ZEEK RECEIVER: ‘Multilayered Investigation Into [Rex Venture Group] And Its Insiders, Advisors, And Financial Institutions’ Continues

ponzinews1The court-appointed receiver in the Zeek Rewards Ponzi- and pyramid case says his “multitilayered investigation into [Zeek operator Rex Venture Group] and its insiders, advisors, and financial institutions” continues.

Receiver Kenneth D. Bell has been at the helm since the epic collapse of the Zeek MLM HYIP scheme in August 2012. The SEC initially filed civil charges to halt the $850 million fraud. A parallel criminal probe by federal prosecutors in North Carolina to date has resulted in the arrest and prosecution of two Zeek insiders, both of whom pleaded guilty.

Bell did not say in his May 7 report to Senior U.S. District Judge Graham C. Mullen precisely who the receivership was investigating. Zeek is known to have had members and vendors in common with the $119 million AdSurfDaily Ponzi scheme, which collapsed in 2008.

Bell so far has sued several members of ASD who became alleged winners in Zeek. (See March 3, 2014, PP Blog story and Comments thread.) Zeek also had members in common with TelexFree, an alleged Ponzi- and pyramid scheme that gathered more than $1.2 billion. Class-action attorneys have alleged RICO violations at TelexFree involving vendors and MLM attorney Gerald Nehra, who also performed work for Zeek, according to Zeek promos.

“The Receiver has begun to investigate possible claims against financial institutions that facilitated the [Zeek] scheme,” Bell advised Mullen. “If the Receiver becomes convinced that there are colorable causes of action against banks and other financial institutions, he will solicit other law firms to undertake this work.”

And, Bell noted, “The Receiver continues to evaluate potential claims against RVG’s third-party advisors, consultants, and others who received fraudulent transfers but who were not Affiliate Investors.

“These claims,” he continued, “are varied in light of the diverse range of involvement these parties had with RVG. The Receiver intends to file multiple third-party actions, likely grouping defendants in these actions based on the similarity of claims asserted against them.”

Moreover, Bell said, he “has been investigating allegations that certain insiders and net winners may be sheltering, hiding, or dissipating assets fraudulently transferred or held. The Receiver intends to fully pursue legal recourse in these situations so that funds are preserved and may be returned to victims of the ZeekRewards scheme.”

Bids to flummox the receivership were not limited to insiders and winners, Bell said.

“The Receiver Team also identified one creditor that appears to have taken numerous actions that were in direct violation of the Freeze Order and greatly damaged the estate,” Bell said. “The Receiver is in the process of determining what actions should be taken in regard to these violations.”

Bell did not identify the creditor.

An examination of of transactions that occurred at offshore processors such as Payza and SolidTrustPay continues, Bell said.

“The Receiver Team is continuing its investigation of and pursuit of any outstanding funds, including any potential transfers or withdrawals, from Payza and Solid Trust Pay,” Bell said.

Foreign transactions involving Payment World and CyberProfit also are under scrutiny, Bell said.

In addition, he asserted that his team “is investigating potential improper transfers totaling approximately $5.8 million from a Trust Account set up by Preferred Merchants’ CEO Jaymes Meyer for which Rex Venture Group was the beneficiary,” Bell said. “The Receiver Team has issued a subpoena to Preferred Merchants to obtain additional information and is engaged in conversations with Preferred Merchants’ counsel regarding these transfers and the production of this information.”

Transactions at Plastic Cash International also are under scrutiny, Bell said.

‘The Receiver Team is investigating potential improper transfers or withdrawals from Plastic Cash International,” Bell said. “This inquiry includes an analysis of the flow of funds through Network Merchants and SecureNet, which facilitated the flow of funds between Rex Venture Group and Plastic Cash International.”

Meanwhile, scrutiny of transactions involving NXPay, another Zeek Vendor, continues, Bell said.

“The Receiver Team completed its reconciliation of account information for NxPay, determining an outstanding amount of over $13 million, including improper post-freeze Order disbursements, and is analyzing potential options to recover this outstanding amount,” Bell said.

Negotiations with various parties over document production and information-sharing continue, Bell said.

“As part of this effort, the Receiver recently conducted an interview of a key fact witness with knowledge of the scheme,” Bell said.

He did not identify the individual.

Read Bell’s May 7 report. Visit the receivership website.

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7 Responses to “ZEEK RECEIVER: ‘Multilayered Investigation Into [Rex Venture Group] And Its Insiders, Advisors, And Financial Institutions’ Continues”

  1. I just read the receiver’s May 7 report.

    What worries me is the status of clawback.

    It says “Following the filing of the “net winner” clawback litigation, the Receiver Team communicated directly with numerous Affiliates (more than a hundred) regarding potential
    settlements.“

    Litigation was filed on March 3 ’14, and up until May 7 ’14 merely 100+ out of 9,000 are being negotiated for POTENTIAL settlement, that accounts only 1.1% for the 1st 2 months.
    Note that these are not the numbers already settled but just being discussed for potential settlement, then how long does it take to settle all 9,000? With this velocity, well over 200 months (17 years) is anticipated. It’s long enough for the receiver & other involved professionals to consume all the reserve funds & recovering assets.

    So far, the receiver’s clawback doesn’t seem to have been working as expected, not much different from the settlement progress at pre-litigation era.

    I found an interesting comment in ASDUpdate.com ,the link is http://asdupdates.com/wordpress/archives/5435# , the comment is about Zeek receiver’s May 1 announcement.

    According to Mr. Jordan Maglich (Ponzitracker) the Ponzi scheme’s average collection & distribution by receivers to victims is around 10%, then 40% distribution Bell plans to make is very good achievement, nevertheless Hall’s comment in ASDUpdate.com is very insightful and pointing out the receiver’s possible hidden agenda.

    As said in my previous posts, suing individuals internationally doesn’t seem to be rewarding.
    I can easily imagine many of them will neglect service of process delivered because unless the defendants are US citizens living outside US, the US court’s enforcement power is very low, each jurisdiction still detests threats of Exorbitant Jurisdiction.

    Another issue the receiver will face is if the defendants’ assets are in the same jurisdiction they live or in different jurisdictions.
    If the assets are not in the same jurisdiction, the receiver needs to identify its location and take another service process which will surely take years or decade as Hall said.

    I guess many international netwinners (especially big winners) must have reasonable financial literacy about offshore money management as well as good knowledge about on-line business.
    Therefore, many of them already transferred their money into different countries where HCCH is not working.

    Anyway, suggest you take a look at Hall’s comment I am copying here, I have no idea about Jul 23 hearing though all his points make sense:

    Comments made by Hall

    “I am not happy with this announcement.

    Bell said, “we have been reviewing approximately 175,000 timely filed claims. By Friday May 9 we will have issued about 160,000 letters of determination regarding those claims. Another 10,000 or so letters of determination will be sent before the end of May. There are a few thousand claims that will require additional time to review, because of conflicting information regarding the amounts claimed. Our goal is to distribute now an amount equal to 40% of each reconciled claim — I will also be reserving cash to distribute to holders of claims that have not yet been determined and allowed.”
    The reserve Bell sets mystified me.
    The total claim amount is supposed to be around $550 million, then 40% of that amount is $220 million. The current recovered asset is $334 million as of end 2013. So, $334 – $220 = $114 million will be reserved. Discounting $16 million allocation for Not Determined Claims (5,000 such claims accounts only 3% out of total 175,000 claims then $550 million x 3% = $16 million), $98 million seems to be reserved for future expenses.

    According to Bell, he pursues $312 million as clawback and he has confidence on recovering more than cost, then why does he need to reserve such huge amount of nearly $100 million (17% of the total claim), Bell should be able to manage future expense using the recovering assets without such huge reserve but with minimum reserve amount.

    Bell also comments “We have sued more than 9,000 of these “net winners” in the United States. We will soon sue net winners who live outside the United States. I remain hopeful that we will add tens of millions of dollars to the pool from which we will make final distributions to claimant victims. Unfortunately, these efforts will take quite a long time, maybe years.“
    I am pretty sure suing a lot of defendants internationally takes years, probably decade to complete or even indefinite because Bell may not be able to reach many defendants with little cooperation of foreign jurisdictions (I understand Bell tries to use HCCH – Hague Conference on Private International Law, yes the member countries recognize foreign judgement but when it comes to enforcement, it’s still extremely weak, don’t forget this convention is about just a civil matter not a criminal matter, once the defendants ignore the notice the case virtually becomes dismissed in many occasions because each country usually doesn’t have enough resources & time to pursue persistently to help other jurisdiction to deprive money from her own country), so from practical standpoint it will not work as people may expect .

    What I can read from these facts are;
    1) Bell anticipates enormous profits (fee) during the lengthy process of thousands of litigation which he describes years of efforts
    2) Bell doesn’t seem to have full confidence to recover the money that can cover all the costs including his own fee (now he says only“ adds tens of millions despite over $300 million target.

    That said, the worst but possible scenario (, which actually happened in many other Ponzi cases) is that Bell will eat up large parts of the reserved funds & even future collection, and the final distribution could be equivalent or even smaller than the amount Bell reserves currently after years of waiting.

    What are the bottom-line?
    – the only winner is the receiver who keeps earning based on hourly fee
    – the victims may have to wait years for the distribution they could get now (another 17%)

    Bell said “We continue to collect receivership assets from financial institutions“, which may bring about solid net recovery but I’m not sure from individual net winners, some may not have enough money to repay and some hide their money, a lot of uncertainties exist not at judgement level but at collection level, so recovery from individuals has huge risks therefore unpredictable.

    At first, I thought the receiver’s defendants class action was cost efficient approach, but after finding the receiver’s plan of the huge reserve fund together with his comment of “I will not be permitted to make final payments until all recoverable assets have been collected”, targeting enormous number of small profiteers would be Bell’s cunning tactics to delay the whole process at his best to maximize their hourly based fee.

    I heard that a hearing has been set for July 23 to hear a request by a group of participants (I guess these are net-winners) to end the receivership over the companies. The Securities and Exchange Commission requested a continuance. The request is scheduled to be heard in U.S. District Court in Charlotte.
    I’m not sure if ending the receivership is the most beneficial way for the victims though, I believe Bell should at least change their fee agreement from hourly based to contingency based, and pay out most of the reserve funds in the first distribution, which sounds only fair for the net-losers.

    Since Bell said “there will be an additional, final distribution at some point”, means he assures the positive net recovery, he doesn’t have any issue to get compensated based on contingency from the amounts he recovers in the future.
    I believe many victims will be happy to get additional distribution from the reserve fund NOW (possibly over 10% extra distribution) rather than waiting for years even the contingency fee costs more than hourly fee (which I personally feel less likely).

    Bear it in mind that there has been so many evidences that Ponzi receivers eat up the assets that could have returned to victims if they hadn’t done costly & lengthy clawback, such as Stanford case (Ralph Janvey), Legisi case (Robert D. Gordon), J.V. Huffman case (William Walt Pettit) and more & more.
    Now, Bell seems to disguises his efforts on maximizing own profit with the word “efforts on your behalf” same as the other unethical receivers.

    Hall”

    I listed a few concerns about the receiver’s clawback litigation in my previous posts http://patrickpretty.com/2013/12/12/urgent-bulletin-moving-lawsuits-against-zeek-insiders-winners-believed-imminent-paul-burks-dawn-wright-olivares-darryle-douglas-among-alleged-insiders-adsurfdaily-figures-todd-disner-and-j/comment-page-1/#comment-72615.

    I hope we will see good efficiency from the receiver’s defendants class action some day, which we have not been able to find from the receiver’s report.

    Gary

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  2. Gary: It’s long enough for the receiver & other involved professionals to consume all the reserve funds & recovering assets.

    Gary, the receiver is NOT going to “consume all the reserve funds” when recovering assets. Respectfully, if you permitting thoughts such as this to enter your mind or permitting others to plant these thoughts in your mind, you are doing yourself a disservice.

    I do understand that victims can become frustrated with receivers and the process in general. But the receiver did not create Zeek, which is the largest Ponzi scheme in U.S. history based on the number of victims. Zeek’s records were a mess, as is typical in such cases. There were domestic and offshore conduits — all of which are being reverse-engineered to the extent possible. Scheme data alone consisted of more than 1 BILLION points.

    Gary: Hall’s comment in ASDUpdate.com is very insightful and pointing out the receiver’s possible hidden agenda.

    The Zeek receiver, a former federal prosecutor who received a prestigious award for public service from the Justice Department for successfully prosecuting a Hezbollah terrorist cell operating in the United States, does not have a hidden agenda. Moreover, he is being supervised by a longstanding federal judge who is a former Naval officer — and the billings are being monitored by the SEC.

    As for the comment of “Hall” you pasted from ASDUpdates to the PPBlog . . .

    The receiver is working for all the “Halls.” There is an estimated 800,000 of them. “Hall” is frustrated — and this frustration has him authoring conspiracy theories and poisoning the well against the receiver.

    Hundreds of millions of dollars are going to go back into the pockets of the Zeek victims over time. As annoying as the process may be to some, well, it’s the process. There can be no doubt that the receiver is adding value to the estate. There also can be no doubt that MLM’s criminal wing will try to frustrate his efforts at every turn and that other participants in what effectively is a vast conspiracy within the HYIP sphere against common decency also will seek to gum up the mix.

    Some of these people want to make crime lawful, Gary. Sounds ridiculous, I know. But they’ve been stealing huge sums of money across national borders for years and have come to believe that organized theft is an entitlement. Some of them were in TelexFree, too.

    Patrick

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  3. “Gary, the receiver is NOT going to “consume all the reserve funds” when recovering assets.”

    What’s your rationale of such affirmative Denial behind it?
    I simply assumed 20 years based on the progress in the first 2 months. Such length of litigation for the collection with a lot of uncertainties has a chance of ending up with disastrous situations that Hall anticipates, namely “Ponzi receivers eat up the assets that could have returned to victims if they hadn’t done costly & lengthy clawback“

    “The Zeek receiver, a former federal prosecutor who received a prestigious award— “

    I’m glad to learn his excellent background. However, I personally don’t want my judgements to be overly affected by the past performance but want to evaluate based on the facts in this case. I admit that my word of Hidden Agenda must have been inappropriate though the comments of Hall have many good points which can be an eye-opener to see the receiver’s activities without any bias.

    “Respectfully, if you permitting thoughts such as this to enter your mind or permitting others to plant these thoughts in your mind, you are doing yourself a disservice.”

    I personally don’t see Hall being obsessed by the conspiracy theory. I agree that the receiver should change the fee agreement from hourly to contingency for the clawback recovery as long as he has confidence on sufficient net recovery. The only way that the receiver can convince victims like Hall is providing cost / return analysis which can prove hourly fee is less costly thus larger final distribution to the victims.

    With all due respect, I don’t have any objection to collect ill-gotten money from net-winners, but as I commented before “Any affirmative attempts or initiatives to transform social norm of MLM industry with punitive demonstration should be the role of law enforcement agencies and regulators funded by the tax of general public. “ not the receiver’s main task, and the receiver’s key task is making the maximum return to those who have suffered from the fraudulent operation.

    Having observed the facts of disappointing progress of clawback together with the receiver’s big reservation as Hall pointed out, I’m now doubt of “There can be no doubt that the receiver is adding value to the estate. “ in the future.

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  4. Gary: I simply assumed 20 years based on the progress in the first 2 months. Such length of litigation for the collection with a lot of uncertainties has a chance of ending up with disastrous situations

    Your analysis collapsed very early on above, specifically “100+ out of 9,000 [winners] are being negotiated for POTENTIAL settlement, that accounts only 1.1% for the 1st 2 months.”

    This you extrapolated to a process that would last “well over 200 months (17 years).”

    For starters, the receiver can’t force the winners to enter settlement negotiations with him. That only “100+” have done so is immaterial. Beyond that, it does not follow that the small number in negotiations drags things out for 17 years. That’s just silly — and is the precise kind of forward-looking vomit the scoundrels within Zeek try to use to poison the well against the receiver.

    As for “Hall,” he threw some forward-looking vomit against the wall and, surprise, deduced that Bell is among a gaggle of “unethical” receivers. It’s just another way of planting the seed that the receiver is a felon, a play ripped from the ASD playbook and advanced by one of the early Zeek conspiracy theorists.

    Hell, I’d fully expect Todd Disner (Miami MLM Vice) and T. LeMont Silver (Dominican/Florida MLM Vice) to adopt those talking points.

    TV allusions aside, allow me to delve into the truly important: I’m not betting against Wake Forest (Bell) for the same reason I didn’t bet against Notre Dame (Cowden) in the forfeiture aspect of the ASD case.

    Cowden handed ASD its ass, and a federal judge declared it dead. I think Bell will hand the Zeek scoundrels their asses, too.

    Even so, I have no doubt that the ASD/Zeek asses will try to better the instruction and will come up with greater and wilder conspiracy theories.

    Patrick

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  5. “For starters, the receiver can’t force the winners to enter settlement negotiations with him. That only “100+” have done so is immaterial. Beyond that, it does not follow that the small number in negotiations drags things out for 17 years.“
    The point is taken.
    I myself really would like to see good progress under this challenging approach in coming months, but the fact still remains that 99% of the defendants seem to have not reacted to the filing over the last 2 months which is not encouraging news for the victims who must expect a lot from the clawback litigation.

    All your other points are not well taken.
    Don’t get me wrong I’m not saying Kenneth Bell is an unethical receiver with certain plot, I honestly don’t know.
    My point is Hall’s comments are worthwhile digesting and we’d better make allowances for the receiver’s actions from indifferent perspective because I still find most of the logic Hall uses quite rational based on the numerical facts thus sounds valid and people should take his comments as a sort of caution to avoid blind faith on the receiver.

    I believe there are no reasons we are afraid of sharing the analysis discussed here with anybody, because whoever uses the information with whatever the purpose, the receiver must be in the accountable position to answer to any concerns / challenges comfortably as long as the receiver does the best to maximize the return to the victims.

    Hope my comments are fair & make sense.

    Gary

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  6. You can always accept nothing and walk away now. No one is forcing you to wait for a receiver you feel is ripping you off trying to get back money from the real people that actually ripped you off.

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  7. IMO, the only true victims are elderly with dimentia and the clinically diagnosed mentally challenged. There is no excuse for anyone else. All other “victims” need to take responsibility for their own actions. These people gambled to make easy money and I don’t believe they deserve any money back. And if they DO get any, it should be considered a bonus and not entitlement.

    I have no problem with using all the money recovered to prosecute all the criminals including anyone who recruited just one person which means a perpetuator and party to the crime. This might force people to do due diligence in the future before joining another networking opportunity.

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