NxPay claim they don’t have funds to pay Zeek Receiver
Mostly losing their battle to retain stolen Ponzi funds, payment processor NxPay was recently ordered to surrender $9 million dollars to the Zeek Rewards Receiver on June 1st.
The funds are to be held by the Receiver until the legal dispute between the two parties is resolved.
Just one problem though…
NxPay now claim they don’t have $9 million to hand over.
Having filed a Motion For Reconsideration on June 8th, NxPay claims it
does not have in its possession or control the amount necessary to fully comply with the financial portion of the Court’s Order of June 1, 2105 (and) is financially unable to meet such a financial obligation.
Nevertheless, in order to comply with the Court’s Order to the extent it is capable, on June 8, 2015, NxPay has made arrangements to wire transfer $1 million dollars to the Receiver’s account.
While $1 million dollars is not the full amount required to be transferred by the Court’s Order, it is a substantial amount.
Substantial in what context? $1 million represents just 11% of the amount NxPay were ordered to turn over.
The problem, according to a declaration filed by Michael Busher, Chairman of the Board of Directors at NxSystems, is that NxPay paid out the stolen Ponzi funds to Zeek investors.
Automated chargebacks were also an issue, with Busher explaining
as a result of the freeze, thousands of account holders obtained “charge backs” of monies in their accounts through their banks.
In other words, they bypassed NxSystems after learning of the freeze and pulled the money out of their account in violation of the freeze. NxSystems had no control over these charge backs.
An account holder can pull back these funds directly with their bank online.
It is similar to a credit card dispute in which a credit card charge is withdrawn when a customer disputes a charge with a merchant.
Unlike a credit card dispute, however, we are not contacted by the bank regarding the dispute. The money is taken out instantly—automatically—and we may not learn about it for a considerable time.
The ACH processor will receive this information and some amount of time may pass before we become aware of it.
Because this freeze caused such a disruption, our relationship with LST became strained and we did not learn of some charge backs for approximately a year and a half.
When word of this freeze circulated to the account holders, a flurry of charge backs occurred to circumvent the freeze.
M’aww, poor them. How terrible that NxPay decided acting as a payment processor for an $850 million Ponzi scheme and now it’s come back to bite them in the ass.
Payment of this partial amount presents a significant financial hardship to NxPay, whose business has steadily declined since being associated with this case and RVG’s wrongdoing and the loss of prior banking relationships.
Oh the humanity!
WHEREFORE, based upon the foregoing, the undersigned respectfully moves the Court for partial relief from the Court’s June 1, 2015 Order to the extent that the amount required to be paid to be frozen by the Receiver be reduced to the amount of $1 million dollars.
The matter now sits before Judge Mullen. Should he deny NxPay’s Motion, what happens next should be interesting.
Ditto should NxPay ultimately lose the dispute and be ordered to forfeit the $9 million in question. Where’s that money going to come from?
Meanwhile payment processors who think it’s a good idea to get into bed with Ponzi schemes take note, this is what happens when the scam goes bust.
You can feign all the ignorance you want, but ultimately you and you alone are going to have to cough up every last dollar.
Footnote – Our thanks to Don@ASDUpdates for providing a copy of NxPay’s June 8th Motion for Reconsideration (Partial Relief).
as are not unsubstantial penalties which are imposed by the credit card companies and banks.
I foresee a ‘bankruptcy’ in their future to try and get away with this.
The NX explanation holds no water, unless they can PROVE, through DETAILED accounting (i.e. how much was charged back) and provide all the transactions.
In cases of chargeback, if the transaction was fraudulent, the merchant is generally held “solely responsible”.
Furthermore, the merchant is provided at least one opportunity “remedy” the chargeback, and the chargeback CAN be denied. The “instant and irreversible” chargeback doesn’t exist in a regular merchant account that takes credit cards.
(See link below, section “chargeback process”)
Being a payment processor, perhaps someone familiar with the payment processing industry can explain how NXSystem fits into the process…
Do they act as “bank” for RVG? And if they accepted ALL chargebacks as legitimate, they are supposed to PROVE such and TELL the receiver “I don’t have 9 mil that you think I do and here’s why”. Right?
What’s far more likely to have happened is that NXSystems did something similar to PlasticCash: they levied so much fines and fees on the RVG account (due to the chargebacks that WERE paid out) the account had been depleted.
They know they can’t justify the fines and whatnot if they are called to show cause, so they’re trying to play these legal shenanigans to hide the fines and fees.
IMHO, of course.
NOLINK://www.dalpay.com/en/support/chargebacks.html
True, except for the fact using a “third party” payment processor is a different kettle of fish.
A third party payment processor falls into the category of “Third party payments aggregation (TPPA)”
IOW, they facilitate the exchange of money between two parties, and are selling a product they do not own.
When chargebacks are initiated, the issuing bank will credit the cardholders account and merchant processor will in turn try to debit the merchant’s account which does not have any money, leaving the processor to carry the can ( and the penalties )
Which is exactly why the Card Associations have discouraged the practice of TPPA and the increased risk, and most merchant account providers are justifiably reluctant to underwrite these types of accounts.
So you’re telling me that payment processors don’t bother investigate the dispute EVER because they can charge extra fees for the dispute.
So it *is* the same as Plastic Cash, except it wasn’t as egregious as outright taking the money.
If so, why don’t Nx have records to prove such fees and whatnot to account for chargebacks and such?