Zeek Receiver caught up in tangled Payza lawsuit
This one’s a bit messy, so bear with me.
Following on from our February article “How Payza & friends are screwing Zeek Rewards investors“, efforts to recover funds from Zeek Reward’s shady banking operations continue.
Our players in this story are:
- Payza – a payment processor synonymous with the MLM underbelly
- Payment World – a Hong Kong based merchant processor Payza used
- Banca Comerciala Victoriabank SA (VictoriaBank) – a Moldovan-based bank Payment World used to stash funds deposited into it by Payza and
- Bank of New York Mellon – a New York based bank that Victoria Bank holds a “correspondent bank account” with
Under contention is some $13 million dollars in stolen Ponzi funds, currently frozen via court-order in VictoriaBank’s Bank of New York Mellon account.
The story so far has seen VictoriaBank give the Zeek Receivership the runaround.
After following the money and tracing it to VictoriaBank, the bank turned around and told the Receiver there is ‘no evidence that this account and these funds are connected with RVG‘.
This despite a paper-trail showing Zeek Rewards processing the funds through Payza, who processed the funds through Payment World, who deposited the funds with VictoriaBank.
The Receiver suspects VictoriaBank has since transferred the funds off into Russia somewhere, so a court-order was sought to freeze the owed amount in VictoriaBank’s Bank of New York Mellon account.
Pending today’s updates, that’s where we’re currently at.
Their plans to make off with $13 million in stolen Ponzi funds thwarted, VictoriaBank are none too happy about the February freeze on their Bank of New York Mellon account.
On April 19th VictoriaBank filed a motion requesting the Receiver’s contempt motion against the bank be dismissed and the asset-freeze dissolved.
VictoriaBank claim to be “astonished” by the court’s decision, arguing that the US court has “no power” over them.
The Receiver thus not only flouted the fundamental requirements of due process, but also basic standards of international comity.
Points of contention rasied by VictoriaBank in their motion include:
- personal jurisdiction – “Victoriabank has no officers, directors, employees, agents, real property, offices, or branches in the United States”
- that the Receiver failed to “obtain a court delegation rendering the 2012 Freeze Order enforceable in Moldova”
- the funds frozen in the New York Bank of Mellon account “are not Receivership assets” and
- that VictoriaBank was not properly served prior to the court-ordered asset-freeze.
Point one doesn’t seem to be relevant, as through Payment World and Payza, VictoriaBank ultimately accepted funds as a result of Zeek Rewards’ business operations.
VictoriaBank has money in the US and so that money is what the US court ordered frozen. Had the court of improperly ordered funds frozen in Moldova, VictoriaBank would have no doubt had a laugh about it and continued to give the Receiver the run around.
Point two is also irrelevant, given the funds frozen are in the US. And anyway, despite VictoriaBank’s protestations, they ultimately accepted funds from the US.
Moldova or elsewhere, banks still need to abide by strict international regulations. Otherwise what, just launder stolen funds offshore and that’s that?
Point three is reminiscent of VictoriaBank’s previous claims about a lack of evidence. The Receiver has a paper-trail leading to VictoriaBank.
Prior to the asset-freeze VictroriaBank were smug in claiming, without any explanation or evidence to the contrary, that the funds the Receiver sought had nothing to do with Zeek Rewards.
Nor would they elaborate on the whereabouts of the funds.
Now that an equivalent amount has been frozen on US soil and VictoriaBank asked to explain themselves, once again they trot out the “this money has nothing to do with Zeek Rewards” statement.
Again, without a scrap of evidence to support their claim.
Point four suggests VictoriaBank’s lawyers don’t quite understand what an ex-parte filing is.
Had the Receiver of not filed a contempt motion against VictoriaBank, I have no doubt they’d still be giving him the runaround.
And it’s not just the Receiver VictoriaBank have been playing coy with.
In 2014 they were contacted by the Department of Homeland Security, who sought ‘assistance in the seizure of Payment World Moldova’s funds held at Victoriabank pursuant to the 2012 Freeze Order‘.
Victoriabank responded by indicating that Victoriabank could not comply with the 2012 Freeze Order because the order had never been rendered enforceable under the laws of Moldova through a court delegation.
Further, Victoriabank pointed out that the order made no reference to Victoriabank’s client (Payment World Moldova) and that the Receivership Defendant (RVG) identified in the 2012 Freeze Order was not and has never been a Victoriabank client.
Again, Payment World worked with Payza who Zeek Rewards used as a payment processor. But VictoriaBank don’t let facts get in the way of feigning ignorance.
Moldova might be a tax haven with loose laws regarding the return of Ponzi funds, however if you want to do international business as a bank, you can’t play dumb in perpetuity.
At least not without consequences.
With the court having already granted the Receiver’s contempt motion and freeze of funds, I suspect VictoriaBank’s motion will be denied. Hopefully not before the Receiver files a response, which should make for an interesting read.
Parallel to VictoriaBank challenging the Receiver, you also have Payza’s newly filed lawsuit against Payment World.
According to Payza,
In or about July 2014, while in possession of approximately $20,733,298.73 of funds belonging to Payza and its customers, Payment World, without any warning or notice, absconded with the money.
In contrast to VictoriaBank’s claims that they were under no obligation to freeze Zeek funds, Payza claim
in or about August 2012, one of Payza’s customers for its transactions, Rex Ventures, was the subect of a Securities and Exchange Commission enforcement acton and ultimately placed into a receivership.
As a result of the Receivership, funds held on behalf of Payza in Payment World’s Acquiring Bank, Victoria Bank were frozen.
That the funds were indeed frozen, despite VictoriaBank asserting otherwise, is based on Payment World CEO Roman Balanko’s telling Payza
all of Payment World’s funds in Victoria Bank are frozen but fail(ing) to substantiate his claims in any way.
Payza claims that $7.5 million in excess of Zeek funds were also frozen in the Payment World account, which was improper because said funds were “not subject to the freeze order’.
In or about July 2014, Payment World completely stopped distributing payments to Payza.
Since then, Payment World has repeatedly refused to provide Payza with any of the funds processed on its behalf.
Efforts by Payza to recoup the funds have been met with ‘nothing but excuses and delay tactics‘.
Payment World’s statements regarding the location of the funds and Payment World’s alleged inability to access them are a subterfuge aimed to further Payment World’s scheme to defraud Payza and withhold funds from their rightful owners.
The actions of Payment World were intentional, malicious and oppressive, sch as to warrant an award of punitive damages.
Should Payza prevail against Payment World, they have told the Receiver that Zeek’s funds out of the $20.7 million sought will be transferred to the Receiver.
A memorandum filed by the Receiver upon learning about Payza’s lawsuit however, suggests they’re having trouble serving Payment World.
Correspondence between the Receiver and David Pivtorak, one of Payza’s attorneys, revealed that
as of March 10, 2016, (Payza) had been unable to serve Payment World with the complaint.
On April 11, 2016, the Receiver’s counsel contacted Mr. Pivtorak to request a status update, but, by the time of this filing, had no received a response.
The Receiver also noted Payza had under-reported the amount of funds owed to the Receivership, with Payza citing the amount in question as $9.4 million (the correct total is $13 million).
Not content to take Payza’s attorney’s word that Zeek victim’s funds will be returned should they prevail, the Receiver has requested
a court order that any funds that Payza receives from Payment World up to the amount of $13,174,015.48, be immediately frozen and turned over the Receiver.
I’m not exactly sure how it’ll play out, but if Payza manage to squeeze $20 million out of Payment World, (who seem to have gone into hiding), that’ll probably negate the asset-freeze on the VictoriaBank account in New York.
How long the Payza litigation will take to resolve though remains a question, with it likely easier to release the frozen funds to the Receiver and have Payment World deal with VictoriaBank to satisfy a judgement against them in the Payza case.
Let the scammers deal with the scammers and give Zeek victims back the $13 million these dodgy operators are trying desperately to hold onto.
Due to the complexity of the issues at play, a decision on VictoriaBank’s motion and the Zeek Receiver’s memorandum is expected sometime over the next fortnight.
Payza’s lawsuit against Payment World was filed in January in California.
The Superior Court of Los Angeles however has its own login system with seemingly prohibitive costs for accessing case information. As such the current status of the lawsuit is unknown.
Footnote: Our thanks to Don@ASDUpdates for providing a copy of VictoriaBank’s April 19th Dismissal Motion and the Receiver’s April 12th Supplemental Memorandum.
Update 18th February 2021 – The Zeek Receiver’s second appeal has been denied, meaning Roman Balanko gets to keep the disputed $13.7 million.