Plastic Cash International demand $14.9M in Ponzi funds
Plastic Cash International LLC, who refer to themselves as one ‘of the prepaid industry’s most prominent players‘, was the credit-card processor for Zeek Rewards.
Plastic Cash International
processed credit card payments from affiliates for (Zeek Rewards).
The processed payments were deposited into an account to be held for the benefit of (Zeek Rewards).
Zeek Rewards, an $850 million Ponzi scheme, was shut down by the SEC back in August of 2012.
In a colossal display of due-diligence failure, Plastic Cash International got on board the Zeek Rewards Ponzi gravy train just two months before the company came crashing down.
Don’t let the short time-span deceive you though, Plastic Cash still collected at least $9.7 million dollars in processor fees and funds from Zeek investors.
That evidently however wasn’t enough, with Plastic Cash filing a claim with the Zeek Rewards Receivership in August of 2013.
Somewhat curiously, Plastic Cash wasn’t on the Receivership radar until the claim was filed. The claim itself didn’t specify a dollar amount Plastic Cash believed they were owed, only that the company was seeking ‘damages from the alleged breach of the contract between PCI and‘ Zeek Rewards.
PCI went on to assert that they
either held a security interest in the funds that (they) held for the benefit of (Zeek Rewards) or, in the alternative, PCI owned all of the amounts that it had collected for (Zeek Rewards) pursuant to its contracts with (the company).
PCI’s claim triggered an investigation by the Zeek Rewards Receivership, as the money PCI referred to in its claim was previously unknown to them.
The Receivership first looked at Zeek Rewards’ financial records, but did not find
any significant economic relationship between PCI and (Zeek Rewards) because no payments were made by PCI to (Zeek Rewards) in the two-month period in which PCI was operating for (the company).
Moreover, the Receiver never received any funds from PCI or accounts held by PCI upon entry of the Freeze Order.
The reason for that was because PCI were doing business with Zeek Rewards through a bank account held in the name of SecureNet, an unrelated “direct payment processor”.
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.
In subsequent communications between PCI and the Zeek Rewards Receivership following the seizure,
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 funds or through which RVG funds flowed.
PCI failed to identify any additional accounts.
And here’s where things get really interesting.
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”).
Not only were PCI caught out lying, it appears they were caught out using documents they themselves provided to the Receivership.
Bravo.
Note that to date, the $812,433.96 is the only money that has been recovered from PCI, for the purpose of distribution to Zeek Rewards’ victims. The identified $8.9 million PCI tried to hide from the Receivership remains at large.
And it gets worse…
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).
For those curious, the above quoted information comes from a reply filed by the Zeek Rewards Receivership to a response filed by PCI. In their response, PCI object to the Receivership’s recent request for authorization to pay Zeek Rewards’ victims.
The Receivership classes PCI as a “trade creditor”, and as such they are not entitled to ‘receive a distribution from the Receivership Defendant‘.
PCI disagrees, and assert that their claim, which now stands at $14.9 million, should be included in the same claim category as that of Zeek Rewards’ investor victims.
To that end, their response was filed on June 11th and asks for a denial of payments to any Zeek Rewards victims until the matter is resolved.
The Receivership argues that PCI’s request should be ignored, as it has nothing to do with payments to Zeek Rewards victims. Having pocketed $8.9 million already on top of the additional $14.9 million they are now asking for, the Receivership explains that they intend to
address the PCI Claim substantively through the Claim Determination process and through counter-claims that it is likely to assert against PCI for.
For their part in ‘perpetuating the Zeek Rewards Ponzi scheme“, the Receivership advises that Plastic Cash International’s claim
will be resolved through the Claim Determination process and future litigation.
Counter-claims that (are) likely to (be asserted) against PCI (include), without limitation, fraudulent transfers of funds to the accounts of PCI and related entities and individuals, violation of the Freeze Order, and its role in perpetuating the ZeekRewards.
Go get ’em boys.
Footnote: Our thanks to Don @ ASDUpdates for providing a copy of Plastic Cash International’s reponse, and the Zeek Rewards Receivership’s reply.
The fees that these payment processing companies charge are astounding.
With TelexFree’s payment processor, eWallet, there was a whole schedule of fees for everything including, but not limited to, a monthy account fee, a fee for tranferring money, a fee for wiping your ass, and a fee for breathing air.
No legtimate payment processors such as Paypal charge such a large number and amount of fees because they would not be able to compete if they did.
IMO, the only way these shady payment processors such as iPayout and Plastic Cash can stay in business despite charging these types of fees is by dealing with shady businesses and MLMs who are not permitted to do business with or are dropped by legitimate payment processors.
They turn a blind eye to the obvious signs of fraud and mismagement that are occuring so they can make money though the whopping fees they charge, and when the shady MLM goes down they act like they had no idea what was going on. Yea right!
That’s what you get for dealing with a bottom of the barrel payment processor.
I hope the receiver or Trustee for both Zeek and TF have a way to get after these payment processors and claim any revenue made from transactions with fradulent businesses.
Instead of giving PCI money, the authorities should get all the fees collected and other money back from PCI for the estate.
I have no doubt the Receiver is going to do just that. At the rate this is going, it will be 2-3 more years before the final distribution to the victims will be made; BUT it will be made.
Hard telling how many other $10 investors will think they can also file a claim for millions of dollars too. Even the world delusional does not cover these people and PCI.
It’s well known now that Telexfree was booted from any legitimate banks and had to go the payment processor route. GPG dumped them pretty quickly. I payout picked them up.
There are several great articles written here on BMLM about the relationship between Telexfree and Ipayout in regards to KYC ( knowing your customer) They claimed to have done their due dilligence and found Telexfree to be “A OK”.
They hired Kevin Thompson in Feb of this year, who apparently know’s the MLM business very well and he was going to go over their “client” list to provide guidence.
Apparently even he found Telexfree on the ok list of companies to work with since Ipayout didn’t shut Telexfree out until April of this year. Three months after Thompson signed on with them but ironically within days of the shit hitting the fan. Oooops that memo must have gotten lost….
To I payout: Kevin advises Ipayout to break ties with Telexfree. They may be an illegal business and you shouldn’t be working with them…..end
Kevin made comments here on BMLM and was part of discussion’s so he was aware of the “potential risk’s” that came with doing business with Telexfree. Many contributers here wondered why he would risk his reputation by putting on his high boots to tread in the shit pool of a company like Telexfree.
Another “professional” that may have looked the other way.
Thompson and Nehra are two peas in the same pod.
Kevin Thompson has criticized the MLM industry before, and AFAIK had never done deals with outright Ponzis, unlike “I see no Ponzi” Nehra who was involved in at least three Ponzi schemes that we know of.
So if they are peas in the same pod, that “other” pea must have fell into a swamp.
This is not really a defense of KT, but IMHO, he did exactly what he was hired by iPayout to do: to advise them on how much of “know your customer” rule would apply to the various schemes (shady or not) that iPayout deal with. He’s not hired to police the industry or “clean the rosters” of iPayout’s customer list.
TelexFree is a mess that everybody got splashed with. But KT’s way out on the periphery and at best, tertiary involvement with TF.
We critics often like to think that what’s obvious to us leads to snap decisions (it’s a scam, stop doing business with them). However, consider it from iPayout’s POV: TF was at one time moving up HUNDREDS OF MILLIONS a month.
Think of the amount of fees (and profit) that generated, since iPayout obviously charge higher fees than its competitors and banks for the “risk”! So as long as they won’t be “liable” iPayout may well do it for the $$$.
Remember, KT is a lawyer, and lawyers are essentially mercenaries: their skills go to the highest bidder
Kevin Thompson is simply more nuanced than Nehra. But when you peel back the onion a layer or two, they are cut from the same cloth.
Most notably, Kevin doesn’t think external sales are necessary, and couldn’t care less about tool scams. Same package, different ages.
Tex, maybe you can cover the Vemma tools that TINA (truth in advertising) dug up. It’s toolscam so I’m sure that’s right up your alley. 🙂