Authorities Confiscate 60 Pipe Bombs From Suspected Ponzi Schemer

Authorities conducting a search of a storage locker belonging to a Pennsylvania man suspected of masterminding a $2 million investment fraud made an unlikely find when they discovered over 60 foot-long pipe bombs.  The turn of events is the latest in twists involving Istvan Merchenthaler, a native of Hungary currently residing in Chester County, Pennsylvania, who currently faces charges that his prepaid phone-card venture was an elaborate Ponzi scheme.  Merchenthaler was charged last year with four counts of wire fraud, one count of aggravated identity theft and two counts of money laundering.  A superseding indictment unsealed last week contained several additional charges, including an additional count of aggravated identity theft, two additional counts of money laundering, two counts of filing false tax returns, and two counts of interstate transportation of stolen property.

Merchenthaler operated PhoneCard USA from at least May 2006 through February 2013, telling potential investors that he was a "premier distribution source" for prepaid phone cards and cell phones with "lucrative" contracts with national retailers like WalMart and 7-Eleven.  Investors were offered "generous" returns in exchange for investing, and Merchenthaler raised approximately $2 million from over 200 investors.  

However, in reality, Merchenthaler had none of the "lucrative" contracts he boasted about, nor did he have relationships with high-ranking executives at WalMart or 7-Eleven.  Rather, he ran a classic Ponzi scheme, using investor funds for a variety of unauthorized uses, including paying 'returns' to investors and living a lavish lifestyle that included the purchase of jewelry, firearms, and luxury vehicles.  

Merchenthaler's criminal indictment was not his first run-in with the law.  Indeed, in 2004, he was arrested in Sao Paolo, Brazil on charges of drug trafficking after he was caught with 20 kilograms of cocaine.  He was released in 2005 (and his lawyer was later disbarred after Merchenthaler accused him of defrauding him).  Even after his indictment, Merchenthaler ran into more problems after he stole two cars, including a 2012 Jeep Grand Cherokee.  He was arrested again, and faced two more charges of grand theft.  

In addition to the pipe bombs discovered in the Pennsylvania storage locker, one report also links Merchenthaler to the discovery of explosive devices in a Monkey Junction, North Carolina rental.  As it isillegal to possess and manufacture explosive devices such as pipe bombs, Merchenthaler will likely face additional charges.  It is unknown as to why Merchenthaler was in possession of the pipe bombs or their intended use.