TelexFree derived only a fraction of its total revenue in a two-year period from sales of VOIP service – approximately 2%. Overall, the nearly 2 million who participated in TelexFree made 96% of their compensation, not from selling the company’s VOIP service, but from ad-posting and recruiting others to join. On paper the company sold about 12.4 million VOIP plans, but in reality it had a tiny number of legitimate customers, an even smaller number of which had actually paid money to TelexFree for the service. In this way, TelexFree created the illusion that it had hundreds of thousands of legitimate VOIP customers. But in reality, participants met this requirement simply by buying the product themselves and, in 97% of instances, never using it. To receive bonuses for recruiting others, in theory each participant needed to have one VOIP customer. Participants were also given substantial financial incentives to recruit others to join the scheme. Participants spent minutes a day cutting and pasting ads into various classified ad sites provided by TelexFree, which were already saturated with thousands of ads posted by earlier participants. Among other things, emails showed Merrill’s awareness that the ad-posting was intended only to ensure that people visited TelexFree’s web site as opposed to generating actual retail sale of the VOIP product. The company couched those payments in terms of “buying back” unused VOIP packages the participants were unable to sell, but the reality was that participants were guaranteed an annual return of over 200% on their money without having to sell anything. As the website advertised at various times, participants paid $1,425 or $339 to sign up with TelexFree, after which they would be paid $100 per week or $20 per week to post classified ads every day on the internet. TelexFree’s website prominently featured Merrill as the leader of the company and as an experienced businessman in the telecom field. TelexFree, however, was a pyramid scheme all of the money TelexFree paid out came, not from sales of its product, but from new participants paying TelexFree to sign up as “promoters” for the company. “HSI special agents will continue to aggressively investigate those who seek to profit by taking advantage of others.”īetween February 2012 and April 2014, Merrill was the President of TelexFree, Inc., which sold a “voice-over-internet-protocol” (VOIP) telephone service, similar to Skype, for which customers could sign up on a website maintained by TelexFree. “While the harm and damage James Merrill caused by stealing more than $3 billion from innocent investors can never be repaired, his victims in more than 240 countries around the world can take some small measure of satisfaction that he is now looking at six years in federal prison and a substantial forfeiture as repayment for his crimes.” said Matthew Etre, Special Agent in Charge of Homeland Security Investigations in Boston. Merrill’s greed damaged the livelihoods of thousands of people who were simply struggling to make ends meet.” Merrill and Telexfree, today’s sentence provides a measure of justice. “For the hundreds of thousands of investors, here and around the world, who were taken in by the lies promoted by Mr. Merrill profited for years at the expense of the hard-working individuals who invested in the fraudulent company,” said Acting U.S. “Despite knowing that Telexfree was a pyramid scheme, Mr. He also agreed to forfeit approximately $140 million and other assets. In October 2016, Merrill pleaded guilty to one count of wire fraud conspiracy and eight counts of wire fraud. Hillman to six years in prison and three years of supervised release.
James Merrill, 55, of Ashland, Massachusetts, was sentenced by U.S. Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI), the FBI, the Brazilian Federal Police, the Securities & Exchange Commission and the Commonwealth of Massachusetts. This sentence resulted from an investigation by U.S. BOSTON - The former head of a global pyramid scheme disguised as an Internet telecom company, was sentenced in federal court Wednesday to six years in prison and must also forfeit $140 million of in criminal gains.