With her husband thought to be hiding in Brazil after being indicted on charges he masterminded one of the largest Ponzi/pyramid schemes in history, a Massachusetts woman was arrested by federal authorities at a New York airport just before she was supposed to board a plane to Brazil. Federal agents arrested Katia Wanzeler moments before her plane to Brazil was due tor take off, discovering that she was carrying 70 pounds of luggage and $3,000 in cash in addition to holding a one-way ticket. Her husband, Carlos Wanzeler, is currently thought to be a fugitive after federal authorities issued a warrant for his arrest earlier this month. A federal judge ordered that Katia Wanzeler be taken into custody to ensure that she appeared to testify before a grand jury this week.
Carlos Wanzeler is the co-founder of TelexFree, a once wildly-popular venture that promised participants astronomical returns by simply recruiting new investors and placing advertisements for the company's voice-over-internet-protocol ("VoIP") business. At its peak, It is estimated that the company had more than 700,000 "promoters." However, both state and federal regulators accused the company of fraud in mid-April following the company's decision to file for bankruptcy in Nevada. A Nevada bankruptcy judge dealt a blow to the company's self-professed desire to shed its obligations to "promoters" and emerge from bankruptcy as a legitimate and profitable venture when he granted the Securities and Exchange Commission's request to transfer the bankruptcy to Massachusetts where the Commission's civil enforcement action is pending.
Shortly following the transfer of the bankruptcy case, federal authorities announced the filing of criminal charges against TelexFree founders James Merrill and Carlos Wanzeler, accusing the men of conspiring to commit wire fraud. While Merrill was arrested that same day, Wanzeler was thought to have fled to Brazil, where his dual citizenship may present extradition problems for U.S. authorities. Indeed, Wanzeler had not been seen or heard from since mid-April.
According to the Boston Globe, it appears that Wanzeler's plan to skip town went into action in mid-April as authorities closed in. On the same day that federal agents executed a search warrant on TelexFree's Marlborough headquarters, Wanzeler allegedly drove his daughter north through the Canadian border, where they caught a plane two days later to Sao Paulo, Brazil. Authorities later subpoenaed Katia Wanzeler as a material witness for testimony before a grand jury that is thought to be considering additional charges against her husband and Merrill.
After authorities unveiled criminal charges against Merrill and Wanzeler on May 9, prosecutors alleged that an unidentified person in Brazil purchased Katia Wanzeler's one-way ticket to Sao Paulo. Authorities then obtained a material witness warrant and arrested Wanzeler as she prepared to board the plane. She was discovered to be carrying $3,000 in cash and over 70 pounds of luggage. At a hearing before U.S. Magistrate Joan Azrack, her lawyer contended that Katia Wanzeler had planned to return (despite having a one-way ticket) and that the excessive luggage was simply clothes purchased for Wanzeler's relatives. Magistrate Azrack rejected those arguments, remarking,
"Seventy pounds of luggage? Four suit cases? There is no way I'm releasing her."
Ponzitracker recently outlined the difficulties authorities would face in extraditing Carlos Wanzeler, as Brazil's constitution was amended in 1988 to prevent the extradition of Brazilian citizens to any country, with limited exceptions.
For more news and analysis of Ponzi schemes, visit Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.
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