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Tag: Ira Lee Sorkin

  • URGENT >> BULLETIN >> MOVING: Federal Judge Denies Alleged Zeek Winners’ Motion To Intervene In Case And Dissolve Receivership

    breakingnews72URGENT >> BULLETIN >> MOVING: (3RD UPDATE 8:44 P.M. EDT U.S.A.) Senior U.S. District Judge Graham C. Mullen has denied a motion by alleged winners in Zeek Rewards to intervene in the SEC’s Ponzi-scheme case and to dissolve the receivership.

    In December 2012, alleged Zeek “winners” Trudy Gilmond and Kellie King asked Mullen for permission to intervene in the case and to end the court-appointed receivership, arguing that Zeek did not sell securities as defined under federal law.

    Mullen today denied the motion on both fronts.

    Kenneth D. Bell is the receiver. He opposed the Gilmond/King motion. So did the SEC, which described Zeek in August 2012 as a $600 million Ponzi- and pyramid fraud selling unregistered securities through Rex Venture Group LLC in North Carolina.

    Gilmond may have more than $1.364 million at risk in a clawback lawsuit. King potentially faces a claim from Bell for more than $205,180, according to court filings.

    “Gilmond and King seek to improperly interfere with a settled SEC enforcement action against defendants Rex Venture Group and Paul Burks to deny the Receiver the ability, as directed by the Court, to marshal the estate’s assets for the benefit of all aggrieved ZeekRewards investors,” the SEC argued in January. “The Motion to Intervene is a transparent attempt to obtain prospective relief in an improper forum with respect to clawback litigation the Receiver has yet to initiate.”

    For his part, Bell said Gilmond and King were engaging in “delaying tactics.”

    Gilmond and King are represented by Ira Lee Sorkin, Bernard Madoff’s defense attorney.

    “The issue Gilmond and King seek to litigate — whether the ZeekRewards program was an ‘investment contract’ or ‘security’ — has been resolved for the purposes of this settled SEC enforcement action,” the SEC argued in January.  “As a result, Proposed Intervenors assert no ‘claim or defense that shares with the main action a common question of law or fact.’  Thus, there is no basis for intervention.

    “Finally,” the SEC continued, “Proposed Intervenors provide no factual or legal support for their request to dissolve the receivership in this matter.  Therefore, the Motion to Intervene should be denied in its entirety.”

    Mullen did just that today.

    Zeek operator Paul R. Burks consented to a judgment in the SEC case in August 2012.

    NOTE: Thanks to the ASDUpdates Blog.

  • Conference Call By Zeek Receiver Under Way [Call Ended At 6:03 P.M.]

    EDITOR’S NOTE: This post was updated at 2:48 p.m. on Dec. 20 to include this link to a recording of the receiver’s Dec. 17 call. The information below reflects the PP Blog’s original notes from the call on Dec. 17 . . .

    UPDATED 7:27 A.M. (DEC 18, U.S.A.) A conference call by Kenneth D. Bell, the court-appointed receiver in the Zeek Rewards Ponzi scheme case, is under way. (Call ended at 6:03 p.m., as noted below.) The call began at 5 p.m. ET (U.S.A).

    UPDATE 5:15 p.m. Bell, formerly a federal prosecutor, has said he knows what a Ponzi scheme is — and “this was one.” Somewhere between $500 million and $600 million was lost. The receivership estate has recovered about half of that. “We’re roughly half-way home, but that’s a huge gap,” Bell said.

    UPDATE 5:18 p.m. A claims form for victims should be ready by the end of January, Bell said. It’s doubtful that victims can be made 100 percent whole.

    UPDATE 5:21 p.m. There are some sad, Zeek-related stories of loss out there. Bell said he had emails from people who’d lost anywhere from $49 to $10,000.

    Some folks are worried they can’t establish their loss because they sent money to their sponsor, not Zeek parent Rex Venture Group, Bell said. A means of addressing such claims is being established.

    UPDATE 5:25 p.m. Bell said some people have questioned whether he is dragging out the receivership to drive up legal fees. He asked listeners to trust him, and he denied foot-dragging. His “goal is to be the most cost-effective receivership in history,” Bell said.

    UPDATE 5:33 p.m. Bell said he did not know if other people will be charged by authorities in connection with Zeek. (Zeek/Rex operator Paul R. Burks is the only person charged to date — civilly by the SEC.)

    He added that he’ll be prepared to prove Zeek was a Ponzi scheme as he pursues winners in clawback litigation. A motion by Zeek winners to appoint attorney Michael Quilling  examiner was “absurd,” he said. He did not reference Quilling by name.

    UPDATED 5:38 p.m. Bell also will oppose a motion by attorney Ira Lee Sorkin to dissolve the receivership. He did not mention Sorkin’s name. (Sorkin was Bernard Madoff’s defense attorney.)

    UPDATED 5:41 pm. Bell is contemplating an interim distribution to victims. More study needs to be done, but “I don’t see any reason to sit on $300 million,” he said. No timetable has been established for an interim distribution.

    UPDATED 5:44 p.m. Zeek’s database “is a real mess,” Bell said. He is studying a means by which victims could gain access to their back offices to gain access to information, but such a capability could be cost-prohibitive.

    UPDATED 5:48 p.m. Some Zeek members have poor records, but others have good records that are helping fill in  gaps in Zeek’s database. “We will try to help you establish your claim,” Bell said. The more records members can submit, the better.

    UPDATED 5:50 p.m. The plan is to treat all Zeek members equally. Distributions likely will occur all at once. No one has received money from the receivership to date.

    UPDATED 5:52 p.m. In the early days of the receivership, Bell said he received “tens of thousands” of emails.

    UPDATED 5:54 p.m. Bell will sell real estate and furnishings owned by Zeek, he said.

    UPDATED 5:58 p.m. There are “eight to 10” core members of the Zeek receivership team. At the moment, some of the lawyers are arguing with lawyers on the other side of the issues, Bell said.

    UPDATED 6 p.m. Bell said if Paul Burks still has Zeek receivership property, he’ll be treated as a winner. The case was not over simply because Burks paid a $4 million fine to the SEC, he said. It was not up to the receivership to determine if Burks would be charged criminally, Bell said.

    UPDATED 6:03 p.m. Call ended. Bell thanked those supporting his efforts and said he understood why some people would not.

    MISC NOTES AT 6:05 p.m. What happens to possible Zeek “ringleaders” is the responsibility of law enforcement, Bell said during the call.

    The current math, he said, looks something like this: 840,000 losers and 77,000 winners. “A lot” of people had more than one Zeek username, Bell said. Every dollar the receivership estate spends on court battles is a dollar that won’t go to victims, Bell said. Prudent choices have to be made when deciding how to fund the receivership estate in a cost-effective manner to maximize the distributions to victims, Bell said. There were “boxes and boxes” of cashier’s checks at Rex headquarters, Bell said.

    Those cashier’s checks were receivership property under the law, Bell said.

  • BULLETIN: Zeek Receiver Opposes Appointment Of ‘Examiner’; Zeek Cheerleaders, ZTeamBiz Missives Get A Mention; Let Them ‘Employ Counsel At Their Own Expense,’ Bell Urges Judge

    “The ZeekRewards scheme has claimed hundreds of thousands of victims who lost hundreds of millions of dollars at the hands of the scheme’s winners who solicited their participation. Now, apparently not appreciating the irony, the lawyer for hundreds of the largest net winners asks the Court to pay him to be an ‘examiner’ or ‘representative for the affiliates,’ yet again at the expense of the scheme’s victims. The requested appointment is unnecessary and ill-advised because it would duplicate and complicate this Court’s, the Receiver’s, and the SEC’s efforts to compensate the victims, not to mention directly reduce the Receivership Assets available to pay them. Furthermore, the individual whom the net winners recommend for appointment (or more correctly who recommends his own appointment) ignores the inherent conflict of interest in seeking to somehow represent both the scheme’s ‘winners’ and ‘losers,’ two groups with irreconcilably adverse interests.” — Zeek receiver Kenneth D. Bell, Dec. 17, 2012

    Section from an email received by the court-appointed receiver in the Zeek Rewards Ponzi scheme case. Source: federal court files.
    Section from an email received by the court-appointed receiver in the Zeek Rewards Ponzi scheme case. The note asks the receiver to oppose efforts by Zeek winners to intervene in the case. Source: federal court files.

    Shortly after the SEC described Zeek Rewards on Aug. 17 as a $600 million Ponzi- and pyramid scheme, Zeek figure Robert Craddock solicited donations purportedly to hire an attorney and form a “protected” group of affiliates. Whether Zeek losers gave to the effort conducted at ZTeamBiz through Fun Club USA, Craddock’s Florida-based entity, remains unclear.

    On Aug. 29, PP Blog guest columnist Gregg Evans questioned how Zeek winners and losers ever could be on the same side.

    Today the court-appointed receiver effectively was asking the same question. His conclusion was that they could not — and he asked Senior U.S. District Judge Graham C. Mullen to reject a contention by certain Zeek “winners” that they could.

    “The net winners have already been put on notice that they will be asked to return their winnings to the Receiver for reimbursement to the net losers,” Bell said in court filings. “On the other hand, the net losers hope that they can recoup some of their losses from the gains of the scheme’s net winners . . . Thus, the winners and losers are plainly opposed in their respective interests regarding the winners’ efforts to keep their winnings.”

    Presumptive Zeek clawback targets Dave Kettner, Mary Kettner and David Sorrells asked Mullen last month to appoint Dallas attorney Michael Quilling as “examiner” over all Zeek affiliates. That should not be permitted to happen, Bell contended, because Quilling “has appeared in this case already as an attorney for Fun Club USA and represents the interests of those net winners.”

    In a bid to bolster his claim, Bell cited Craddock ties to Dave Kettner through ZTeamBiz and quoted from a letter attributed to Kettner.

    “In a similar vein, Mr. Kettner sent a letter seeking donations from affiliates that stated, “The SEC has tried to make us all believe that Zeek Rewards was an ‘investment’ and a Ponzi scheme. All the pages that were submitted by the SEC indictment [sic] has [sic] all been one sided and what we believe to be a misrepresentation of the truth and facts of what Zeek Rewards was as a viable and legal business,” Bell advised the judge in a footnote that included the URL to ZTeamBiz.

    Beyond that, Bell argued, the Craddock entity, the Kettners and Sorrells had no standing in the case brought by the SEC.

    And Bell said he has heard from Zeek members who want him to oppose the appointment of Quilling as examiner.

    Here, according to Bell, is a passage from one such Zeek member who contacted Bell after learning about the “examiner motion”:

    As one of the many losers in Zeek Rewards I wish to encourage you to do whatever is possible to block the motion filed on behalf of Fun Club USA (Robert Craddock) David & Mary Kettner and David Sorrells, asking that their personal attorney Michael J Quilling be appointed as the Examiner to oversee and represent the interest of ALL former Zeek Rewards affiliates.

    To many of us this is just another way for another attorney firm to slow up your process of recovery and to diminish the amount of funds to be returned to those of us who are in hopes of being able to recover some of our losses.

    Personally I feel that their agenda is also to help block your efforts to recover funds from the 1200 who received subpoenas.

    The Kettners and Sorrells potentially have exposure of nearly $2 million in receivership clawback litigation, Bell said.

    At least two apparent Zeek winners represented by attorney Ira Lee Sorkin also oppose the appointment of Quilling as examiner, according to filings last week.

    Todd Disner, a Zeek affiliate and figure in the AdSurfDaily Ponzi scheme story, once was on a conference call with Craddock.

    In recent remarks, Craddock said Disner was in Hong Kong with a “lost” passport.

    Reports now have surfaced that Craddock is pitching a “program” known as Offer Hubb that uses a Wyoming mail drop as its address. Disner’s name was listed on the Offer Hubb pitch, according to BehindMLM.com.

  • Potential Zeek Clawback Target Pitched Collapsed Regenesis 2X2 Cycler: ‘Giddy Up. Get Involved. [It’ll] Be The Best Decision You Ever Made’

    gilmondregenesis2x22UPDATED 7:55 A.M. ET (DEC. 23, U.S.A.) In May 2009, before the launch of the alleged Zeek Rewards Ponzi scheme, a Zeek promoter who has hired famed attorney Ira Lee Sorkin appeared in a check-waving video for an “opportunity” known as Regenesis 2X2.

    Check-waving is used as a form of “proof” that an “opportunity” that “pays” is not a scam.

    “Giddy up,” intoned Trudy Gilmond of Vermont. “Get involved. [It’ll] be the best decision you ever made.”

    Gilmond, according to the video she narrated while waving two checks from Regenesis 2X2 totaling $1,200, sent by Priority Mail and drawn on Bank of America, was “fired up.”

    She’d been in Regenesis 2X2 only since May 1, and already had received a nice payout, Gilmond explained.

    “Knew this company would work,” she said, before alluding to a Biblical tale of an apostle who insisted on proof of the resurrection of Jesus.

    “A lot of people are nonbelievers, doubting Thomases, didn’t believe it,” Gilmond said. She then presented checks as a form of proof that Regenesis 2X2 paid.

    About two months later — in July 2009 — the U.S. Secret Service applied for search warrants in federal court in Washington state, the purported home of Regenesis 2X2. From a PP Blog story on Aug. 3, 2009 (italics added):

    Agents, according to court filings, observed complaint letters directed at the firm being discarded into a Dumpster that was kept under constant surveillance. Also found in the Dumpster were copies of checks sent in by customers, other documents that included customers’ names and information to identify them personally, complaint faxes sent by customers and a letter from a law firm complaining about false, misleading and deceptive advertising.

    In one case in which agents were observing one of the adult principals in the case, they observed a youth described as a teenager exiting a vehicle and “struggling with a large arm full of opened business and UPS Priority Mail envelopes,” the Secret Service said in court filings.

    The juvenile entered a building and “then immediately came back outside and discarded the materials into an alley [D]umpster,” agents said.

    Agents identified the adult under surveillance as a person “arrested by the Internal Revenue Service out of Las Vegas, Nevada[,] for felony violations related to Illegal Money Laundering from Securities Fraud and Wire Fraud” in a previous case.

    How the Regenesis 2X2 probe proceeded is unclear.

    What is clear is that Zeek eventually came to the fore. In court filings, Sorkin has noted that Gilmond has potential clawback exposure of more than $1.364 million from the court-appointed receiver in the Zeek Rewards Ponzi scheme case.

    Gilmond once was listed on a Zeek website as both an “Employee” and “Official Rep.” So, too, was Zeek pitchman OH Brown of USHBB Inc., which produced ads for both Zeek and the collapsed Narc That Car pyramid scheme. For a while, at least, Zeek and Narc That Car appear to have used the same North Carolina-based bank: NewBridge.

    Checks displaying the name of NewBridge showed up in independent affiliate promotions on YouTube in 2010. After one Narc affiliate quit the program, he moved to another one. The check-waving for the new “program” began at the one-second mark. Literally.

    BehindMLM reported yesterday that Brown may have a tie to a burgeoning “opportunity” known as Offer Hubb.  AdSurfDaily and Zeek promoters Todd Disner and Jerry Napier also appear to be in the communication chain of Offer Hubb. The U.S. Secret Service has described ASD as a “criminal enterprise.” The U.S. Department of Justice has described ASD as “insidious.”

    A source told the PP Blog last week that Zeek figure Robert Craddock now was pitching Offer Hubb. Craddock is a purported Zeek “consultant” raising money to contest elements of the SEC’s Ponzi-scheme complaint and the court-appointed receivership. In July, Craddock sought to have the website of Zeek critic K. Chang removed from the Internet. Craddock was successful briefly, but the “K. Chang” Hub at HubPages returned.

    By Aug. 4 — just 13 days prior to the filing of a emergency action by the SEC alleging that Zeek was a $600 million Ponzi- and pyramid scheme — Zeek used its Blog to blast unspecified “North Carolina Credit Unions” for raising questions about the “program.”

    For years, questions have been raised about whether fraud schemes within the MLM sphere were recycling money between and among schemes and putting banks and other financial-service companies in possession of tainted funds. Purported “Wiring Instructions” of Offer Hubb imply that the Wyoming-based entity is soliciting sums of up to $10,099 from prospects and is using City National Bank.

    From a section of the BehindMLM report that describes an address used by Offer Hubb (italics added):

    As mentioned in the introduction of this review, “1712 Pioneer Avenue” is the headquarters of “Corporations Today”. The address is apparently so well-known in tax haven circles that Reuters used the 1712 Pioneer Avenue building itself for a 2011 article on corporate secrecy in the United States.

     

  • URGENT >> BULLETIN >> MOVING: Ira Lee Sorkin, Bernard Madoff’s Attorney, Files Motion For Clients Who Are Potential Clawback Targets For More Than $1.56 Million In Zeek Case

    URGENT >> BULLETIN >> MOVING: (3RD UPDATE 11:33 P.M. ET (U.S.A.) Famed defense attorney Ira Lee Sorkin is seeking pro hac vice admission to practice in U.S. District Court for the Western District of North Carolina on behalf of two prospective clawback targets in the Zeek Rewards Ponzi scheme case.

    Sorkin is with Lowenstein Sandler PC in New York. He perhaps is best known as Ponzi schemer Bernard Madoff’s defense counsel. Sorkin also is the former head of the SEC’s New York regional office.

    Sorkin’s clients are Zeek affiliates Trudy Gilmond and Kellie King, and Sorkin is arguing that Zeek did not sell securities and that the receivership should be dissolved.

    Gilmond is the prospective target of a clawback action for more than $1.364 million, with receiver Kenneth D. Bell asserting she put in only $3,105, according to Sorkin’s motion. King potentially faces a claim from Bell for more than $205,180 after paying in only $1,492, Sorkin said in the filing.

    Sorkin, according to a separate motion, also contests how the receiver issued subpoenas and is opposing a motion late last month by Dallas attorney Michael J. Quilling to be appointed “examiner.”

    Quilling sought “to represent the collective interests of the Affiliates and all creditors of the receivership estate” and desired to “be compensated out of the receivership estate,” Sorkin argued.

    But that should not be permitted to happen, Sorkin contended.

    From Sorkin’s motion (italics added):

    It is quite clear from the Receiver’s Preliminary Liquidation Plan and the defective subpoena issued to Ms. Gilmond that Qualified Affiliates have inherently conflicting positions as to one another, and thus cannot be jointly represented. To illustrate, it is in the interests of a Qualified Affiliate who is a “net-winner” to challenge the Receiver’s authority to clawback funds because the Receiver intends to use the “net-winner’s” money to pay net-losers. To the contrary, it is in the interests of a Qualified Affiliate who is a net-loser to support the Receiver’s efforts because the Receiver will take money from the “net-winner” and distribute it to the “net-loser” Qualified Affiliate. As such, an Examiner cannot be appointed to represent all of the Qualified Affiliates because the Examiner would have clients with inherently contradictory positions as to one another.

    The motion by Sorkin potentially puts Gilmond and King at odds with positions taken by Quilling clients and potential Zeek clawback targets Dave Kettner, Mary Kettner and David Sorrells. The Kettners and Sorrells, for example, moved to have Quilling appointed examiner.

    The Kettners and Sorrells potentially have a combined clawback exposure of nearly $2 million, according to court filings.

    Zeek records, according to letters from Bell cited by the trio, suggest Sorrells received $945,539 from Zeek while paying in only $1,695. Dave Kettner received $537,577.95 while paying in only $1,378, and Mary Kettner received $465,866.67 while paying in only $1,495.