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.
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.