On September 12, 2017, the Securities and Exchange Commission announced it had obtained final judgments against the co-owner and president and the CFO of a pyramid scheme, which primarily targeted Latino communities. Under the terms of the final judgments, James M. Merrill and Joseph H. Craft will be permanently enjoyed from violating similar laws in the future.
Merrill is subject to a permanent officer and director bar, while Craft is subject to a five-year officer and director bar. The final judgment has deemed Merrill liable for approximately $3.6 million in disgorgement and prejudgment interest. Craft will be required to pay $298,708 in disgorgement and prejudgment interest. He will also be required to pay a $50,000 penalty.
During the settling of the charges, Craft admitted that he prepared financial statements, which were ultimately provided to telecommunications regulators and a financial regulator. Those statements materially overstated the pyramid scheme’s income. Merrill and the other co-owner of TelexFree, Carlos N. Wanzeler, were previously charged criminally.
Merrill pleaded guilty and was sentenced to six years in prison. Wanzeler has become a fugitive from justice. The Securities and Exchange Commission has confirmed that the litigation continues against TelexFree, Wanzeler and other promoters.