zeekrewardsThanks to the diligent efforts of Don@ASDUpdates to catalog the vast swath of legal documents pertaining to Zeek Rewards litigation, much of what is discussed in the Receiver’s 4th quarter Status Report has already been covered.

In going over the 16 page report, filed on January 30th, there is however some new information that the Receivership shares.

We’ll start off with funds incoming over the fourth quarter. A series of legal proceedings are currently in progress to recover additional funds, but during the fourth quarter two sources contributed to funds incoming to the Receivership:

$3,977,188.96 turned over by e-wallet provider NxSystems, Inc. (and) $323,592.12 into the Settlement Account from settlements with net winners.

On the disbursement side of things,

the final approximately 7,000 claim determinations were issued to Affiliate claimants in the final quarter of 2014.

The total approximate number of claim determinations issued by the Receiver through the final quarter of 2014 was 175,000.

As of December 31, 2014, the Receivership Estate held approximately $90.7 million in the Affiliate Account, approximately $118 million in the Seized Asset Account, approximately $294,000 in the Pre-Filing Account, approximately $4.7 million in the Settlement Account, $0 in the Withholding Account, and approximately $1.1 million in the Holdback Account.

Some Zeek victims with succesful claims had funds withheld for tax purposes. That much we already knew, including the Receivership’s determination that the funds would not be needed.

58,000 checks sent out to victims who had funds withheld for tax purposes.

At the time, December 2014, the Receiver’s reasoning sounded a bit weak. Citing “a tax opinion from a professional”, the Receiver claimed it ‘persuaded (him) that tax withholding (was) not necessary‘.

The Receivership’s fourth quarter report clears the uncertainty of the above statement, revealing that

The Receiver Team had discussions with the Internal Revenue Service regarding potential withholding requirements. Eventually, the Receiver Team determined that there are no withholding requirements.

Why the Receiver didn’t reveal he’d spoken directly with the IRS earlier is unclear, but it would have gone over much better than “I spoke to some tax guy”.

Speaking of government agencies, although no specifics are provided, the report hints at ongoing investigations into third-parties who had dealings with Zeek Rewards.

The Receiver Team continued to assist various government agencies in their own investigations concerning the Receivership Defendant, principals, affiliates, and the entities and financial institutions that provided services to or transacted with the Defendants.

Some of these investigations are no doubt known to us via the various court filings made by regulators, others still I suspect we’ll see revealed later on in the year.

As for the Receivership, we certainly haven’t seen the last of litigation they intend to file:

In the quarter ending December 31, 2014, the Receiver’s conflicts counsel, Erwin, Bishop, Capitano & Moss, P.A. (“EBCM”) continued working to resolve claims against financial institutions arising from dishonored cashier’s checks, teller’s checks and bank money orders.

As of December 31, 2014, EBCM had resolved six claims pending completion of settlement documentation, and continued work on thirty-two active claims with a gross adjusted value of $465,668.

Discussions with responsible parties on the thirty-two remaining claims are at impasse such that litigation will be required to resolve these claims.

As a result, the Receiver has decided to pursue those claims through turnover / civil contempt motions under the freeze order.

The Receiver expects to file an initial motion in this regard within the next ten days.

Should be interesting to see the financial institutions giving the Receivership the run around named and shamed. Ten days puts us at February 9th, so keep an eye out for upcoming coverage of that.

A number of lawsuits filed by the Receivership are also currently pending before the courts, most of which are waiting on judgement. The first quarter of 2015 should see most of the pending litigation resolved.

As always, stay tuned…


Footnote: Our thanks to Don@ASDUpdates for providing a copy of the Zeek Receivership’s 4th Quarter Status Report.