STUNNING: Nearly 1 BILLION Zeek Transactions Over 18 Months, Receiver Says; ‘Sheer Quantity Of Data’ And ‘Inadequate And Incomplete’ Records Necessitate Delay In Filing Of Liquidation Plan

EDITOR’S NOTE: It’s this simple: Ponzi = Pain — and even “ordinary” Ponzi schemes often result in extraordinary paper chases. The Zeek case may be setting a new standard for the extraordinary.  

The receiver in the Zeek Rewards Ponzi scheme case informed a federal judge today that “the Receivership Team is still in the process of reconstructing over 18 months of ZeekRewards financial information involving more than 931 million transactions.”

It was not immediately clear if the jaw-dropping number set a record for a Ponzi case. About 2.2 million “unique users” of Zeek exist, and about 1 million affiliates “paid money into” Zeek, receiver Kenneth D. Bell said.

Without objection from the SEC, Bell has asked Senior U.S. District Judge Graham C. Mullen for a delay until Dec. 17 in the filing of a liquidation plan.  On Aug. 17, the SEC accused Zeek — through its parent company Rex Venture Group LLC — of operating a $600 million Ponzi- and pyramid scheme. In terms of the number of participants, Zeek may be the largest Ponzi scheme in U.S. history.

“In short, the magnitude of the transactions, the inadequate and incomplete nature of the Receivership Defendant’s financial records, and the sheer quantity of data and Affiliates all necessitate additional time for the Receiver to analyze, account, and liquidate the assets of the Receivership Defendant,” Bell wrote.

Bell also filed reports today that showed the McGuireWoods law firm and FTI Consulting Inc., a forensic accounting firm, are providing significant billing discounts to the receivership estate. The law firm is providing a 15 percent discount, Bell said.

Meanwhile, the accounting firm is providing a discount of more than 22 percent, Bell said.

“As of September 30, 2012, the Receiver recovered $293.7 million for the Receivership Estate,” Bell said. “Combined, MW and FTI request $853,491.29 in fees and services. The fees requested are less than 0.3% of the recovery for the Estate.”

Here is the breakdown, according to the receiver’s first application for fees and expenses:

  • Receiver and law firm (billing for services of $718,713.86 and expenses of $49,388.37).
  • FTI (billing for services of $82,430 and expenses of $2,959.06).

From footnotes in the billing report (italics added):

1 At the time of the Receiver’s appointment, the Receiver and MW agreed to a 15% reduction in the hourly rates for the Receiver and all of MW’s attorneys and paraprofessionals. In accordance with the SEC Guidelines, long-distance travel time was billed at a rate that was reduced 50% from the already-discounted rates, resulting in an effective discount of 64% or greater for travel time, and a total discount of $21,258.05 in fees related to travel time alone. The Receiver and MW also determined to write off the time for 11 timekeepers in a further effort to increase savings to the estate.

2 In keeping with the rate discounts applied by MW, FTI reduced the hourly rates for its Senior Managing Directors to $495, Managing Directors to $410, Senior Directors to $395, Directors to $350, Senior Consultants to the range of $270-$320, and Consultants to the range of $210-$225. The average reduction in bill rates is 22.5% per hour.

3 FTI has agreed to not charge for travel time. Additionally, FTI has waived its customary administrative expense that is usually 6% of fees charged.

The judge must approve the billings.

NOTE: Visit the Zeek files site maintained by the ASDUpdates Blog.

About the Author

2 Responses to “STUNNING: Nearly 1 BILLION Zeek Transactions Over 18 Months, Receiver Says; ‘Sheer Quantity Of Data’ And ‘Inadequate And Incomplete’ Records Necessitate Delay In Filing Of Liquidation Plan”

  1. Oddly enough, ASD didn’t keep good records either. What Ponzi does?

  2. Quick note: In a Nov. 16 order, the judge granted the receiver’s extension request until Dec. 17 for “good cause.”