56.7% of Zeek Rewards ROI payouts recovered
In the Zeek Rewards Receiver’s third quarter report for 2013, a “settlement conference” was proposed for January 27th, 2014. This date was later granted, however as of yet there’s been no word on how it went down.
Filed on the 30th of January 2014, the Receiver’s fourth quarter report for 2013 makes no mention of the conference, however there is an update on pending clawback litigation and ongoing settlement negotiations with Zeek’s top affiliates.
The Receiver filed a Request for Leave to Institute Actions and For Order Setting Initial Conference on December 11, 2013. The Court granted the Receiver leave to institute clawback actions on December 19, 2013, allowing the Receiver to file clawback actions at an appropriate time in the coming weeks.
Nearly eighteen months into the life of this Receivership, the Receiver is on the brink of filing the first legal actions.
Whereas it seems those affiliates who believe their Ponzi returns are rightfully theirs will battle it out in court (and eventually lose), other net winners chose to settle with the Receiver in the fourth quarter:
The Receiver entered into settlements with 10 additional net winners during the fourth quarter, bringing the total number of settlements to 179.
These additional 10 settlements total $545,300 on $892,549 in net winnings (61.09%).
A 61% recovery might seem a bit low, but for affiliates who lost money it’s at least some funds that will ultimately be returned to them. In total, the current recovery percentage from Zeek’s net winners stands at 56.7%.
Also clarified is the current status of the Receiver’s efforts to recover funds held by payment processors:
The Receiver continued during the fourth quarter to investigate the financial information of the Receivership Defendant and to marshal, identify, and secure potential assets of the Receivership Estate.
Coordinating with the United States Secret Service (“USSS”), the Receiver Team continued to work with various e-wallet vendors, payment processors, and financial institutions.
On November 8, 2013, the Receiver deposited $855,532.84 seized by the USSS from LST Financial, a payment processor for e-wallet provider NxSystems, Inc.
On December 18, 2013, the Receiver deposited $5,374.32 from the return of gift cards that were found at the Rex Venture Group facility.
On December 24, 2013, the Receiver deposited $1,181,253.29 seized by the USSS from First Premier Bank, which had been holding the funds for check processor Western Clearing Corporation.
The Receiver also deposited a net total of $2,414,294.84 into the Affiliate Account during the fourth quarter, which is comprised of payments from various financial institutions for checks and other instruments on which payment had previously been stopped.
Specifically singled out later in the report are NxPay, Payza and SolidTrustPay:
The Receiver obtained additional information, including detailed transactional data, from NxPay and Payza to allow FTI to reconcile the flow of funds and confirm any outstanding amounts, including any improper transfers or withdrawals of Receivership Assets.
With respect to NxPay, the Receiver Team identified an outstanding amount of approximately $12 million, which includes a previously-unaccounted for $6.7 million transfer to NxPay’s account and additional funds that were not turned over after the Freeze Order was entered.
In addition, as discussed in the section on Foreign Accounts below, the Receiver Team has analyzed the additional information received from Payza, updating its reconciliation to determine an outstanding amount of approximately $13 million.
The Receiver Team obtained detailed transactional data from Payza to assist in the
reconciliation of the outstanding funds associated with the previously reported foreign account.
Based on our records and analysis to date, the funds outstanding that are being held in this foreign account total approximately $13 million in Receivership Assets.
The account holder is the foreign affiliate of the payment processor that facilitated the flow of funds. The Receiver continues to investigate the relationships and flow of funds between these entities and to work with these entities and government officials to recover these funds.
The Receiver Team (also) continues to investigate Solid Trust Pay to determine whether there are outstanding funds to pursue.
The mention of Payza is of particular interest, as they recently cut off their US clients from their funds under particularly murky circumstances. To date nobody US government agency or Payza themselves have clarified exactly what led up to Payza’s business operations being abruptly halted in the US.
The hard numbers closing out 2013?
As of December 31, 2013, the Receivership Estate held approximately $89.7 million in the Affiliate Account, approximately $230.9 million in the Seized Asset Account, approximately $466,000 in the Pre-Filing Account, and approximately $2.1 million in the Settlement Account.
No additional word on when affiliates will start to see their funds returned to them, but I imagine after the Receiver has wrapped up its payment processor and clawback litigation finally begins, that it won’t be much more of a wait.
Anybody still investing in MLM Ponzi schemes (you know who you are), and the payment processors handling money for the companies would do well to take note. If your scheme manages to take off and break into the mainstream, this is what happens.
Update 3rd February 2014 – More of an aside than an update, Zeek’s COO Dawn Wright-Olivares and stepson Daniel will be appearing in court this Wednesday.
(Wright-Olivares) will appear in federal court Wednesday, along with her stepson, 31-year-old Daniel Olivares, who’s pleading guilty to securities fraud conspiracy.
U.S. District Court spokeswoman Lia Bantavani says prosecutors couldn’t discuss details of the case because it’s an ongoing investigation.
Both Dawn Wright-Olivares and Daniel Olvares have already plead guilty for their part in the operation of Zeek Rewards.