Morning walkers stroll the boardwalk on the shoreline of the upscale Praia do Canto neighborhood, while rowers glide across sun-streaked water. As a boy, the TelexFree Inc. co-owner sold ice cream on these beaches to help support his family.

VITORIA, Brazil — In this bustling port city, with its long sand beaches and rocky hills rising from the sea, Carlos Wanzeler is taking refuge from the US authorities who want to put him in jail.

Today, Wanzeler is a wealthy fugitive, separated by 4,800 miles from his wife and son in Northborough, Mass., but safely beyond the reach of US law. From most any vantage point here, he can take in bands of palm trees, ships lined up on the horizon to take iron ore to China, and a 16th-century convent perched high on a peak.


His longtime business partner, James Merrill, has a different view. He is sitting in a Rhode Island jail cell awaiting trial.

Both men are accused of running a pyramid scheme that topped $1 billion, one of the largest in history. Federal prosecutors say Merrill and Wanzeler lured at least 1 million people around the world to invest in TelexFree, which sold a long-distance phone service meant to appeal to Brazilians and others with far-away relatives. In the United States alone, people allegedly poured $300 million into the company.

On April 15, TelexFree unraveled with a flurry of events. US law enforcement officials and securities regulators closed in just after the company moved to protect its remaining assets in bankruptcy court.

Federal agents raided TelexFree’s Marlborough headquarters and stopped an executive from walking out the door with $38 million in checks. The raid came 10 months after a Brazilian judge in the remote western state of Acre had closed TelexFree’s parent company, Ympactus, calling it a pyramid scheme.


Wanzeler, 45, was not at the office the day of the raid. He was headed for Canada with his daughter in a BMW, crossing the border at about 11 p.m., enroute to Toronto for a flight to Brazil, according to court records. When the authorities showed up at his house two days later, his wife, Katia, said he was staying at a hotel.

Today, Carlos Wanzeler is a wealthy fugitive, separated by 4,800 miles from his wife and son in Northborough, Mass., but safely beyond the reach of US law. telex media

Wanzeler’s lawyers and relatives in Brazil insist he did nothing wrong. They say his late-night departure was part of a routine trip to his native country. But with a possible 20-year prison sentence looming in the United States, there is little chance he will return to Northborough, Brazilian law enforcement officials, lawyers, and family members said.

“He is not afraid of facing justice,’’ Wanzeler’s brother-in-law, Marcio Barbossa, said during a recent interview at the pizzeria in Vitoria where he is a chef. “The real story is a story of struggle, a story of hard work.’’

Barbossa and others close to Wanzeler portray him as a man who overcame steep odds to find success and wealth, and now stands on the verge of losing everything.

Wanzeler was born on Christmas Eve 1968 and grew up in a working-class section of Vitoria, the eldest of five children. As a teenager, he worked at a furniture store, and then as a shoe seller, before dropping out of high school at 19 and traveling to the United States to find something better. In 1988, he settled in Worcester, where a friend had already moved. But just three months after his arrival, tragedy struck back home.


Wanzeler’s father was slain during a home invasion of his family’s house in Vitoria. Carlos could not afford to go back for the funeral, so he threw himself into his work, washing dishes at the Worcester Country Club by day and scrubbing hospital floors at night. After two years of 17-hour days, he saved enough to bring his mother, Marilza, his three younger sisters, and only brother to live with him in Worcester.

Met at cleaning company

Wanzeler could not support them on his own, so he started looking for cleaning jobs for the family. A phone book search led him to Merrill, now 53, who ran a commercial cleaning company from his Ashland home. The Wanzelers all went to work for him, and eventually, Carlos became Merrill’s partner in the business. He also started his own firm, K&C Cleaning.

But Wanzeler aspired to something more than housecleaning, eventually launching a series of telecom ventures with Merrill. At rallies and in online marketing campaigns, Wanzeler delivered an enticing message to potential investors — through TelexFree, they could gain a better life. Just like he did.

“His story is very beautiful,’’ Barbossa said as he rearranged flowers in a vase on a table in his restaurant. “They helped a lot of people here and in the United States.’’

TelexFree’s upfront premise was simple. It offered customers a way to avoid Brazil’s costly $5-a-minute long-distance phone charges. For $49.90 a month, they could get 3,000 minutes of talk time, a bargain.


But US prosecutors allege TelexFree became something else entirely — a global money machine that plundered people’s savings. They say the real business involved recruiting people to deposit about $1,400 into individual accounts with the company.

Once an account was established, each participant was asked to sell 50 phone service plans to others. They were also instructed to go to the company’s website each day and click on what they believed were five advertisements that promoted TelexFree’s service.

In exchange for their efforts, participants received $100 a week, and were promised annual returns on their investments of as much as 250 percent. They also were paid commissions for persuading people to open their own accounts.

To keep making payouts, TelexFree needed to persuade an ever-increasing number of people to bring in more members, prosecutors say. Eventually, the model became unsustainable.

Lawyers deny charges

Wanzeler’s lawyers on both continents deny civil fraud charges brought by the Securities and Exchange Commission and a criminal charge of conspiracy to commit wire fraud brought by the US attorney’s office in Boston.

“Carlos Wanzeler is a hard-working family man and not the fraudster that has been portrayed in recent filings and arguments by the government,’’ said Paul Kelly, the Wanzeler family’s Boston lawyer. “He remains in his homeland of Brazil at the present time, but is evaluating how best to respond to the false and exaggerated charges that have been leveled against him, Mr. Merrill, and their company, TelexFree.”


TelexFree did, in fact, pay off for many early participants.

One group of former TelexFree promoters in Cariacica, a town northwest of Vitoria, says some of its members earned “seven figures” in Brazilian reals, or about $500,000. Rodrigo, a member of Group “ADM7,” a team of seven TelexFree promoters, said he put in long hours running meetings to recruit people to invest and participate in the company.

Through a translator, Rodrigo described his hectic schedule before the company’s shutdown. “I’ve got a family, a kid on the way. I leave the house on Monday and am going all around the country to meetings. I’m gone 20 days sometimes,’’ he said.

Rodrigo, who sports a large, flashy watch common among successful TelexFree promoters, or “leaders,” did not want his last name published because his entire group had not agreed to the interview. “A lot of people think it’s easy money, but it wasn’t,” he said.

Rodrigo and his colleagues embody the evangelical-like grip the company had on people who were making money on TelexFree. Even now, they insist the setup wasn’t too good to be true — it was the real thing.

“It’s not lost money,’’ Rodrigo said. “It’s blocked money,’’ meaning the company’s shutdown is preventing participants from being paid.

A group of TelexFree promoters said some of them made as much as $500,000 by selling TelexFree phone service and recruiting people to sell as well. Gabriel Lordello for The Boston Globe

TelexFree cultivated the appearance of an established company. It had offices at the top of a Vitoria office tower and, for a time, a marketing deal with Rio soccer club. It also produced a constant flow of sales videos that were posted on YouTube by Wanzeler, Merrill and their Brazilian business partner, Carlos Costa.

“This is Bernie Madoff goes to Walmart,’’ said Ivar Hartmann, a professor and research project coordinator at the FGV Law School in Rio de Janeiro. To the average person, he said, “It has a very strong appearance of something that’s legitimate.’’

In a country where many believe the government is riddled with corruption, it’s common for TelexFree participants to say it is the authorities in power, not the company, who are cheating them out of their money.

“What kind of country is this that doesn’t let a company pay people?” asked Rhuan Christo, a member of the ADM7 group.

After TelexFree was shut down last June in Brazil, the Acre judge received death threats. TelexFree promoters picketed outside the local newspaper, A Gazeta, claiming it was siding with the government by reporting on the company’s problems.

The backlash reflects a well of frustration that runs deep in Brazil. The world’s seventh-largest economy is a place of sharp contrasts, with an $11 billion World Cup underway and roads being feverishly built as Rio prepares to host the 2016 Summer Olympics.

Beyond the construction cranes piercing the skyline are infamously poor communities, or favelas, often tucked into hillsides and controlled by drug traffickers.

Wanzeler had seen this world, and he sought to escape it. But if the allegations against him are true, somewhere on his march to success Wanzeler began preying on the people he set out to help.

Replacing Common Cents

He and Merrill had been toiling away at various small ventures, selling phone-related services since 2002, through their company Common Cents Communications Inc. In 2005, Wanzeler met Costa, who would become the link to TelexFree.

At the time, Wanzeler was selling adapters to link traditional telephone lines with a digital network. He ran the business from the United States but advertised and sold the devices in Brazil. Costa was his top sales agent, according to court filings.

In early 2012, Costa suggested they start advertising online. He and Wanzeler formed Ympactus and established the TelexFree brand in Brazil. They then replaced the Common Cents name with TelexFree in the United States.

So when TelexFree was shut down in Brazil, the money naturally started flowing to the US operation. In a YouTube video, Wanzeler assured investors and customers all was well.

“We’re still here,” he said. “We’re going to stay here for a long time.’’

And up until then, all had been well — for Wanzeler, Merrill, and their top associates. Between April 2012 and April of this year, they collectively brought in $340 million from investors in Massachusetts and around the world, according to the Securities and Exchange Commission.

One of them was Elizabette Coswosk, a 53-year-old house cleaner who earns about $83 a week, low wages in an expensive country. She lives in a poor section of the city of Serra, with craggy hills steeper than San Francisco’s, and houses tucked one against the next.

Elizabette Coswosk, 53, a housekeeper in the city of Serra, near Vitoria, was among hundreds of thousands of alleged TelexFree victims in Brazil. She earns about $83 a week at her job, but she paid about $1,500 in cash that she will probably never get back. Gabriel Lordello for The Boston Globe

Investor was skeptical

On a balmy late May evening, Coswosk talked about her TelexFree experience in her living room adjacent to a barred-in porch. She said she had known a few people who had profited from TelexFree but was skeptical when friends tried to get her to invest last year. In February, her hair stylist tried to persuade her TelexFree was still a good deal, even though the company had already been shuttered in Brazil.

Again, Coswosk resisted, but she was curious. She went to see a local promoter for more details, and wound up giving him the equivalent of $1,500 in cash. He told her the company was still flourishing in the United States. She would get her money back in four monthly installments, he said, and could earn about $400 per month for the next year.

Coswosk was told to approve several Internet ads per week to get her payout. But because she did not know how to use a computer, she agreed to pay the promoter about $50 weekly to post the ads.

Coswosk considered her TelexFree venture like a lottery bet. Some people had made out well, she thought, so why not her? In her neighborhood, it was said that the owner of Bar do Pele made so much money in TelexFree that he sold the drinking establishment, bought a fancy car, and moved to a better area.

But within a month of Coswosk’s investment, TelexFree was imploding. In April, the company sought bankruptcy protection, just as federal and state securities regulators were preparing to take legal action.

Merrill and Katia Wanzeler had allegedly gone to a bank in Connecticut to withdraw $27 million in cashiers’ checks. One was made out to Katia for $2 million, court records show. Days later, agents from the FBI and Homeland Security raided the TelexFree office in Marlborough.

In Brazil, and around the world, the cascade of events playing out so far away was hard to follow. TelexFree promoters took to Facebook and other websites to downplay the bankruptcy filing and federal charges.

“I knew going in there was a risk,’’ said Coswosk, who is now resigned to the likelihood her money is gone. She has no paperwork to prove she invested anything. Her brother lost even more, she said.

Meanwhile, in the 18 months leading up to the company’s collapse, Wanzeler and Merrill were reaping huge rewards.

Merrill remodeled his home, prompting neighbors to speculate that his business was finally taking off. Wanzeler’s spending was far more conspicuous. He bought a fleet of luxury cars, including two Ferraris for $193,000, a Porsche, and three BMWs, according to court filings by the SEC. He bought a 40-foot yacht for about $274,000 in cash, along with two other boats.

Wanzeler also invested heavily in real estate, purchasing 34 properties worth $6.3 million through a variety of business entities between July 2012 and February of this year, according to the SEC’s court filings.

One of those properties is the $950,000 Northborough home where his wife and 16-year-old son are still believed to be staying. It is tucked away on a wooded lot, far from the main road. At the head of the long driveway, signs read “No Trespassing” and “Beware of Dog.”

All told, Wanzeler and his family received nearly $13.7 million from TelexFree through February, the SEC said. Merrill took in $3.2 million through December.

Their assets have been frozen by a federal judge, but Wanzeler may have access to millions of dollars transferred to TelexFree entities in other countries, according to court records.

Kelly, the Wanzelers’ lawyer, said none of the homes or assets listed by the SEC were bought with TelexFree money. The funds “came from the operation of legitimate businesses in Brazil, and with assets on which Mr. Wanzeler declared and paid taxes in that country,’’ he said.

Wanzeler’s relatives in Vitoria call him generous and say he is a hard worker.

“In my heart, I know that he didn’t do anything wrong,” his sister Marisa said.

She and other family members profess not to have seen or spoken with Wanzeler much since he arrived in Vitoria. He also has been kept out of the public eye by his lawyers, who have advised him not even to speak with his wife.

His lawyer, Rafael Freitas de Lima, said attorneys in the United States and Brazil did not want Wanzeler to speak with reporters. So far, no charges have been filed against him in Brazil, but a criminal inquiry is underway, led by the federal police.

Rafael Freitas de Lima, Carlos Wanzeler’s lawyer, said no charges have been filed against Wanzeler in Brazil. Gabriel Lordello for The Boston Globe/Globe Freelance

Brazil’s constitution prevents Wanzeler from being extradited to the United States, where he has dual citizenship. His lawyers say there is no reason for him to return voluntarily, given his partner’s incarceration and the fact he could face a long prison term himself.

“The lawyers here think it’s arbitrary and unnecessary,’’ Lima said. “He’s not coming back.”

A famous criminal lawyer in Brazil whom Wanzeler also has hired, widely known as Kakay, defended his client’s decision to stay in Vitoria. “Under Brazilian law, we don’t have to prove that we are innocent,’’ said the lawyer, Antonio Carlos de Almeida Castro.

The most severe sentence Wanzeler could receive in Brazil if he were convicted of fraud is two years, officials and legal specialists said. But because the justice system moves at a glacial pace in Brazil, a conviction might not result in any jail time, they said.

Court-ordered report due

Brazilian prosecutors are waiting for a report ordered by the judge in the civil case here that will determine whether TelexFree is a pyramid scheme. The consulting firm Ernst & Young is conducting the review, which is scheduled this month.

So far, TelexFree has been fined $2.5 million by Brazilian authorities, and the company is appealing. The criminal investigation continues, although Wanzeler’s lawyers say he has not been interviewed by the police or prosecutors. His adult daughter, Lyvia, who left the United States with him in April, is part of the inquiry, according to official records.

Wanzeler’s wife, Katia, was held for nine days last month after federal agents stopped her from boarding a flight to Brazil at JFK airport in New York. She had to surrender her passport to get out of jail.

Marcio Barbossa’s eyes clouded with tears when he spoke of his sister Katia, and the effects of the arrests on his family. “I’ve always considered my sister like a superhero, and Carlos, too,’’ he said in Portuguese.

He said he talks to Katia nearly every day, but their conversations rarely involve her time in jail — or when she might again see her husband of almost 22 years.

“Katia is a really honest person. She loves Carlos so much,’’ Barbossa said. “It’s all so surreal.’’

If she were to be caught up in the case, Marcio said, he would expect Carlos to rethink his plan. “He will go back,’’ Barbossa said.

Barbossa said he and other family members are distressed that the Wanzeler name is now associated with wrongdoing. The plight of anxious investors from Boston to Uganda does not seem to weigh as heavily on him or other people close to Wanzeler. Barbossa said investors should have known they were taking a risk.

TelexFree “was not structured to be a pyramid,” he said. “It was made to last and to grow.’’

On its website, TelexFree says it has “suspended all business activity,” but maintains that its sales model is still viable. “We continue to be hopeful that we will obtain approval from the bankruptcy court to restart day-to-day operations and restructure,” reads a message to customers and investors.

“Until then,” it concludes, “you have our sincerest regard.”

Carlos Wanzeler, out of the reach of US law in Brazil, could view a 16th-century convent on a hill overlooking Vitoria. Gabriel Lordello for The Boston Globe/Globe Freelance

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Beth Healy can be reached at beth.healy@globe.com. Follow her on Twitter @HealyBeth. Megan Woolhouse of the Globe staff contributed to this report.