 00:36:47,489
But that doesn't fly with the
prosecutors, who point to Merrill's
484
00:36:47,490 --> 00:36:50,710
appearances like these as evidence
against him.
485
00:36:51,170 --> 00:36:54,670
What James Merrill needed to do was walk
out the door.
486
00:36:55,500 --> 00:37:01,939
And he chose not to do that. And at that
moment is when he decided that he'd
487
00:37:01,940 --> 00:37:04,859
rather run a criminal enterprise and not
tell anybody it's a criminal enterprise
488
00:37:04,860 --> 00:37:07,200
instead of simply leaving.
489
00:37:07,940 --> 00:37:13,839
And so he pleads guilty to charges of
wire fraud and is sentenced to six years
490
00:37:13,840 --> 00:37:14,890
in prison.
491
00:37:18,080 --> 00:37:23,060
He finally acknowledges that Telex Free
is a pyramid scheme.
492
00:37:23,540 --> 00:37:29,250
In this case, Mr. Merrill acknowledged
that he was willfully blind and
493
00:37:29,490 --> 00:37:33,590
that in the face of obvious facts, he
wasn't paying attention to them.
494
00:37:33,950 --> 00:37:39,029
And his friend, Carlos Wanzeller, had a
different idea about where this was
495
00:37:39,030 --> 00:37:43,949
going. And to a large degree, Carlos
Wanzeller used Jim Merrill to accomplish
496
00:37:43,950 --> 00:37:45,000
his goals.
497
00:37:46,850 --> 00:37:51,370
Through their attorneys, both James
Merrill and Carlos Wanzeller...
498
00:37:51,640 --> 00:37:54,560
decline interview requests from American
Greed.
499
00:37:56,020 --> 00:37:59,240
At this point, Wanzeller is still in
Brazil.
500
00:38:00,300 --> 00:38:03,220
Well, he seems to be doing just fine.
He's not in custody.
501
00:38:03,640 --> 00:38:08,379
It appears that he is under indictment
in Brazil for running the telex -free
502
00:38:08,380 --> 00:38:10,790
pyramid scheme, so he will be prosecuted
there.
503
00:38:11,100 --> 00:38:16,039
But he appears to live in a high -rise
in Vitoria, Brazil, and just go about
504
00:38:16,040 --> 00:38:17,120
business day -to -day.
505
00:38:18,320 --> 00:38:23,159
But what Wanzeller does not know is that
federal agents in Brazil are listening
506
00:38:23,160 --> 00:38:24,320
to his phone call.
507
00:38:26,380 --> 00:38:31,059
From his conversations, U .S.
authorities learn that Wanzeller is
508
00:38:31,060 --> 00:38:35,200
courier to pick up money he has left in
the U .S.
509
00:38:35,940 --> 00:38:39,900
And so Homeland Security Investigation
sets up a sting.
510
00:38:42,140 --> 00:38:46,460
The handoff of the cash is to take place
in a parking lot.
511
00:38:47,850 --> 00:38:53,609
And so it was on that night, January
4th, 2017, that they set up surveillance
512
00:38:53,610 --> 00:38:57,310
and they waited for a person to show up.
513
00:38:57,830 --> 00:39:04,549
And lo and behold, the person showed up
in a red SUV and delivered a bag
514
00:39:04,550 --> 00:39:09,830
put in the trunk of the car along with
an undercover agent of $2 .2 million.
515
00:39:14,960 --> 00:39:18,600
Shortly after, the person delivering the
cash is arrested.
516
00:39:18,860 --> 00:39:23,460
He is Kleber Rocha, who was once a
promoter for Telex Free in Brazil.
517
00:39:23,740 --> 00:39:26,980
And now he is doing Wanzeller's dirty
work.
518
00:39:28,260 --> 00:39:35,019
It turns out that Rocha has been here
twice before, helping Wanzeller collect
519
00:39:35,020 --> 00:39:36,070
his cash.
520
00:39:44,440 --> 00:39:50,499
Now, with the potential of criminal
charges, Rocha decides to stop helping
521
00:39:50,500 --> 00:39:51,840
Carlos Wanzeller.
522
00:39:54,100 --> 00:40:00,059
He provides the address of the apartment
where he says there is some cash, but
523
00:40:00,060 --> 00:40:02,340
no one could imagine just how much.
524
00:40:03,360 --> 00:40:08,209
When the agent searched the apartment,
They find a box spring mattress stuffed
525
00:40:08,210 --> 00:40:09,260
with money.
526
00:40:09,930 --> 00:40:12,790
Approximately $20 million in cash.
527
00:40:13,450 --> 00:40:16,940
And we thought that there might be a
couple million dollars out there.
528
00:40:18,530 --> 00:40:20,530
But that was staggering.
529
00:40:20,770 --> 00:40:22,850
That much cash out there.
530
00:40:23,890 --> 00:40:27,990
But those millions of dollars do not
belong to Carlos Wanzeller.
531
00:40:31,110 --> 00:40:33,510
That money belongs to these people.
532
00:40:35,080 --> 00:40:39,719
Every few months, the Chelsea
Collaborative holds a meeting to update
533
00:40:39,720 --> 00:40:40,770
-free victims.
534
00:40:40,840 --> 00:40:44,600
I'm Stephen Darr. I'm the court
-appointed trustee.
535
00:40:44,960 --> 00:40:50,279
The bankruptcy trustee informs them that
so far he has recovered $168 million
536
00:40:50,280 --> 00:40:56,119
and that he is also going after the top
recruiters who made off with the bulk of
537
00:40:56,120 --> 00:40:57,170
the money.
538
00:40:57,240 --> 00:41:01,919
We're trying to recover money from the
winners, the people who took more money
539
00:41:01,920 --> 00:41:03,640
out than they put in.
540
00:41:04,780 --> 00:41:10,639
But what concerns many in this room is
not just the money they lost, but also
541
00:41:10,640 --> 00:41:12,680
the people they brought into the scheme.
542
00:41:13,120 --> 00:41:16,260
And for that, they place blame on
themselves.
543
00:41:17,900 --> 00:41:24,179
It's hard for me because, you know, I'm
a man of the family, and it's hard to
544
00:41:24,180 --> 00:41:28,820
look at my wife and daughter and see.
545
00:41:29,760 --> 00:41:34,180
And all the investment, all the hard
work we did, it goes to the drain.
546
00:41:34,780 --> 00:41:38,440
And it was so sad.
547
00:41:40,880 --> 00:41:45,899
On the day that James Merrill is
sentenced, Gladys Vega represents his
548
00:41:45,900 --> 00:41:49,260
and gets a chance to speak to him
directly.
549
00:41:49,980 --> 00:41:56,959
And I basically looked at his face and I
said, you stole the dreams and
550
00:41:56,960 --> 00:41:58,220
the hopes of these people.
551
00:41:59,150 --> 00:42:05,229
You don't deserve six years or whatever
they're negotiating. You deserve to be
552
00:42:05,230 --> 00:42:10,429
in jail for life. For me, it was one of
those emotional moments
553
00:42:10,430 --> 00:42:17,249
because these people really, really care
about this company, and they
554
00:42:17,250 --> 00:42:19,590
literally gave all they had.
555
00:42:20,630 --> 00:42:26,070
And for the prosecutors, the telex -free
fraud is one for the record books.
556
00:42:26,650 --> 00:42:28,130
The success...
557
00:42:28,830 --> 00:42:33,769
Of the pyramid scheme and the speed with
which it grew and took over the world
558
00:42:33,770 --> 00:42:39,129
is unlike any other broad case I've done
in about 15 years as a fraud
559
00:42:39,130 --> 00:42:45,969
prosecutor. To do that much damage in
that short a period was really amazing
560
00:42:45,970 --> 00:42:49,170
and just showed you how dangerous these
kinds of scams are.
561
00:42:49,220 --> 00:42:53,770
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