DEVELOPING STORY: More Than $800,000 In Funds Potentially Due Zeek Victims May Have Been Stolen By Credit-Card Vendor’s California Lawyer

From a filing by Plastic Cash International in the Zeek Rewards Ponzi case. The screen shot above reflects a partial page from "Exhibit P," a copy of an investigative report by the California State Bar dated July 28, 2014.

From a filing by Plastic Cash International in the Zeek Rewards Ponzi case. The screen shot above reflects a partial page from “Exhibit P,” a copy of a report by the California State Bar dated July 28, 2014.

UPDATED 9:15 A.M. ET DEC. 19 U.S.A. If its presence on the Ponzi boards and similarity to the AdSurfDaily Ponzi scheme were not enough, the morass surrounding Zeek Rewards and operator Rex Venture Group may be getting even muddier.

A Zeek credit-card vendor being pursued by the court-appointed receiver in the SEC’s 2012 Ponzi- and pyramid case says a California lawyer facing multiple bar investigations has stolen at least $800,000 that originated in Zeek transactions.

It is possible that the number could be even higher, potentially on the order of $1 million or more, according to an estimate by the State Bar of California.

A July 28 report by the Bar says the lawyer — Scott Stone Mehler of Long Beach — has invoked his Fifth Amendment right against self-incrimination. Mehler, according to records, already has been recommended for disbarment for the alleged misappropriation of $1.4 million in funds from other clients.

Whether a criminal investigation into Mehler’s alleged activities is under way was not immediately clear.

Zeek receiver Kenneth D. Bell has been pursuing Plastic Cash International, formerly represented by Mehler, to return millions of dollars Bell alleges to be receivership assets. But PCI claims it is a victim of both Mehler and Zeek and, in any case, is unable to pay because working with Zeek destroyed its reputation in the financial community.

“As a direct result of [Rex Venture Group’s] criminal and otherwise fraudulent conduct, all of PCI’s partners and customers eventually ceased doing business with PCI, ultimately resulting in PCI’s involvency,” Paul Schafer, PCI’s director of brand partnerships, said in a Dec. 17 affidavit.

The Bar has alleged moral turpitude, misrepresentation to client, falsification of accounting, failure to maintain entrusted funds and failure to account against Mehler in the PCI matter involving Zeek funds. Bar documents strongly suggest that Mehler was using client funds, including PCI funds that originated via Zeek-related transactions, to play a shell game.

If that proves to be the case, it would mean that Zeek Ponzi funds were being used to prop up Mehler’s personal scam.

PCI, which says it first learned about Zeek operator Rex Venture Group in March 2012, five months before the SEC’s fraud complaint, potentially faces questions about whether any due diligence it conducted into Zeek was adequate.

On Nov. 19, Bell asked Senior U.S. District Judge Graham C. Mullen for an order directing PCI to turn over more than $8.3 million to the receivership that PCI allegedly “failed to freeze and return to the Receivership Estate.” Bell also is seeking a contempt finding against PCI.

For its part, PCI contends that it “never” held receivership assets and that “any” funds in dispute are not recoverable assets. The firm also contends that, through Mehler, it paid more than $1.1 million in fines issued by VISA. It also said it paid legal fees in excess of $600,000 and  Zeek-related chargebacks in excess of $2 million.

NOTE: Our thanks to the ASD Updates Blog.

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