Preferred Merchants wired $4.8M 19 mins after SEC call
I haven’t really been covering the battle between Preferred Merchants, COO Jaymes Meyer and the Zeek Rewards Receivership that has been quietly playing out for some time.
The only mention I’ve thus far made of the tussle was noting it briefly in the Zeek Receivership’s quarterly report for July.
Recent filings by the Receivership in the SEC’s case against Zeek Rewards however shed interesting new light on the situation.
For those unfamiliar with Preferred Merchants, the company acts as a gateway between its clients and third-parties providing access to
payment processing, a business loan or cash advance, a gift card program, a loyalty or rewards program, point of sale equipment, credit card terminals, any type of supplies, website hosting or development, a mobile website, a website store, restaurant online takeout or delivery ordering, ATM equipment, ATM services, equipment leasing, printing services, phone systems, phone services, promotional products, branded products, display racks or accessories, packaging, or any number of other products and services PREFERRED Merchants can provide.
Zeek Rewards was a client of Preferred Merchants and as I understand it they provided payment processing services to them.
At the time Zeek Rewards was shutdown by the SEC, Preferred Merchants had access to approximately $5.8 million of stolen Zeek investor funds.
One million of that has been recovered by $4.8 million remains outstanding, with Preferred Merchants fighting the Receiver in court and refusing to hand over the money.
Seeking a temporary restraining order against Preferred Merchants, the Receivership lays out exactly what went down on the day Zeek Rewards was shut down.
Attached as an exhibit, a declaration by James Buck, an Assistant Director with the SEC, alleges he contacted Jaymes Meyer on either August 16th or 17th – before the SEC freeze order was made.
On either August 16 of August 17, 2012 before the Freeze Order was entered, I contacted Mr. Jaymes Meyer of Preferred Merchants Solutions LLC as part of my efforts to notify banks, merchants, and payment processors associated with Rex Venture Group of the anticipated asset freeze and to request their cooperation in voluntarily and immediately freezing all Rex Venture Group accounts and assets.
During my first conversation with Mr. Meyer, I notified him of the anticipated asset freeze and requested that Preferred Merchants freeze any Rex Venture Group accounts and assets.
During this conversation, Mr. Meyer informed me that Preferred Merchants does not hold funds or accounts but, rather, acts as a broker to line up those in need of such service with those who provide it.
Mr. Meyer did not disclose the trust account for which Preferred Merchants was trustee for the benefit of Rex Venture Group, nor did he in any way indicate that he would soon request that $4.8 million and $1 million be transferred from that trust account.
How Meyer expected to get away with his deception is unclear, but the Receivership meanwhile is clearly having none of it.
The Receiver is filing this separate Motion for Temporary Restraining Order because he has received new evidence that definitively establishes that Preferred Merchants and Meyer
(1) knew of the asset freeze on August 16, 2012 before they directed the transfer of $4.8 million from RVG’s trust account to Preferred Merchants’ account;
(2) made material misrepresentations and omissions to the SEC regarding their custody and control over and transfer of RVG funds; and
(3) made material misrepresentations in their submission to this Court regarding the circumstances under which they received notice of the freeze and directed the transfers at issue.
Preferred Merchants have previously represented in court that
Discovery will show that Preferred Merchants initiated the process for the $4.8 million transfer one of two days before August 16.
That Preferred Merchants was unaware at the time it requested the transfer that RVG’s assets would be frozen the following day.
That the $4.8 milion transfer was completed by late morning on August 16th and (that) it learned on August 17th that governmental authorities had frozen RVG’s assets.
So who’s telling porky pies, the SEC or Preferred Merchants?
A timeline put together by the Receivership (backed by forensic evidence obtained from the SEC) reveals what went down:
August 16th 6:01 pm – 6:10 pm – Assistant Director James Buck calls Jaymes Meyer of Preferred Merchants and notifies him of the asset freeze. Buck requests Meyer freeze any RVG assets Preferred Merchants have access to or are currently in their possession.
Meyer tells Buck that Preferred Merchants is a broker, with the implication being that “the voluntary freeze was not applicable to Preferred Merchants”.
At no time during the call does Meyer disclose the trust account the company has access to, within which over $4 million of stolen investor funds is kept.
August 16th 6:29 pm (20 minutes after Buck phonecall) – Meyer emails Bay Area Escrow and requests they transfer $4.85 million dollars in stolen Ponzi funds to Preferred Merchants’ eTrade account.
August 16th 9:19 pm – Bank of the West (where the funds were held) creates entry to initiate wire transfer of $4.85 million.
August 16th 9:46 pm – Paul Burks send the following text message to Greg Caldwell (Zeek Rewards “acting” COO):
Jaymes Meyer is calling me wanting to know what is going on. I haven’t responded.
Guess all ER (sic) can do now is dodge thr (sic) calls until there is a final dispositions (sic).
August 17th 11:49 am – Meyer sends another email to Bay Area Escrow and requests they wire another $1 million from the Zeek Rewards trust account to Preferred Merchants’ lawyers Barnes & Thornburg
He also requests they “close incoming and outgoing ACH until further notice”.
August 17th 12:28 pm – 12:29 pm – The first $4.85 million wire transfer is approved, released and confirmed.
August 17th 3:52 pm – 3:54 pm – Greg Caldwell send a text message to Paul Burks:
I called Joey Adair and Larry Cohn yo (sic) tell them last night. Asked Joey to let Jaymes know since he rarely answered his phone.
I did so to tell them to protect and preserve the assets to expect to hear from the Feds
Joey offered their considerably legal team if we needed it any both offered any help in getting reports as to balances, etc.
Between 3:54 pm and 5:00 pm, the SEC’s requested freeze order was entered.
August 17th 5:00 pm – 5:11 pm – Bank of West creates entry to initiate $1 million wire transfer. The transfer is approved, released and confirmed by 5:11 pm.
August 17th 7:26 pm – Agent Buck calls Meyer and leaves a voicemail informing him that the Freeze Order has been entered.
August 17th 11:00 pm – Joey Adair emails Paul Burks, Greg Caldwell, and Dawn Wright-Olivares, stating, in relevant party, that all banking and processing relationships are intract but frozen until word is given to re-open and offers the dedication of Preferred Merchants’ significant legal resources to assist if needed.
No mention is made of the $4.85 million of $1 million transferred to Preferred Merchants and its counsel. /end timeline
As the Receivership points out,
The evidence establishes that Preferred Merchants and Meyer directed the $4.8 million transfer from the RVG trust account to Preferred Merchants’ accounts just 19 minutes after the SEC told them about the asset freeze and imminent shutdown of RVG.
This is unlikely to be a coincidence.
No shit it isn’t… Meyer’s been caught with his pants down.
Indeed, when the SEC notified Preferred Merchants and Meyer of the anticipated Freeze Order and requested assistance in immediately freezing all RVG assets, Meyer informed the SEC that it did not maintain custody and control over RVG assets, failing to disclose that it had custody and control over RVG assets as trustee of the RVG trust account.
Once Meyer and Preferred Merchants had raided the Zeek Rewards piggy bank, ‘only then did (they) belatedly instruct the escrow agent for the trust account to stop all incoming and outgoing transfers from the trust account.’
Not only did Meyer fail to tell the SEC about his custody and control over RVG assets, Meyer also failed to disclose that he anticipated making any transfers, or, after the transfers were executed, that he had done so.
Had Meyer disclosed to the SEC during the initial August 16th phone call that Preferred Merchants and Meyer had control over RVG assets or that they intended to transfer over $5.8 million in assets from the trust account, the SEC and Receiver could have taken immediate steps to ensure that these funds were secured.
Similarly, the funds could have been promptly secured if the transfers had been disclosed during Preferred Merchants’ and Meyer’s subsequent communications with the SEC and the Receiver.
Preferred Merchants and Meyer thus obstructed and delayed the SEC’s and the Receiver’s efforts to secure the assets.
Arguing that ‘there is simply no public interest in allowing Preferred Merchants and Meyer the opportunity to hide or dissipate the transferred funds instead of having the funds secured and segregated pending further order of the Court,’ the Receivership have requested a temporary injunction against Meyer and Preferred Merchants be granted.
When are these Ponzi insiders going to learn you don’t get to keep funds you steal from your victims?
No matter how clever you think you are, forensic investigation is smarter and will catch up with you eventually.
Irrespective of whether the Receivership’s injunction is granted or not (let’s face it, in light of the evidence presented it’s going to be granted), one would hope there were some additional penalties dished out to Meyer and Preferred Merchants at some point.
They’ve lied, wasted the Receiver’s time (which costs victims) and purposefully sought to obstruct the recovery of stolen investor funds. What a farce.
Footnote: Our thanks to Don @ ASDUpdates for providing a copy of the Receiver’s “Motion for Temporary Restraining Order” and accompanying filings.
Update 1st November 2014 – The requested Temporary Restraining Order against Preferred Merchants and Jaymes Meyer has been granted.
Preferred Merchants Solutions, LLC (“Preferred Merchants”) and Jaymes Meyer (“Meyer”) are directed to immediately deposit with the Receivership $4,854,010.40, which is the amount they transferred from RVG’s trust account after the SEC notified them of the asset freeze and requested that they freeze all RVG accounts and assets.
The injunction has been granted till a hearing on November 12th.
Looking at the Judge Mullen’s remarks above, it would seem he’s accepted that Preferred Merchants transferred the stolen funds after the SEC contacted them.
Should be fun reading about them defending the transfer in light of the forensic evidence against them. Stay tuned…