FEDS: Istvan Merchenthaler Charged In Alleged ‘Prepaid Phone Cards’ Ponzi Scheme That Stole More Than $2 Million From Investors
EDITOR’S NOTE: If you’re keeping a “Bubba Blue” notebook on how to have your Ponzi scheme, this alleged caper in Greater Philadelphia involving prepaid phone cards and purported ties to major retailers perhaps merits an entry . . .
A 42-year-old Pennsylvania man has been charged in an alleged “prepaid phone cards” Ponzi scheme that operated for more than five years and bilked more than 200 investors out of more than $2 million.
Istvan Merchenthaler of Downingtown was indicted on four counts of wire fraud, one count of aggravated identity theft and two counts of money laundering, the office of U.S. Attorney Zane David Memeger of the Eastern District of Pennsylvania said.
Merchenthaler also is known as Steve Merchenthaler, prosecutor said, alleging that the scheme operated “at least” between May 2006 and September 2011.
The long-running scam involved a business known as PhoneCard USA of which Merchenthaler claimed to be the founder, prosecutors said.
They described the scheme as one that duped investors by trading on fancy terms such as “exponential growth,” defining the market as a wide geographic expanse and fabricating ties to famous businesses to keep the Ponzi wheel greased.
Merchenthaler positioned PhoneCard USA as a “premier distribution source” for phone cards and cell phones, claiming to have contracts with Walmart, 7-Eleven and BJ’s Wholesale Club, prosecutors said.
It is common for scammers to purport to have ties to famous business entities — and that proved to be the case with Merchenthaler and his PhoneCard USA pitch, prosecutors said.
“In reality, Merchenthaler had no such contracts with these major retail chain stores,” prosecutors said.
Investors were drawn into the Ponzi morass in part through claims that the firm’s “lucrative contracts” with vendors covered “territories that span the east coast,” prosecutors said.
“Merchenthaler claimed that these investments would finance the ‘exponential growth’ of PhoneCard USA and would provide investors with ‘generous returns’ on their investments,” prosecutors said.
An investigation demonstrated that “Merchenthaler operated a ‘Ponzi’ scheme, stealing over $2 million from over 200 investors and using much of these funds for his own benefit and to perpetuate his scheme,” prosecutors said.
The FBI and IRS led the probe.