The Zeek Rewards Receiver is one step closer to recovered $13.1 million in stolen investor funds, following the reversal of a District Court decision.

The Receiver has been locked in a struggle with Payza, Payment World and VictoriaBank since February, 2016.

In a nutshell, Payza laundered $13.1 million dollars invested by Zeek affiliates through PaymentWorld, who in turn laundered it through VictoriaBank.

Unable to access the $13.1 million held abroad, a freeze order was granted on $13.1 million VictoriaBank held in a US account at the Bank of New York Mellon.

VictoriaBank sought do dismiss clawback proceedings against it, by claiming the court had no jurisdiction over it.

The Receiver appealed the decision and managed to keep the seized funds frozen while the appeal was decided.

Following oral arguments last October, the Fourth Circuit published its decision on March 26th.

The District Court’s finding for lack of jurisdiction was based on a lack of evidence presented by the Receiver.

The problem is the same court also denied the Receiver full discovery, permitting the Receivership to access information only via subpoena and the deposition of Roman Balanko.

Balanko is the owner of PaymentWorld and believed to the primary beneficiary of the $13.1 million in stolen funds.

In his appeal, the Receiver argued

the district court erred in applying a preponderance of the evidence standard to prove jurisdiction at this preliminary stage.

The Fourth Circuit agreed with this position, reasoning that because “full discovery” did not occur, the Receiver didn’t have to satisfy the burden of showing personal jurisdiction during the preliminary stages of the case.

Mind you, it’s not that the Receiver can’t meet prove personal jurisdictional at a later date.

The current issue is that without access to full discovery, the Receivership lacked ‘meaningful information regarding Victoriabank’s contacts and business dealings with the United States‘.

Accordingly, we find that the district court erred in requiring the Receiver to prove personal jurisdiction by preponderance of the evidence because it substantially curtailed jurisdictional discovery.

We leave it to the district court in the first instance to determine
whether to review the parties’ initial filings and apply the lower standard of proof or permit additional discovery to create a fuller evidentiary record before requiring the Receiver to prove jurisdiction by a preponderance of the evidence.

If the District Court grants additional discovery, I imagine the Receiver will know what to request in order to satisfy the personal jurisdiction burden.

The Fourth Circuit points out that if the District Court instead opts for lowering the standard of proof,

it “must construe all relevant pleading allegations in the light
most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction.”

Either way it seems the $13.1 million clawback case is back on schedule.

For the reasons stated above, we reverse the district court’s dismissal of the freeze order against Victoriabank and remand for further proceedings consistent with our opinion.

VictoriaBank is either going to have to open the books to the Receiver or the District Court will accept what has already been submitted and proceed.

The Fourth Circuit’s decision was published as a non-binding precedent on March 26th.

The reversal has been recorded on the District Court case docket on March 27th.

It is expected proceedings will commence after the Easter break.

Stay tuned…


Update May 24th 2018 – On April 9th VictoriaBank challenged the appeal decision with a petition for a rehearing.

On May 22nd the petition was denied.