Business

Prosecutors recommend 10-year sentence for former TelexFree CEO

James Merrill, of Ashland, pleaded guilty to multiple fraud counts.

telex media/FILE

James Merrill, of Ashland, pleaded guilty to multiple fraud counts.

Federal prosecutors are recommending 10 years of prison time for James Merrill, the former chief executive of TelexFree Inc., for his role in one of the largest pyramid schemes of all time.

Merrill, of Ashland, pleaded guilty in October to multiple fraud counts for his role in the global scheme, in which nearly 1.9 million people from more than 100 countries lost $3.5 billion.

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He will be sentenced in federal court in Worcester next week, while his business partner, Carlos Wanzeler, remains a fugitive in his native Brazil.

In sentencing memorandums filed Thursday, prosecutors alleged that from February 2012 to April 2014, Merrill ran TelexFree’s day-to-day operations, controlled its bank accounts, and helped design its compensation system.

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The company, formerly based in Marlborough and Brazil, purportedly sold Internet phone-service plans, but in reality brought in vast sums from people who invested in increments of about $1,400. In a pyramid scheme, money from new investors is used to pay off earlier participants.

Massachusetts was the hardest hit in this country, with 41,050 investors, nearly one-quarter of the 169,554 US participants, according to the court filings.

TelexFree preyed in particular on Brazilian and Dominican immigrant communities in Framingham, Lawrence, and Everett. The average loss per person in Massachusetts was $2,940, prosecutors said.

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“These are real dollars, lost by real people, who trusted the TelexFree system and invested, in many cases, their life savings,’’ prosecutors said. “It is not an exaggeration to say that Merrill and co-defendant Carlos Wanzeler destroyed the lives of thousands of people the world over.”

Merrill paid himself $4.5 million, even, as prosecutors alleged, when he knew the risks and the flaws of the TelexFree system. But prosecutors spared him a stiffer sentence in the plea deal, they said, because Wanzeler played a “greater role” in the scheme.

Over time, the records said, “it appears that Wanzeler embezzled and laundered millions of dollars from TelexFree’s coffers.” Wanzeler fled the country, via Canada, in April 2014, as TelexFree filed for bankruptcy protection and federal agents raided its office.

In January, a man with ties to Wanzeler was arrested after leading authorities to a Westborough apartment where $17.5 million was hidden in a bed’s box spring .

Merrill apologized in court last fall for not alerting investors sooner that TelexFree was near collapse. His lawyer was unavailable for comment late Thursday.

Beth Healy can be reached at beth.healy@globe.com. Follow her on Twitter @HealyBeth.
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