BULLETIN: Receiver Re-Serves Zeek Member Who Sought To Quash Subpoena

BULLETIN: An apparent Florida member of the Zeek Rewards “program” who claimed last week that the court-appointed receiver situated in North Carolina had served a subpoena improperly from the Tar Heel state via U.S. Mail now has been served again — this time through a more expensive process that involved certified U.S. Mail, FedEx and a Florida federal district court.

Receiver Kenneth D. Bell said in a court filing today in North Carolina that he had sent a revised subpoena to Nathaniel Woods of Ocala, Fla.

This time, the subpoena was issued by U.S. District Court for the Middle District of Florida, as opposed to U.S. District Court for the Western District of North Carolina, Bell said.

And it was sent by both certified mail and FedEx, Bell noted, adding that the subpoena “requires the requested documents to be produced at a location in Jacksonville, Florida, less than 100-miles from Mr. Woods’ residence in Ocala.”

Jacksonville is approximately 85 miles from Ocala. The address at which the documents must be produced is the Jacksonville office of the McGuireWoods law firm. The firm is counsel for the receiver and also has an office in Charlotte, N.C.

The implication is that Woods now will have to travel from Ocala to Jacksonville to comply with the second subpoena. In the initial process, he could have mailed the requested documents to North Carolina, the home base of the receivership.

Senior U.S. District Judge Graham C. Mullen now should rule Woods’ objections to the manner in which he initially was served moot, Bell argued.

Mullen is overseeing the Zeek case from the Western District of North Carolina.

Bell’s earlier method of serving subpoenas was designed to save money, he advised the judge.

From the receiver’s filing today (italics added):

One of these subpoena recipients, Nathaniel Woods, admittedly received his subpoena, but has filed a motion to quash his subpoena on various procedural grounds. The Receiver’s initial investigation found that Mr. Woods may have received more than $500,000 in other people’s money in net winnings from this scheme. Thus, the documents sought by the Receiver from Mr. Woods are clearly relevant, and are at least likely to lead to relevant and admissible evidence. Indeed, Mr. Woods could simply have contacted the Receiver to discuss or object to the original subpoena or obtain more time to respond, as many other subpoena recipients have done. The Receiver has worked with everyone who has responded in good faith to obtain relevant documents on an agreed schedule. Many recipients are also pursuing the opportunity offered by the Receiver to reach a prompt settlement of the fraudulent transfer claims.

Thus, Mr. Woods’ motion to quash only serves to delay – on the grounds of form, not substance – the production of documents to which the Receiver is undoubtedly entitled in his role as appointed by this Court.

Bell also advised Mullen that the first batch of subpoenas that went out earlier this month were targeted at “approximately 1,200 of the largest net winners of the Zeek Rewards scheme.

“On average,” Bell advised the judge, “these net winners made over $100,000 from the scheme’s victims.”

From the initial mailing of “approximately 1,200 subpoenas,” the receiver said, “to date only 26 have been returned as undeliverable, confirming the Receiver’s belief that this initial method of delivery would accomplish the practical goal of actual notice.”

And, he noted, “It would have cost more than five times as much to serve the subpoenas via certified mail or FedEx and taken far longer to issue them from numerous judicial districts and make arrangements for production of the documents within 100 miles of each address.”

The goal of the initial mailing “was to implement a streamlined process that would most effectively begin the process of recovering Receivership Assets and initiating a dialogue with the net winners who are willing to cooperate with the Receiver in gathering information and discussing the return of fraudulently transferred funds,” Bell said.

In August, the SEC described Zeek as a $600 million Ponzi scheme and pyramid fraud.