Accused Ponzi Schemer Successfully Extradited From Germany

I didn't steal any money. If I had they would have arrested me and charged me long before my trip to Germany WHICH THEY COURT WAS AWARE OF. This isn't a spy novel. Anything that investigators are going to find has already been found. They aren't finding what they're looking for. Perhaps its time to recognize that maybe they can't find it while there is nothing to find!

- Joel Wilson, on newspaper comment board

A Michigan man who suddenly relocated to Germany as authorities closed in on his alleged $8.5 million Ponzi scheme has lost a bid to halt his extradition back to the United States to face criminal charges.  Joel Wilson, of Saginaw, Michigan, is due to arrive back in the United States later this week from Frankfurt, Germany, where he has lived since late 2012.  Wilson, whose wife was briefly jailed following accusations she lied to investigators, has been an active critic of authorities' investigation - even lashing out at authorities through the online comment section of a local newspaper. Wilson is set to be arraigned on Friday, May 16.

According to authorities, Joel Wilson operated Diversified Group Partnership Management, LLC and American Realty Funds Corporation.  Beginning in 2009, investors were solicited to invest with Wilson's companies, with Wilson allegedly promising annual returns of nearly 10% that were obtained through the purchase, renovation, and resale of real estate in Bay City, Michigan. Investors were told that they would be repaid with the payments made by the purchasers of the renovated houses.  In all, approximately 120 investors entrusted Wilson and Diversified Group with nearly $7 million.  

However, authorities allege that Wilson's real estate businesses simply did not raise enough money to pay the returns promised to investors.  Wilson did not disclose these facts to investors, and instead used new investor funds to pay these purported "profits".  Additionally, over $500,000 was used to support Wilson's lavish lifestyle, including:

• $75,000 to purchase a rival securities broker;
• $35,000 on his wife’s business, 
• $7,914 to buy Detroit Red Wings tickets, 
• $13,160 to purchase tickets and sponsor the Saginaw Sting, a professional indoor football team, and 
• $46,780 on travel.

In January 2013, Wilson was charged with multiple felonies, including racketeering, selling unregistered securities, larceny, fraudulent sale of securities, and conversion.  If convicted of all charges, Wilson could face decades in prison.  From Germany, Wilson allegedly made little effort to keep a low profile, making a variety of statements in the comment section of various articles published by his local newspaper.  While the majority of those comments have since been removed, one comments he allegedly left in response to a January 2013 article summed up his feelings towards the investigation:

I guess now is as good a time as any to let the world know I will not be returning from Germany.  I have developed an intense and irreconciable (sic) hatred for what America has become.  Fascists run rampant and unchecked.  An opiated populous continues to vote away more and more freedom.  Freedom will die in my lifetime.  I'm going to do what I can from here to try and wake  up as many people as I can and try and prepare as best as I can for the long dark night that is coming.  If my words hold weight, begin your own preparations.  A 30 year old man has just been turned into a slave.  Sure there are no chains, but I opened an account in Germany two weeks ago.  The US government knew about it.  They are not made of iron, but these chains are just as real.

A copy of the SEC's complaint is here.

Utah Man Gets 5-Year Sentence For $21 Million Ponzi Scheme

A Utah man will serve time in both federal and state prison for operating a Ponzi scheme that took in more than $21 million from at least 50 victims.  Arvin Lee Black II, known as Lee Black, received a 63-month sentence recommended by prosecutors from U.S. District Judge Robert Shelby after previously pleading guilty to one count each of wire fraud and money laundering.  Black could have faced up to 30 years in prison had he been sentenced to the maximum term for each charge. In addition to the federal prison sentence, Black also previously pleaded guilty to charges brought by Arizona authorities. Black was also ordered to pay approximately $13.8 million in restitution to victims.

Black owned and operated Sole Group LLC ("Sole Group"), which advertised itself as a highly-successful stock day trading company that could pay 5% monthly returns to potential investors.  In addition to the sky-high returns, investors were also assured that their funds had minimal risk exposure.   Based on these promises, Black and Sole Group raised at least $21 million from approximately 50 investors from 2007 to 2012.

However, authorities alleged that the extraordinary returns promised by Sole Group were possible only through the continuous flow of funds from new investors - a classic hallmark of a Ponzi scheme.  Indeed, Black was accused of using more than $7 million in investor monies to fund the promised interest payments.  Black also used a portion of investor funds for his own personal use.  He was charged by both state and federal authorities with various fraud charges, and later pleaded guilty to all charges in February 2014.  Arizona authorities also charged Black's wife, a Sole Group sales rep, and the Sole Group CFO.

Black will first serve a 30-day prison sentence related to the Arizona criminal charges before he is due to report on July 1 to begin serving his sentence.  

Extradition Of TelexFree Fugitive Could Be Difficult

credit: Don BayleyOn Friday, the U.S. Attorney for the District of Massachusetts announced the filing of criminal fraud charges against the co-owners of a telecommunications consortium, joining state and federal regulators in accusing the pair of operating a $1.1 billion Ponzi and pyramid scheme.  One of the accused, James Merrill, was arrested without incident and is currently in custody awaiting an upcoming hearing where a judge will decide whether bail will be granted.  However, the remaining co-owner, Carlos Wanzeler, is a fugitive and is believed by authorities to have fled to Brazil, where he holds dual citizenship.  While this typically would not present a problem to extraditing Wanzeler to face the charges, the particulars of Brazil's extradition policies suggest that Wanzeler's decision to flee may have been a calculated one.

Extradition is the official process utilized when a country seeks the transfer of a suspected or convicted criminal from another country to face charges.  This procedure is typically governed by treaties, but is also governed by other conditions including the dual criminality of the offense or the penalties for the alleged crime.  The process is not automatic, nor is it typically quick.

The United States and Brazil signed a treaty in 1964 that provides for the extradition of anyone accused of a crime with a maximum sentence of one year or more (the equivalent of a felony).  However, Brazil amended its constitution in 1988 to prohibit the extradition of Brazilian citizens to any country, leaving the possibility of extradition available only for those with proven involvement in the narcotics trade.

 Nearly 30 years later, Brazil's official policy remains to prohibit the extradition of its citizens.  This may present a problem to U.S. authorities seeking the extradition of Wanzeler, who is believed to hold dual citizenship with both the U.S. and Brazil.  Brazil has seen its policy challenged by U.S. authorities in recent high-profile cases, but with no success.  For example, in August 2010, a south Florida police officer accused of drug trafficking somehow removed his court-ordered electronic monitoring bracelet and hopped on a flight to his native Brazil.  Despite efforts by Florida authorities, Britto remains a fugitive in Brazil and unlikely to face the charges unless on his own free will.  

Authorities have not commented on any anticipated problems with Wanzeler, only labeling him a fugitive due to beliefs that he is already in Brazil.  While the truth of this assumption should be easily verifiable using flight manifests, Wanzeler's lawyer has not offered any comment.  However, even if Wanzeler is able to at least indefinitely escape U.S. prosecution, the possibility still remains that he could be charged by Brazilian authorities, who have been investigating TelexFree since mid-2013.

Michigan Man Convicted Of $46 Million Ponzi Scheme

After discovering that he was entrusting investor funds to a company operating a Ponzi scheme, a Michigan man did the opposite of what most might do next: he started his own Ponzi scheme by continuing to recruit investors based on promises of astronomical returns.  On Friday, a federal jury convicted David W. McQueen of fifteen charges based on the scheme, which caused losses of over $40 million to nearly 1,000 victims.  McQueen was convicted of six counts of mail fraud, six counts of money laundering, and three counts of tax evasion.  Each count of mail fraud and money laundering carries up to a 20-year prison sentence, meaning McQueen will likely face a substantial time in federal prison.

McQueen initially started out investing in a company called Maximum Return Transactions ("MRT"), a Florida company operated by James Clements and Zeina Smidi that purported to trade in foreign currencies.  MRT promised monthly returns ranging from 5% to 11%, and McQueen was one of these investors.  Beginning in 2006, McQueen began receiving 10% monthly returns from MRT.  After the passage of several months of receiving the promised returns from MRT, McQueen devised a plan to recruit other investors to invest in MRT through him, with those investors receiving 5% monthly payments and McQueen pocketing the remaining 5%.  McQueen's entity, Accelerated Income Group ("AIG"), also recruited insurance agents to sell the investment to their clients.  For a short period of time, this form of arbitrage was successful.

However, in mid-2007, MRT stopped making payouts to investors (and was later the target of a civil enforcement action by the Securities and Exchange Commission which alleged it was a Ponzi scheme).  However, rather than notifying AIG's investors of the failure of MRT, McQueen continued soliciting investors based on the promised returns.  In an attempt to reconstruct the returns from MRT, McQueen placed nearly 1/3 of investor funds in a variety of speculative investments that resulted in severe losses.  Despite these losses, investors continued to receive falsified account statements showing consistent account gains.  

In August 2009, federal authorities executed search warrants and seized approximately $430,000 from McQueen.  In a last-ditch attempt to rescue his scheme, McQueen took approximately $400,000 in hidden funds from a New Zealand bank account to make more speculative investments - which also failed.

Following the jury's verdict, McQueen was remanded into custody until his sentencing.

Authorities Went Undercover In TelexFree Investigation

Earlier today, federal authorities filed criminal charges against the owners of TelexFree, Inc. and related entities, alleging the companies were a massive Ponzi and pyramid scheme that may have taken in more than $1 billion from victims worldwide.  Co-owner James Merrill was taken into custody, while the remaining co-owner, Carlos Wanzeler, is now a fugitive as he is believed to be in Brazil.  The criminal charges were announced approximately four weeks after state and federal regulators filed emergency actions seeking to halt TelexFree.

A criminal complaint filed today contained a 27-page sworn statement by Special Agent John S. Soares of the Department of Homeland Security ("DHS") outlining the allegations against Merrill and Wanzeler.  The complaint contains a significant amount of previously-nonpublic information, including the disclosure that authorities utilized undercover operations as part of their investigation of TelexFree.  According to Soares, an undercover law enforcement officer (the "Undercover Officer") arranged to have himself recruited as an TelexFree promoter by an existing promoter referred to as Person A.  Person A told the Undercover Officer that they could make $100 per week using an "AdCentral Family Package" by simply posting online ads for TelexFree, and that they could earn additional money from recruiting new promoters to TelexFree.

The next day, the Undercover Officer joined TelexFree as a new promoter by purchasing an AdCentral Plan for $1,425 using a check made payable to Person A.  After setting up a "back office" account, Undercover Officer began placing online advertisements as a promoter for TelexFree - a process that took about 25 minutes per day.  For the next seven months, the Undercover Officer posted more than 700 advertisements, which were simply included among hundreds of identical ads posted on certain websites.  According to Person A, Undercover Officer did not need to sell the VOIP product advertised by TelexFree to make money, and Person A bragged that "he had earned $1,600,000 as a TelexFree promoter, without selling a TelexFree product."

In early January 2014, Undercover Officer linked an undercover bank account to his "back office," and was able to successfully obtain payments for posting the advertisements.

The undercover activity continued in March 2014 when Homeland Security agents, some undercover, attended a conference presented by TelexFree at a Boston hotel relating to the new compensation plan.  Both Merrill and Wanzeler made remarks at the presentation which were included in the criminal complaint, including statements alleged to be false and misleading about TelexFree's customer base and revenue stream.  Finally, on April 9, 2014, days before TelexFree's bankruptcy filing in Nevada, another undercover agent purchased a TelexFree VoIP package from a promoter via the TelexFree website.  

A copy of the affidavit is below (special thanks to ASDUpdates):

2-1