September 24, 2014 – Fidelity Bank in Fitchburg, Massachusetts, has agreed to pay $3.5 million dollars to the Massachusetts Secretary of State’s Office to settle claims that it allegedly allowed TelexFree Inc. to open bank accounts, without properly screening the company. TelexFree was an alleged investment fraud, which purported to sell discount, long-distance phone plans. The company was operated by Massachusetts residents James Merrill and Carlos Wanzeler and primarily solicited Brazilian and Dominican immigrants by selling “accounts” for about $1,400 and paying investors $100 per week to assist with marketing the company. TelexFree raised over $900 million from thousands of investors. The company was started in Brazil and had its U.S. headquarters in Marlborough.
The Secretary of State’s investigation of Fidelity Bank began in April 2014, after federal and state authorities had brought fraud charges against TelexFree. The investigation revealed that the President of Fidelity Bank was John Merrill, who is the brother of James Merrill, TelexFree’s CEO. Investigators also discovered that the bank had allowed TelexFree to open three accounts, in August and September, 2013, after the company had been shut down in Brazil in June, 2013. . TelexFree then filtered millions of dollars through the accounts, without the bank performing any compliance review until November, 2013.
The bank eventually forced the company to close its accounts, but permitted James Merrill and Wenzeler to make personal transfers through December 2013. As a result of the investigation, the Secretary of State brought charges against the bank, alleging that it failed to properly research the company prior to opening the accounts, and failed to adequately supervise the account activity.
James Merrill and Carlos Wanzeler are also facing criminal charges. Merrill is currently home on bail, and Wanzeler has fled to Brazil. It is unclear if he will return to the United States.
Source: BostonGlobe.com
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