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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,

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

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Brazil.

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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...

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

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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

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to stop 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 classifiers.

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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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TelexFree 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 TelexFree 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, TelexFree gave
you $100.

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At the end of a month, $400.

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At the end of a year, $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're 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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Tissa 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.

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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
this 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 change a few

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ads 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.

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

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

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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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That is how TelexFree pays its members,
in credits.

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They are like reward points programs.

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For TelexFree, 100 credits equals $100.

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

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would send you a check.

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

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form of credits.

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And that's what Tirico does.

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

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

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

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So we put another $15 ,000.

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

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

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

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ridiculous.

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They are TelexFree recruiters.

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

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

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person recruits. And that continues down
six levels.

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

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

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people directly below you.

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And recruiters all have one requirement.

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

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It had to be cash.

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And why cash only?

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Because recruiters have figured out how
to game telex free.

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00:17:03,120 --> 00:17:07,339
When a new member comes to a recruiter,
they often pay thousands of dollars to

233
00:17:07,339 --> 00:17:08,579
open multiple accounts.

234
00:17:09,900 --> 00:17:14,400
Once the accounts are open, the
membership fee for those accounts needs

235
00:17:14,400 --> 00:17:15,819
paid to TelexFree.

236
00:17:16,380 --> 00:17:20,079
But the recruiters do not pay TelexFree
with the new members' cash.

237
00:17:20,660 --> 00:17:26,040
Instead, they pay using credit that they
accumulate by recruiting new members.

238
00:17:26,760 --> 00:17:28,600
And they pocket the cash.

239
00:17:30,520 --> 00:17:35,100
Ultimately, a lot of the money didn't
actually go to TelexFree. It was going

240
00:17:35,100 --> 00:17:36,100
the high promoters.

241
00:17:36,830 --> 00:17:40,550
There were promoters at the very top of
the pyramid who were making a lot of

242
00:17:40,550 --> 00:17:41,550
money out of the scheme.

243
00:17:43,170 --> 00:17:48,730
And with so much money to be made
signing up people for Telex Free,

244
00:17:48,730 --> 00:17:54,350
begin to open their own offices in
storefronts, welcoming people off the

245
00:17:54,810 --> 00:17:59,430
It was truly a secondary market in which
these storefronts would pop up in towns

246
00:17:59,430 --> 00:18:04,370
with large immigrant communities where
people would come in with bags of cash.

247
00:18:07,240 --> 00:18:11,820
and just pay these pre -existing members
of TelexFree to sign them up.

248
00:18:12,920 --> 00:18:17,920
But to make these transactions work,
recruiters need lots of credits.

249
00:18:18,340 --> 00:18:21,280
And suddenly, credits are in high
demand.

250
00:18:22,100 --> 00:18:25,020
They become a form of underground
currency.

251
00:18:26,000 --> 00:18:30,980
People were paying lots of cash for
these credits because those credits were

252
00:18:30,980 --> 00:18:32,520
key to future compensation.

253
00:18:34,420 --> 00:18:39,320
Rosemary Tirico is shocked when a
recruiter shows up at her door and wants

254
00:18:39,320 --> 00:18:40,700
buy her credits.

255
00:18:41,060 --> 00:18:45,460
He brought to my house $60 ,000 in cash.

256
00:18:46,260 --> 00:18:51,180
I said, I don't have that amount, you
know. I said, I wish I would have that

257
00:18:51,180 --> 00:18:52,180
amount.

258
00:18:52,640 --> 00:18:56,740
And while there are thousands of people
capitalizing on the Telex free credit

259
00:18:56,740 --> 00:19:02,360
boom, there is one person with a
particular advantage, Carlos Wanzeller.

260
00:19:03,620 --> 00:19:09,260
According to federal prosecutors, he is
running a kind of insider's club where

261
00:19:09,260 --> 00:19:11,980
he manually adds credits to friends'
accounts.

262
00:19:12,200 --> 00:19:16,420
They collect cash from new members and
deliver it to him.

263
00:19:17,640 --> 00:19:21,380
It was almost a way to embezzle money
out of the company.

264
00:19:22,020 --> 00:19:25,460
And we have stories of people showing up
at Telex Free literally with duffel

265
00:19:25,460 --> 00:19:27,100
bags of cash.

266
00:19:27,360 --> 00:19:31,640
And it appears that Juan Zeller was able
to extract from Telex Free.

267
00:19:32,280 --> 00:19:34,540
millions upon millions of dollars.

268
00:19:37,500 --> 00:19:43,580
Up next, like rock stars on a world
tour, Merrill and Wanzeller showcase

269
00:19:43,580 --> 00:19:45,660
popularity around the globe.

270
00:20:01,640 --> 00:20:07,560
In the old days, before the Internet,
predatory frauds like Telex Free relied

271
00:20:07,560 --> 00:20:11,380
personal relationships to spread the
word of the scheme.

272
00:20:12,800 --> 00:20:15,800
But that was then, and this is now.

273
00:20:16,720 --> 00:20:21,680
Right from the start, James Merrill and
Carlos Wanzeller turned to social media

274
00:20:21,680 --> 00:20:24,100
to promote their amazing opportunity.

275
00:20:25,040 --> 00:20:28,460
This is truly a 21st century fraud.

276
00:20:29,040 --> 00:20:34,330
When we first started, Looking at this
scheme, we went online and looked, typed

277
00:20:34,330 --> 00:20:37,510
Telex Free into YouTube, and there were
just thousands of videos.

278
00:20:37,890 --> 00:20:44,010
So YouTube, Facebook, Twitter had the
ability to just exponentially increase

279
00:20:44,010 --> 00:20:46,490
awareness of this scheme overnight
almost.

280
00:20:47,950 --> 00:20:53,650
Some of the videos are made by Telex
Free, designed to explain how the

281
00:20:53,650 --> 00:20:54,650
works.

282
00:21:00,410 --> 00:21:03,870
Others keep members updated on changes
in the company.

283
00:21:05,310 --> 00:21:10,530
But it is not long before people
watching the videos realize they can

284
00:21:10,530 --> 00:21:11,530
the company, too.

285
00:21:11,930 --> 00:21:17,430
All they have to do is set up their own
telex -free website, like this one.

286
00:21:17,650 --> 00:21:22,110
They would walk through what the
compensation plan was, walk through how

287
00:21:22,110 --> 00:21:26,970
was to post the ads, and then try to get
other people to sign up for them.

288
00:21:28,270 --> 00:21:32,150
Their sites are the online version of
the storefronts in immigrant

289
00:21:32,150 --> 00:21:37,110
neighborhoods, set up by people who see
a chance to make easy money with

290
00:21:37,110 --> 00:21:38,110
TelexFree.

291
00:21:38,790 --> 00:21:43,970
And through these sites, the TelexFree
message takes on a life of its own.

292
00:21:44,830 --> 00:21:49,490
YouTube will make you famous overnight,
but now we can see that YouTube can also

293
00:21:49,490 --> 00:21:51,490
make fraudsters rich overnight as well.

294
00:21:53,570 --> 00:21:59,210
Just months after its launch, TelexFree
promoters show potential members in

295
00:21:59,210 --> 00:22:02,510
Internet videos that it has a staggering
following.

296
00:22:03,330 --> 00:22:08,390
Designed to attract new members, the
videos document popular TelexFree events

297
00:22:08,390 --> 00:22:10,790
called extravaganzas.

298
00:22:12,070 --> 00:22:18,810
This video shows an event held in Brazil
in 2012, but they are all strikingly

299
00:22:18,810 --> 00:22:19,810
similar.

300
00:22:20,770 --> 00:22:24,490
Interviews with big winners offer
evidence of money being made.

301
00:22:25,040 --> 00:22:30,560
And Marilyn Wanzeller are portrayed as
hugely admired celebrity businessmen.

302
00:22:30,960 --> 00:22:36,640
Can you people do me a favor? You did
the wave earlier today. Can we do one

303
00:22:36,640 --> 00:22:38,320
of those waves? Can you people get up?

304
00:22:39,160 --> 00:22:45,380
And when you watch the video, it really
strikes you how pulled in

305
00:22:45,380 --> 00:22:52,120
to Telex 3 all of these people are. They
view Marilyn Wanzeller as their

306
00:22:52,120 --> 00:22:53,120
champion.

307
00:22:53,210 --> 00:22:56,550
We're going to help them change their
lives, and everyone's going to make a

308
00:22:56,550 --> 00:22:57,550
of money.

309
00:22:57,910 --> 00:23:03,810
In almost no time, the videos posted
online fueled Telexfree's expansion

310
00:23:03,810 --> 00:23:04,970
the entire globe.

311
00:23:06,050 --> 00:23:07,050
To Russia.

312
00:23:07,630 --> 00:23:08,630
To China.

313
00:23:09,370 --> 00:23:10,370
To Malaysia.

314
00:23:11,030 --> 00:23:13,690
To 248 countries.

315
00:23:14,690 --> 00:23:18,510
And it got out of control, because it
wasn't just them talking about

316
00:23:18,610 --> 00:23:19,710
It was entire communities.

317
00:23:20,880 --> 00:23:26,860
While some online recruiters are
generating big bucks for themselves, at

318
00:23:26,860 --> 00:23:30,420
of the day, according to federal
investigators, there is no one who is

319
00:23:30,420 --> 00:23:36,840
more money than Carlos Wanzeller, who is
shown in online videos as the picture

320
00:23:36,840 --> 00:23:37,840
of success.

321
00:23:38,080 --> 00:23:41,780
By all appearances, his dreams are
coming true.

322
00:23:42,380 --> 00:23:47,510
In addition to the duffel bags of cash
being delivered to him, Court records

323
00:23:47,510 --> 00:23:50,110
show he is sending millions of dollars
overseas.

324
00:23:52,170 --> 00:23:59,030
And he and his wife are creating a small
real estate empire with 30

325
00:23:59,030 --> 00:24:03,490
different properties, including his
million -dollar house in Massachusetts

326
00:24:03,490 --> 00:24:05,550
several houses in Florida.

327
00:24:06,670 --> 00:24:10,450
Wanzeller, of course, was, in addition
to buying real estate, he was buying

328
00:24:10,450 --> 00:24:11,950
and boats, including a yacht.

329
00:24:12,720 --> 00:24:16,220
He bought Ferraris, he bought three
BMWs, he bought a Porsche.

330
00:24:17,060 --> 00:24:18,400
A lot of money to burn.

331
00:24:21,220 --> 00:24:26,740
Up next, Carlos Wanzeller shows his
compassion for his victims.

332
00:24:27,360 --> 00:24:28,500
They started to cry.

333
00:24:29,300 --> 00:24:32,820
Derrick and Merrill, knowing that he was
stealing money from these people.

334
00:24:47,790 --> 00:24:50,150
Telex Free begins in Brazil.

335
00:24:50,570 --> 00:24:53,570
At its peak, it has one million members
there.

336
00:24:55,450 --> 00:25:01,850
And as the YouTube videos show, those
members are as enthusiastic as any can

337
00:25:01,850 --> 00:25:02,850
possibly be.

338
00:25:05,750 --> 00:25:12,330
That is, until June 2013, when a court
decision makes the news.

339
00:25:12,970 --> 00:25:16,710
A Brazilian court.

340
00:25:17,240 --> 00:25:22,140
issues an injunction freezing telex
free's assets and shutting it down in

341
00:25:22,140 --> 00:25:27,020
country because the brazilian court has
concluded that telex free is probably a

342
00:25:27,020 --> 00:25:33,320
pyramid scheme immediately merrill posts
a reassuring message online

343
00:25:49,870 --> 00:25:54,630
At an event in July, later turned into
this online marketing, it is Juan

344
00:25:54,630 --> 00:25:55,630
Zeller's turn.

345
00:25:55,810 --> 00:26:01,390
And so far, they can't find anything
wrong with us.

346
00:26:03,510 --> 00:26:08,670
Trust in God and trust the law.

347
00:26:10,950 --> 00:26:15,110
We're very close to this get -fixed.

348
00:26:16,230 --> 00:26:19,150
And then he does something his audience
loves.

349
00:26:19,660 --> 00:26:22,920
A demonstration of his compassion for
the members in Brazil.

350
00:26:23,760 --> 00:26:24,940
He breaks down.

351
00:26:25,700 --> 00:26:29,640
If you guys don't mind, I want to give a
message in Portuguese for all those

352
00:26:29,640 --> 00:26:30,720
people. Yes.

353
00:26:31,260 --> 00:26:32,260
Okay.

354
00:26:33,060 --> 00:26:34,280
They started to cry.

355
00:26:34,780 --> 00:26:38,420
They're at Jim Merrill, knowing that he
was stealing money from these people,

356
00:26:38,480 --> 00:26:41,820
and this is going to fail, and it's
going to be in the back of people from

357
00:26:41,820 --> 00:26:42,820
own community.

358
00:26:44,320 --> 00:26:48,720
And also knowing that Telex Free's own
lawyer is so concerned.

359
00:26:49,440 --> 00:26:52,400
He has asked that his name be taken off
the website.

360
00:26:52,820 --> 00:26:56,940
And a new lawyer is definitely not more
encouraging.

361
00:26:57,840 --> 00:27:02,220
New lawyer comes back within a matter of
weeks and says, you're running a

362
00:27:02,220 --> 00:27:03,220
pyramid scheme.

363
00:27:03,280 --> 00:27:06,800
He doesn't mince words. He says, your
company is illegal. You are exposed to

364
00:27:06,800 --> 00:27:08,240
civil and criminal liability.

365
00:27:08,940 --> 00:27:09,940
Needs changes.

366
00:27:10,900 --> 00:27:12,500
But they make no changes.

367
00:27:13,100 --> 00:27:18,020
Instead, as this online video shows,
They continue to stand before members

368
00:27:18,020 --> 00:27:20,600
convince them to bring in more people.

369
00:27:21,240 --> 00:27:27,560
So Telex Free will be here today,
tomorrow, many, many years from now.

370
00:27:30,480 --> 00:27:35,260
And thousands of people like Elirides
Arikas believe that message.

371
00:27:36,000 --> 00:27:41,340
She thinks Telex Free will not just
change her life, it could save her life.

372
00:27:41,540 --> 00:27:43,460
She has learned that she has heart
trouble.

373
00:27:45,070 --> 00:27:51,310
I have coronary artery disease, 90 %
clot,

374
00:27:51,690 --> 00:27:58,470
160 % and another 140%. She has

375
00:27:58,470 --> 00:28:03,630
no health insurance, but she does have
savings that could pay part of needed

376
00:28:03,630 --> 00:28:04,630
surgery.

377
00:28:04,950 --> 00:28:07,570
And then she hears about Telex Free.

378
00:28:08,690 --> 00:28:12,530
And I think, oh, this is going to help
me.

379
00:28:13,040 --> 00:28:19,240
I can work at home to make money enough
to make my surgery.

380
00:28:20,920 --> 00:28:27,640
In three days, she empties her savings
account and puts $20 ,400 into

381
00:28:27,640 --> 00:28:28,640
Telex Free.

382
00:28:29,680 --> 00:28:36,540
And they count the money, and then they
say, yo, everything's okay.

383
00:28:37,160 --> 00:28:39,260
You're great. You did great.

384
00:28:39,680 --> 00:28:42,140
I trust them very much.

385
00:28:43,440 --> 00:28:44,500
And I'm happy.

386
00:28:46,220 --> 00:28:52,300
At the end of 2013, as people like
Eloita's Eriques turn over their life

387
00:28:52,300 --> 00:28:58,160
to Telexfree, Meryl and Wanzeller decide
to give themselves a Christmas bonus.

388
00:28:58,940 --> 00:29:01,180
Three million dollars each.

389
00:29:02,980 --> 00:29:06,620
Up next, when the going gets tough.

390
00:29:07,240 --> 00:29:12,260
The very day that the agents search
Telexfree's offices,

391
00:29:13,160 --> 00:29:18,300
Carlos Wondeller hops in a car, gets on
a plane to Rio, and he's gone.

392
00:29:19,960 --> 00:29:24,980
See how a million -dollar lottery winner
gets taken by Telex Free at

393
00:29:24,980 --> 00:29:27,720
AmericanGreed .CNBC .com.

394
00:29:28,620 --> 00:29:30,740
Want inside information from the show?

395
00:29:31,140 --> 00:29:33,080
Join the Greed social network.

396
00:29:33,600 --> 00:29:36,260
Like us on American Greed's Facebook
page.

397
00:29:36,740 --> 00:29:37,940
We'll be right back.

398
00:29:48,170 --> 00:29:54,250
In December 2013, six months after Telex
Free Brazil is shut down, video

399
00:29:54,250 --> 00:30:00,090
captures a Telex Free extravaganza to
beat all extravaganzas. This one is on a

400
00:30:00,090 --> 00:30:01,310
cruise ship in Brazil.

401
00:30:03,510 --> 00:30:09,090
The video appears to offer evidence that
Telex Free is thriving. And despite

402
00:30:09,090 --> 00:30:13,470
serious red flags, the message from its
founders is consistent.

403
00:30:14,070 --> 00:30:16,550
This company is just beginning.

404
00:30:18,830 --> 00:30:24,830
Through events like this promoted
online, even a skeptic like Edivaldo

405
00:30:24,830 --> 00:30:26,230
starting to change his mind.

406
00:30:27,030 --> 00:30:32,910
When Ruiz came to the U .S. from Brazil,
he was hired by Whole Foods to clean a

407
00:30:32,910 --> 00:30:34,190
store outside of Boston.

408
00:30:35,270 --> 00:30:41,810
I was young at the time, and I started
to work hard.

409
00:30:42,510 --> 00:30:45,490
And now that cleaning job has grown.

410
00:30:46,300 --> 00:30:53,060
Reese owns USG, a concrete polishing
company. His biggest client is Whole

411
00:30:53,640 --> 00:31:00,480
For more

412
00:31:00,480 --> 00:31:06,580
than a year, he has listened to the
stories of people making money in Telex

413
00:31:06,580 --> 00:31:07,580
Free.

414
00:31:08,060 --> 00:31:12,400
And at the start of 2014, he is finally
convinced.

415
00:31:13,550 --> 00:31:15,950
I didn't want to go and do it.

416
00:31:16,470 --> 00:31:23,050
But the way they promote it, and a lot
of people was making money.

417
00:31:24,070 --> 00:31:25,350
I said, why not?

418
00:31:27,430 --> 00:31:31,890
And that is how effective the Telex Free
video messaging has become.

419
00:31:32,510 --> 00:31:38,970
That a cautious businessman decides to
refinance a house and put $400 ,000

420
00:31:38,970 --> 00:31:40,310
into Telex Free.

421
00:31:41,729 --> 00:31:45,190
Unfortunately for Reese, his timing
could not be worse.

422
00:31:47,150 --> 00:31:51,570
At Telex Free headquarters, James
Merrill and Carlos Wanzeller have just

423
00:31:51,570 --> 00:31:56,630
received news that the Massachusetts
Secretary of State is preparing to file

424
00:31:56,630 --> 00:31:58,350
complaint against Telex Free.

425
00:31:59,650 --> 00:32:02,890
And at that point, they decide to make
some changes.

426
00:32:03,870 --> 00:32:07,910
As Merrill shares with the public in a
video posted online.

427
00:32:09,550 --> 00:32:14,770
We're working with our attorneys and
marketing people to create a brand new,

428
00:32:14,910 --> 00:32:21,690
more compliant program, and we're going
to knock this to the moon. In

429
00:32:21,690 --> 00:32:26,890
March, Telex Free announces a new
program, and now the members are

430
00:32:26,890 --> 00:32:28,830
actually sell the product.

431
00:32:29,390 --> 00:32:33,050
A lot of Telex Free's members are
extremely angry about this.

432
00:32:33,290 --> 00:32:34,630
They want their money back.

433
00:32:34,930 --> 00:32:36,290
They think it's a bait and switch.

434
00:32:37,770 --> 00:32:40,770
They descend on the Telex Free
headquarters office.

435
00:32:43,150 --> 00:32:45,150
The police are called.

436
00:32:45,490 --> 00:32:50,730
This and other videos of the meeting are
posted online to draw attention to

437
00:32:50,730 --> 00:32:51,730
their complaints.

438
00:32:53,250 --> 00:33:00,170
At this point, the company owes $5
billion to 1 million people, and it

439
00:33:00,170 --> 00:33:02,710
only has $105 million in the bank.

440
00:33:04,650 --> 00:33:06,470
They take an obvious option.

441
00:33:07,500 --> 00:33:08,720
declaring bankruptcy.

442
00:33:09,100 --> 00:33:14,080
When most pyramid schemes collapse, they
collapse and the people running it run

443
00:33:14,080 --> 00:33:18,560
away. This pyramid scheme collapsed in
plain sight. It declared bankruptcy,

444
00:33:18,700 --> 00:33:22,020
which lent this veneer of legitimacy to
the company.

445
00:33:23,440 --> 00:33:28,900
But it means that members around the
world log into a system that is shut

446
00:33:31,460 --> 00:33:35,940
I remember I came back from a trip and I
got a phone call.

447
00:33:37,430 --> 00:33:42,690
And she asked me, she said, hey, have
you heard about what's going on with

448
00:33:42,690 --> 00:33:43,690
Deluxe Free?

449
00:33:44,130 --> 00:33:45,430
The accounts are frozen.

450
00:33:46,730 --> 00:33:51,790
And as the news gradually becomes real,
the truth sinks in.

451
00:33:52,270 --> 00:33:55,290
It was weeks and months I couldn't
sleep.

452
00:33:56,090 --> 00:33:58,250
And I'm thinking, what the heck did you
do?

453
00:33:58,470 --> 00:34:02,290
How could you be so stupid? I mean, how
could you be so naive?

454
00:34:03,360 --> 00:34:08,120
To think this is great, this is the
opportunity of your life.

455
00:34:08,500 --> 00:34:13,679
One friend called me and say, you know,
Eloise, what happened with Telex Free?

456
00:34:13,980 --> 00:34:15,780
I say, no, what happened?

457
00:34:16,139 --> 00:34:20,400
And they say, they stolen everybody
money.

458
00:34:20,620 --> 00:34:21,840
I say, what?

459
00:34:23,280 --> 00:34:29,400
That's the only money I have for fix my
problems.

460
00:34:30,000 --> 00:34:31,500
It's a big problem.

461
00:34:32,400 --> 00:34:33,659
That's my life.

462
00:34:35,260 --> 00:34:40,940
Within 24 hours of the bankruptcy
filing, agents from Homeland Security

463
00:34:40,940 --> 00:34:41,940
Telex Free headquarters.

464
00:34:42,360 --> 00:34:47,739
They seize hard drives that contain
every transaction made in the two years

465
00:34:47,739 --> 00:34:48,900
the company's short life.

466
00:34:50,760 --> 00:34:54,760
It is clear that the deception will soon
be discovered.

467
00:34:55,780 --> 00:34:58,920
And then Carlos Wanzeller makes a move.

468
00:35:00,560 --> 00:35:07,340
The very day that the agents search
Telex Free's offices, Carlos Wanzeller

469
00:35:07,340 --> 00:35:11,600
meets his daughter, who's an adult, at a
local mall.

470
00:35:12,700 --> 00:35:19,120
He packs a bag, hops in a car, and has
her drive him over the Canadian border

471
00:35:19,120 --> 00:35:24,680
Montreal, where the next day he gets on
a plane to Rio, and he has not left

472
00:35:24,680 --> 00:35:25,680
Brazil yet.

473
00:35:29,420 --> 00:35:34,860
Next on American Greed, a stunning
secret inside a mattress.

474
00:35:35,540 --> 00:35:36,540
That was staggering.

475
00:35:36,720 --> 00:35:38,760
That much cash out there.

476
00:35:51,240 --> 00:35:57,960
In little more than two years, 170 ,000
people in the U .S. joined Telex Free.

477
00:35:59,080 --> 00:36:03,220
And additional victims can be found in
every corner of the globe.

478
00:36:04,580 --> 00:36:11,080
There are 17 ,000 in Uganda, close to 3
,000 in Afghanistan, 26

479
00:36:11,080 --> 00:36:15,240
,000 in Russia, China, more than 90
,000.

480
00:36:16,180 --> 00:36:22,600
We had a number of farmers in the
Dominican Republic who not only

481
00:36:22,600 --> 00:36:26,720
their farms to participate, but they
pledged their future cops.

482
00:36:27,130 --> 00:36:29,090
to participate in this scheme.

483
00:36:30,730 --> 00:36:35,590
And the only person in the U .S. facing
criminal charges for all this damage is

484
00:36:35,590 --> 00:36:36,710
James Merrill.

485
00:36:37,630 --> 00:36:38,630
His defense?

486
00:36:38,930 --> 00:36:41,230
He actually wanted the company to
succeed.

487
00:36:41,650 --> 00:36:43,270
He tried to fix it.

488
00:36:43,650 --> 00:36:47,490
But that doesn't fly with the
prosecutors, who point to Merrill's

489
00:36:47,490 --> 00:36:50,710
appearances like these as evidence
against him.

490
00:36:51,170 --> 00:36:54,670
What James Merrill needed to do was walk
out the door.

491
00:36:55,480 --> 00:37:01,940
And he chose not to do that. And at that
moment is when he decided that he'd

492
00:37:01,940 --> 00:37:04,860
rather run a criminal enterprise and not
tell anybody it's a criminal enterprise

493
00:37:04,860 --> 00:37:07,200
instead of simply leaving.

494
00:37:07,980 --> 00:37:13,840
And so he pleads guilty to charges of
wire fraud and is sentenced to six years

495
00:37:13,840 --> 00:37:14,840
in prison.

496
00:37:18,120 --> 00:37:23,060
He finally acknowledges that Telex Free
is a pyramid scheme.

497
00:37:23,540 --> 00:37:29,270
In this case, Mr. Merrill acknowledged
that he was willfully blind and

498
00:37:29,510 --> 00:37:33,590
that in the face of obvious facts, he
wasn't paying attention to them.

499
00:37:33,930 --> 00:37:39,030
And his friend, Carlos Wanzeller, had a
different idea about where this was

500
00:37:39,030 --> 00:37:43,950
going. And to a large degree, Carlos
Wanzeller used Jim Merrill to accomplish

501
00:37:43,950 --> 00:37:44,950
his goals.

502
00:37:46,850 --> 00:37:51,370
Through their attorneys, both James
Merrill and Carlos Wanzeller...

503
00:37:51,640 --> 00:37:54,560
decline interview requests from American
Greed.

504
00:37:56,000 --> 00:37:59,240
At this point, Wanzeller is still in
Brazil.

505
00:38:00,300 --> 00:38:03,220
Well, he seems to be doing just fine.
He's not in custody.

506
00:38:03,640 --> 00:38:08,380
It appears that he is under indictment
in Brazil for running the telex -free

507
00:38:08,380 --> 00:38:10,760
pyramid scheme, so he will be prosecuted
there.

508
00:38:11,100 --> 00:38:16,040
But he appears to live in a high -rise
in Vitoria, Brazil, and just go about

509
00:38:16,040 --> 00:38:17,040
business day -to -day.

510
00:38:18,300 --> 00:38:23,160
But what Wanzeller does not know is that
federal agents in Brazil are listening

511
00:38:23,160 --> 00:38:24,400
to his phone calls.

512
00:38:26,420 --> 00:38:31,040
From his conversations, U .S.
authorities learn that Wanzeller is

513
00:38:31,040 --> 00:38:35,200
courier to pick up money he has left in
the U .S.

514
00:38:35,960 --> 00:38:39,900
And so Homeland Security Investigation
sets up a sting.

515
00:38:42,140 --> 00:38:46,460
The handoff of the cash is to take place
in a parking lot.

516
00:38:47,850 --> 00:38:53,650
And so it was on that night, January
4th, 2017, that they set up surveillance

517
00:38:53,650 --> 00:38:57,310
and they waited for a person to show up.

518
00:38:57,830 --> 00:39:04,550
And lo and behold, the person showed up
in a red SUV and delivered a bag

519
00:39:04,550 --> 00:39:09,830
put in the trunk of the car along with
an undercover agent of $2 .2 million.

520
00:39:14,960 --> 00:39:18,580
Shortly after, the person delivering the
cash is arrested.

521
00:39:18,840 --> 00:39:23,460
He is Kleber Rocha, who was once a
promoter for Telex Free in Brazil.

522
00:39:23,760 --> 00:39:26,960
And now he is doing Wanzeller's dirty
work.

523
00:39:28,300 --> 00:39:35,020
It turns out that Rocha has been here
twice before, helping Wanzeller collect

524
00:39:35,020 --> 00:39:36,020
his cash.

525
00:39:44,740 --> 00:39:50,500
Now, with the potential of criminal
charges, Rocha decides to stop helping

526
00:39:50,500 --> 00:39:51,820
Carlos Wanzeller.

527
00:39:54,160 --> 00:40:00,080
He provides the address of the apartment
where he says there is some cash, but

528
00:40:00,080 --> 00:40:02,320
no one could imagine just how much.

529
00:40:03,400 --> 00:40:08,200
When the agents search the apartment,
they find a box spring mattress stuffed

530
00:40:08,200 --> 00:40:09,200
with money.

531
00:40:09,830 --> 00:40:12,790
approximately $20 million in cash.

532
00:40:13,430 --> 00:40:19,550
And we thought that there might be a
couple million dollars out there, but it

533
00:40:19,550 --> 00:40:22,850
was staggering that there'd be that much
cash out there.

534
00:40:23,850 --> 00:40:28,010
But those millions of dollars do not
belong to Carlos Wanzeller.

535
00:40:31,370 --> 00:40:33,530
That money belongs to these people.

536
00:40:34,670 --> 00:40:39,710
Every few months, the Chelsea
Collaborative holds a meeting to update

537
00:40:39,710 --> 00:40:40,710
-free victims.

538
00:40:40,910 --> 00:40:44,590
I'm Stephen Darr. I'm the court
-appointed trustee.

539
00:40:44,970 --> 00:40:50,290
The bankruptcy trustee informs them that
so far he has recovered $168 million

540
00:40:50,290 --> 00:40:56,130
and that he is also going after the top
recruiters who made off with the bulk of

541
00:40:56,130 --> 00:40:57,130
the money.

542
00:40:57,250 --> 00:40:59,730
We're trying to recover money from the
winners.

543
00:41:00,360 --> 00:41:03,640
the people who took more money out than
they put in.

544
00:41:04,780 --> 00:41:10,640
But what concerns many in this room is
not just the money they lost, but also

545
00:41:10,640 --> 00:41:12,680
the people they brought into the scheme.

546
00:41:13,120 --> 00:41:16,260
And for that, they place blame on
themselves.

547
00:41:17,900 --> 00:41:24,180
It's hard for me because, you know, I'm
a man of the family, and it's hard to

548
00:41:24,180 --> 00:41:28,820
look at my wife and daughter and see.

549
00:41:29,760 --> 00:41:34,180
And all the investment, all the hard
work we did, it goes to the drain.

550
00:41:34,780 --> 00:41:38,440
And it was so sad.

551
00:41:40,860 --> 00:41:45,900
On the day that James Merrill is
sentenced, Gladys Vega represents his

552
00:41:45,900 --> 00:41:49,260
and gets a chance to speak to him
directly.

553
00:41:49,980 --> 00:41:56,960
And I basically looked at his face and I
said, you stole the dreams and

554
00:41:56,960 --> 00:41:58,080
the hopes of these people.

555
00:41:59,150 --> 00:42:05,230
You don't deserve six years or whatever
they're negotiating. You deserve to be

556
00:42:05,230 --> 00:42:10,430
in jail for life. For me, it was one of
those emotional moments

557
00:42:10,430 --> 00:42:17,250
because these people really, really care
about this company, and they

558
00:42:17,250 --> 00:42:19,590
literally gave all they had.

559
00:42:20,630 --> 00:42:26,070
And for the prosecutors, the telex -free
fraud is one for the record books.

560
00:42:26,630 --> 00:42:28,410
The success...

561
00:42:28,830 --> 00:42:33,770
Of the pyramid scheme and the speed with
which it grew and took over the world

562
00:42:33,770 --> 00:42:39,130
is unlike any other broad case I've done
in about 15 years as a fraud

563
00:42:39,130 --> 00:42:45,970
prosecutor. To do that much damage in
that short a period was really amazing

564
00:42:45,970 --> 00:42:49,170
and just showed you how dangerous these
kinds of scams are.