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Tag: Zeek Rewards receivership

  • Full Statement From Zeek Receiver On New Information Available Through Claims Portal

    EDITOR’S NOTE: Zeek Rewards receiver Kenneth D. Bell has issued the statement reproduced below. It is dated Nov. 25, 2014. Source: Zeek Rewards Receivership Website.

    ** ________________________________ **

    ANNOUNCEMENT FROM THE RECEIVER – November 25, 2014

    Today, new features were added to the claim status portal in response to issues that have arisen in the distribution process. The claim status portal can be accessed by following: https://cert.gardencitygroup.com/zrwdet/fs/home. These updates allow for a claimant who is eligible to receive a distribution to be able to check the status of that distribution by logging on to the claim status portal. In addition to claim status, that portal will now provide those affiliates who are eligible to receive a distribution with: the date on which his/her distribution check was issued; the amount of the distribution check; whether the distribution check has been cashed; and whether the distribution check was returned to us as undeliverable. Second, if your check was returned to us, lost, destroyed, or your check was issued in the wrong name (for example, if you inadvertently provided your Zeek username instead of your real name when you provided your payment information), you will now be able to request a new check be issued to you in the proper name. We hope that these updates will address many of the issues you have been asking us about.

    With these improvements to the claims status portal we will no longer respond to emails and calls that request the status of a claim that can otherwise be answered by logging into the claim portal and checking on the status of your claim. We have been spending a considerable amount of receivership assets responding to affiliate claimants’ inquiries about the status of their claim, all of which can now be answered through self-help. The savings generated by this automated system will allow us to make larger distributions to all affiliate claimants holding allowed claims.

    Among the inquiries to which we will no longer be responding are requests from affiliates who registered on the claims portal but did not complete and finally submit a claim. The claims system was continuously operational and was tested and verified as accurate during the claims period and afterward. If review of your claim status shows that you did not finally submit a claim through the claim portal by the Court ordered deadline of September 5, 2013, I have no authority to accept or permit you to file a claim thereafter, including now. I regret that anyone who could have validly submitted a claim failed to do so.

    If you hold a claim eligible for a distribution, but were not mailed a check on September 30, 2014, I encourage you to login to the claims status portal and accept the letter of determination you were issued (or have any objection you raised to the claim determination resolved) and submit the required Release and OFAC certification so that we may distribute money to you. If you take these steps, you will be mailed a first interim partial distribution at the end of January 2015.

    By the close of business on December 1, 2014, we will have issued Letters of Determination to all affiliate claimants who timely filed claims.

    Finally, we continue to receive many inquiries about tax withholdings from distribution checks. We are trying very hard to get reliable guidance from the Internal Revenue Service. I do not want to withhold taxes from distribution checks, but unless and until I receive assurance that the IRS agrees with me, withholdings will be made. We cannot expose the receivership, and the assets which we have and from which we will make distributions to victims, to potential penalties and fines by the IRS.

    ** ________________________________ **

    Visit the receivership website.

  • Some Zeek Claimants From Outside The United States Unable To Deposit Distribution Checks; Receiver Provides Guidance

    Kenneth D. Bell, the Zeek Rewards receiver, published an announcement last night that certain Zeek claimants from outside the United States who received a distribution check were unable to deposit it. Here is the announcement, dated Oct. 30, 2014 (italics/bolding added).

    ANNOUNCEMENT FROM THE RECEIVER – October 30, 2014

    Various foreign claimants have reported that their banks have refused to deposit the distribution checks I have sent to you. It is likely that these banks are mistakenly seeking to deposit the checks in the local currency instead of in United States dollars. ALL checks issued by the Receivership are issued in United States dollars. Please inform your bank when you are depositing your check that it is in United States dollars. I am unable to issue checks in any currency other than United States dollars.

    Visit the receivership website.

  • BULLETIN: $30 Million Claim Filed By Zeek Affiliate Who Appears To Have Invested Only $10, Receiver Says

    breakingnews72BULLETIN: (5th Update 9:20 p.m. EDT U.S.A.) How absurd and abusive is HYIP Ponzi Land?

    The court-appointed receiver in the Zeek Rewards Ponzi- and pyramid case says a Zeek affiliate who appears to have invested only $10 has filed a claim seeking $30 million.

    Receiver Kenneth D. Bell asserted in a court filing today that the $30 million claim is the highest encountered in the case. Precise details about the claim, whose denial is pending, were not immediately available.

    Viewed another way, a Zeek member who invested $10 appears to believe he or she is entitled to tens of millions of dollars that otherwise would go to thousands of Zeek victims.

    A separate claim for $14.9 million filed by an asserted Zeek vendor known as Plastic Cash International LLC (PCI) may have a gall factor nearly as high, court filings by Bell today suggest.

    The $14.9 million claim by PCI was the second-highest in the Zeek case, exceeded only by the affiliate seeking $30 million on an apparent $10 investment, Bell said.

    PCI “was a trade creditor of the Receivership Defendant that processed credit card payments from Affiliates for the Receivership Defendant,” Bell said in court filings. “The processed payments were deposited into an account to be held for the benefit of the Receivership Defendant. PCI contends that it should be permitted to ‘retain’ funds that it collected for the Receivership Defendant in its role as a trade creditor.”

    Bell said in court filings today that PCI had a “role in perpetuating the ZeekRewards Ponzi Scheme,” but now was behaving disingenuously — in part by asserting in had no knowledge of the asset freeze ordered by a federal judge in 2012.

    The proposition that PCI did not know about the freeze was “absurd,” Bell said.

    From Bell’s filings (italics/carriage returns added):

    As disclosed in the PCI Claim, PCI acted as a credit card processor for the Receivership Defendant for the two-month period from June 2012 to the appointment of the Receiver. The PCI Claim further asserts that PCI either held a security interest in the funds that it held for the benefit of the Receivership Defendant or, in the alternative, PCI owned all of the amounts that it had collected for the Receivership Defendant pursuant to its contracts with the Receivership Defendant.

    No disclosure regarding the amounts collected by PCI during the time it acted as a credit card processor for the Receivership Defendant was made in the PCI Claim.

    Prior to the filing of the PCI Claim, the Receivership Team did not know that PCI had been involved in perpetrating the ZeekRewards Ponzi Scheme, nor did the Receivership Team know that PCI held Receivership Assets generated by the ZeekRewards Ponzi Scheme. The filing of the PCI Claim caused a preliminary investigation into the assertions made in the PCI Claim.

    This initial review of the records of the Receivership Defendant did not show any significant economic relationship between PCI and the Receivership Defendant because no payments were made by PCI to the Receivership Defendant in the two-month period in which PCI was operating for the Receivership Defendant.

    Moreover, the Receiver never received any funds from PCI or accounts held by PCI upon entry of the Freeze Order.

    Subsequent investigation unearthed a relationship between SecureNet and PCI, leading to a bank account at Eagle Bank that, even though it was held in SecureNet’s name, held approximately $812,433.96 (the “Eagle Bank Account”) in Receivership Assets. Upon its discovery, the United States Secret Service sought and obtained a seizure warrant to recover those funds. The United States Secret Service thereafter seized all of the funds contained in the Eagle Bank Account.

    At that time, PCI did not identify any additional accounts that were involved in the RVG transactions that PCI processed, and it represented that it did not hold any additional Receivership Assets. When the Receivership Team subsequently interviewed PCI’s counsel, the Receivership Team specifically asked about any additional accounts that held RVG [Rex Venture Group] funds or through which RVG funds flowed. PCI failed to identify any additional accounts.

    As the Receivership Team investigated further and obtained documents from PCI, the Receivership Team determined that PCI had collected approximately an additional $8.9 million over the two-month period in which they acted for the Receivership Defendant. This $8.9 million was held and/or distributed from Los Angeles Firemen’s Credit Union n/k/a Firefighters First Credit Union (the “Firemen’s Account”).

    PCI never paid any of the approximately $9.8 million in Receivership Assets it collected to the Receivership Defendant or the Receiver. Only $812, 433.96 of the $9.8 million in Receivership Assets has been recovered, and those assets were recovered solely through a seizure by the United States Secret Service.

    Moreover, PCI never informed the Receiver that it held such Receivership Assets. Instead, after the entry of the Freeze Order, PCI remained silent regarding the funds it held and i) withdrew or otherwise expended approximately $4.5 million of the Receivership Assets in the Firemen’s Account to allegedly pay certain processing fees, alleged fines, alleged chargebacks, and “commissions” to its insiders; and ii) converted the remaining approximately $4.5 million for its own uses (this $4.5 million was removed from the Firemen’s Account by PCI and has never been accounted for) on the alleged theory that such withdrawals were covered by the governing contracts, which the Receiver disputes, and their contractual rights are somehow superior to the express terms of the Freeze Order.

    And, Bell advised Senior U.S. District Judge Graham C. Mullen:

    “It is disingenuous for PCI to assert that it did not have notice of the Freeze Order or that it was not somehow constrained from dissipating the Receivership Assets in its care. It is beyond reason that PCI would not inquire as to why thousands of credit card transactions that it was processing and generated revenue of in excess of $4.5 million per month would suddenly cease. Moreover, the Receiver caused a notice reflecting the entry of the Freeze Order to be published across the United States. Finally, significant transfers from the account that held Receivership Assets just prior to and after the freeze order suggests that PCI was on notice of the freeze and was seeking to avoid the constraint to its revenue stream. Any assertion that PCI did not know of the pendency of the Freeze Order is absurd.”

    Bell further contended today that efforts by PCI to inject itself into the distribution plan proposed to the court in which distributions to victims would begin Sept. 30 should be short-circuited by Mullen.

    Bell said the receivership already has denied PCI’s claim.

    NOTE: Our thanks to the ASD Updates Blog.

  • If The Good Lord’s Willing And The Creek Don’t Rise, Be At The Zeek Rewards Auction On Dec. 16 And 17

    This commemorative poster of the concert Hank Williams never made it to is among dozens of items up for auction in the Zeek Rewards Ponzi scheme case.
    This commemorative poster of the concert Hank Williams never made it to is among dozens and dozens of items up for auction in the Zeek Rewards Ponzi scheme case.

    UPDATED 7:42 P.M. ET (U.S.A.) Not only is the court-appointed receiver in the Zeek Rewards Ponzi-scheme case selling Zeek’s old headquarters (with attached coin-operated laundry) in Lexington, N.C., he’s also selling a hefty collection of country-music memorabilia and other entertainment keepsakes. Among them is a “Saturday Night Live Script featuring Johnny Cash and musical guest Elton John from April 17th 1982.”

    There’s also a “Slam” grand piano with no working components and no top. The wooden shell is signed by Jerry Lee Lewis, a legendary keyboard pounder known as rock ‘n’ roll’s first wild man and “The Killer.” (Expect the piano to have “minor wood damage,” the receiver’s auctioneer says.)

    The screen shot above is taken from an image of just one of the items up for auction: a framed poster advertising an appearance by legendary country performer Hank Williams in Canton, Ohio, on New Year’s Day 1953. (The poster appears to be a Hatch Show Print commemorative, rather than an original show promo. Even so, some collectors might want it to round out their Williams collection or for discussion value: Williams died on the way to his scheduled Canton performance, and the “if the good Lord’s willing and the creek don’t rise” line is a classic American idiom.)

    Iron Horse Auction Company Inc. is conducting the auction for Zeek receiver Kenneth D. Bell. (See Day 1 auction items; see Day 2 auction items.)

    The live auctions will open in Lexington on Dec. 16 and 17 and will be simulcast online. Bidders must register at the site of proxibid. The catalog for Day 1 is here; the catalog for Day 2 is here.

    Day 1 items are described by Iron Horse as real estate (former buildings associated with Zeek), and as “Memorabilia from numerous country music artist[s], to include stage costumes by Nudie, autographed  pictures & prints of NASCAR personalities, shadow boxes, reproduced Hatch Show Prints; record label awards & more

    “Porter Wagoner, George Strait, Alabama, Willie Nelson, Kenny Rogers, Barbara Mandrell, Dolly Parton, Waylon Jennings, Charlie Daniels, Alan Jackson, Brooks and Dunn and many more.”

    Day 2 items are described by Iron Horse as “Like new bedroom suites, couches, living room furniture, office furniture, electronics and more.”

    Read receiver’s announcement of the auction. Visit receiver’s website.

  • RECEIVER: AlertPay And SolidTrustPay May Hold Additional Zeek Assets; Forensic Team Is Working ‘To Investigate And Seize These Funds’

    EDITOR’S NOTE: One way to read a report filed yesterday by the court-appointed receiver in the Zeek Rewards Ponzi-scheme case is as a warning manual that brings to life the kind of vexing problems HYIP schemes create for operators, vendors and participants — including “insiders.” Kenneth D. Bell’s report to Senior U.S. District Judge Graham C. Mullen of North Carolina strongly hints that the receivership has identified “key insiders.” Their names have not been published in court filings . . .

    recommendedreading1UPDATED 4 P.M. EDT (U.S.A.) Although early filings last year in the Zeek Rewards Ponzi scheme case suggested that offshore payment processors Alert Pay (Payza) and Solid Trust Pay held more than $40 million connected to Zeek, the court-appointed receiver has advised a federal judge that the two processors may hold even more than originally believed.

    Both AlertPay and SolidTrustPay operate from Canada. Their names appear constantly in Ponzi-board promos for fraud schemes. The companies’ names also have appeared in court filings related to various HYIP schemes, including the alleged $72 million Pathway To Prosperity fraud in 2010 and the $119 million AdSurfDaily fraud in 2008.

    In 2009, while the ASD case was still in the courts, some members of AdSurfDaily received mysterious “final refunds” from SolidTrustPay through an STP-connected email address of oceannamusic@xplornet.com. The purported pro rata refunds led to questions about whether some ASD members were benefiting at the expense of others while the case still was in the U.S. courts and whether ASD actually had money in SolidTrustPay under the name of a different company or a user other than President Andy Bowdoin. (See July 2009 post by PP Blog guest columnist Gregg Evans here.)

    Later, an emerging scam known as JSSTripler/JustBeenPaid purportedly operated by former ASD pitchman Frederick Mann began to use the offshore processors — amid claims from JSS/JPB pitchmen that they not only were recruiting for JSS/JBP, but also managing both the JSS/JBP accounts of their sign-ups and the payment-processor accounts of the sign-ups.

    Because HYIP schemes proliferate in part through the willful blindness of promoters and serial con artists, a situation has evolved over the years in which fraudulent proceeds circulate between and among scams and their individual promoters. “Alan Chapman,” a Zeek pitchman, also was promoting JSS/JPB and a follow-up scam known as “ProfitClicking,” for instance. Serial huckster “Ken Russo” also promoted Zeek and JSS/JBP — and many more schemes, including ASD and Profitable Sunrise, which the SEC described last month as a scam that may have gathered tens of millions of dollars.

    But a new filing by Kenneth D. Bell, the Zeek receiver, suggests that the receivership may seek to foreclose any after-the-fact opportunities for offshore processors to duck their responsibilities to the receivership estate and for holders of the offshore accounts to benefit from Zeek after the SEC brought spectacular allegations of Ponzi- and pyramid fraud against Zeek in August 2012.

    Zeek, the SEC said last year, was a $600 million fraud scheme that used at least 15 foreign and domestic financial institutions.

    A forensic accounting has led Bell to believe that “both Payza and SolidTrustPay may have additional Receivership assets.”

    In a report to Senior U.S. District Judge Graham C. Mullen, Bell said he is working “to investigate and seize these funds.”

    And, Bell advised Mullen, “[t]o the extent these entities allowed affiliates to withdraw funds after receiving notice of the Receivership, the Receiver may seek reimbursement of indemnification for the funds from the payment service providers.”

    If Bell somehow is able to foreclose chicanery involving serial Ponzi pitchmen and the scamming insiders with offshore accounts, it could go a long way toward minimizing the spread of fraud schemes over the Internet.

    Bell’s April 30 filing also reveals that the receivership has recovered $291,000 from a “merchant services account reserve” that had been held by American Express for Rex Venture Group, Zeek’s parent company. At the same time, it reveals that Bell — to date — has recovered $36,000 from Zeek net winners in prelitigation settlements. That number may grow. The deadline to enter into negotiations for a prelitigation settlement is May 31.

    More than anything, though, Bell’s report to the court showcases the enormous problems created by HYIP schemes. Among the problems outlined in the filing:

    Potentially costly and time-consuming litigation disputes for all parties. Zeek operator Paul Burks is claiming privilege on certain matters. Some Zeek “winners” have filed motions that could slow down the refund process for Zeek victims at large.

    Taxes: Zeek appears to have misclassified certain employees as independent contractors, which has tax ramifications.

    Incomplete records. Because of poor records at Zeek, some members who received 1099 tax forms from the receivership received forms that showed earnings either higher or lower than actual earnings. The receivership has prepared amended 1099s for certain Zeek members.

    Possible disputes with vendors. Bell’s report noted that USHBB Inc. asserted it was owed $878,856 by Zeek. USHBB produced video promos for Zeek. In September 2012, the PP Blog reported that Zeek once listed USHBB executive OH Brown as an employee. Meanwhile, USHBB once produced videos for a collapsed MLM scheme known as Narc That Car.)

    Clawback litigation: In the absence of settlements, the receiver potentially could file actions that involve thousands of Zeek affiliates in possession of ill-gotten gains from the scheme.

    Read the receiver’s April 30 filing. (Our thanks to the ASD Updates Blog for providing the filing.)

    Visit the receivership website.

     

     

     

  • 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.