WCM777 Receiver’s 8th Interim Report (4th quarter, 2015)

As part of her court-appointed Receivership duties, Kristina Freitag has filed an eighth interim report.

The report spans the Receivership’s activities during the fourth quarter of 2015.

Some of the developments such as the settlement with Phil Ming Xu’s family BehindMLM has already covered, but there’s also some new stuff we haven’t seen too.

As per the eighth interim report, the WCM777 Receiver has focused on

(a) implementing Phase I of the investor claims process

(b) completing negotiations to resolve three receivership assets/claims – assignment of the WCM Resources oil and gas interests, settlement of the claims against Sue Wang, et al., and sale of the Frequency Networks stock;

(c) monitoring other assets and claims, and

(d) selling the remaining real property assets.

Real Estate

The WCM777 Receiver is currently engaged in the selling off of numerous properties Phil Ming Xu acquired.

A potential buyer for a warehouse in El Monte, California was lined up but pulled out. A backup buyer was found in January 2016.

The sale is currently awaiting court approval with a hearing scheduled for April 25th.

The Glen Ivy Golf Course in Corona, California has been sold off with approval from the court.

A land plot in Santa Barbara County, California received an “extremely low verbal offer” the Receiver “is not prepared to accept”.

To help improve the marketability of this property, the Receiver is seeking proposals from water management companies to investigate the site wells in order to offer an opinion as to the suitability of the well to provide water for agricultural and various other purposes.

Upon completion of this process, the Receiver will work with the broker to determine the appropriate pricing for this asset.

The PMX Jewels diamonds

Why Phil Ming Xu invested in flawed diamonds we have no idea, but the Receiver has been working to sell them off for some time.

The Receiver is advised that the Los Angeles diamond cutter received the special wheels ordered from Israel; however, such wheels were not strong enough to complete the polishing and cutting of the stones.

A master gemologist appraiser in Los Angeles who was engaged to ultimately assist with marketing and selling the (flawed) Diamex Diamonds upon completion of the polishing and cutting process is currently conferring with the diamond cutter to determine what, if anything, can be done with the stones at this point.

When appropriate, the Receiver will seek further orders from this Court regarding the disposition of the Diamex Diamonds.

Oil & gas leases

Another poor investment by Xu was oil and gas leases in Texas and Louisiana.

Following “very disappointing results” in Louisiana and no results in Texas, the Receiver assigned ‘them to others involved in the projects‘.

This was done to ‘recover some value … and minimize the Receivership’s exposure to claims relating to the projects‘.

The court approved the motion to assign the leases on February 3rd, 2016.

Governmental Impact & James Dantona

Governmental Impact & James Dantona received $40,000 in stolen Ponzi funds, purportedly to provide Phil Ming Xu “access to US politicians”.

In April 2015 a settlement agreement was approved by the court, with Governmental Impact and Dantona continuing to pay back the Receiver.

Dantona has continued to make monthly settlement payments to the Receiver, which payments are secured by a deed of trust encumbering real property owned by Dantona.

Late in the first quarter 2016, the Receiver learned that Dantona secured a buyer to sell the property securing the monthly settlement payments, which sale is anticipated to generate sufficient proceeds to fully pay off the remaining balance of the monthly settlement obligation.

The Receiver is in communication with escrow regarding payoff of the settlement from the sale proceeds and is informed by escrow that sale will close around mid-to-late April 2016.

Zayda Aberin and ZHB International Corp. were named defendants in recovery efforts pertaining to Governmental Impact, however they failed to enter an appearance to defend the action.

Their defaults were entered, and, on the Receiver’s motion, a default judgment was entered against them for $325,000.

Since the default judgment was entered, the Receiver’s counsel was contacted by counsel purporting to represent Aberin and ZHB to discuss the judgment and possible settlement based on claims that Aberin and ZHB have limited net worth and no significant assets or equity in their home.

While Aberin and ZHB produced some documents, said production was deficient in making a determination.

Additional documentation and information was thus requested and the Receiver is awaiting receipt of these documents and information.

Gee, I wonder what they were hiding. Couldn’t be Aberin and ZHB’s actual net worth and significant assets could it?

While settlement discussions may proceed, Aberin and ZHB have since filed a number of motions with the Court seeking to set aside their defaults, but these motions have each been stricken by the Court for procedural deficiencies.

Pursuant to discussions with Aberin and ZHB’s counsel, the Receiver’s counsel is informed that Aberin and ZHB intend to re-file their motion.

However, and as of the date of this submission, no such motion has been filed.

Notwithstanding their intent to seek relief from default, Aberin and ZHB are continuing in their discussions with the Receiver and her counsel for a possible settlement.

Update on Phil Ming Xu’s family settlement

As per a settlement agreement reached earlier this year, Phil Ming Xu’s sister and mother will return $1,125,000 in stolen Ponzi funds to the WCM777 Receivership.

The Wang Defendants have since made an initial $50,000 payment. The Receiver is awaiting payment of the remaining $1,075,000, which is due within 60 days of the approval order.

If full payment is not received by the deadline, the Receiver will proceed to foreclose on the three properties securing the settlement obligation via the deed of trust recorded as part of the settlement.

Evidently Phil Ming Xu’s family are a bit cash-strapped, with a proposal made a few weeks back to sell two of the three properties in question.

On April 6, 2016, the Wang Defendants proposed a sale of two of the three properties which serve as collateral for their settlement obligation to pay down a portion of the remaining settlement obligation.

The Receiver, through her counsel, is in communications with counsel for the Wang Defendants to provide instructions to facilitate the proposed sales and payment to the receivership.

My guess is the Wang’s hope the sale of two of the three properties will raise enough to pay off the settlement – leaving them one house to live in.

I don’t think it’s going to be enough, which will see all three properties sold off and Phil Ming Xu’s relatives tossed out into the street.

Seeing as the properties were likely purchased with WCM777 investor funds, I have no sympathy for them whatsoever.

Victim claims process updates

Following phase 1 of the victim claims process, the WCM777 Receivership received ‘over 35,000 claims representing over 72,000 investments‘.

The current “cash book balance” held by the WCM777 Receivership stands at $20,328,686.

Having served ‘subpoenas on certain institutions, individuals, and entities’, recovery efforts continue.

The Receiver also recommends continuing to explore whether there are third parties who aided Xu in connection with this enterprise.

The Receiver will continue to evaluate whether such third parties should be liable for damaged caused to the Receivership Entities and their investors.

Stay tuned…