Zeek Receivership’s 4th Quarter 2014 Fees & Expenses report
Intended to be a summary of the financial status of the Zeek Receivership as of December 31st 2014, the Reciever’s latest fees and expenses report nonetheless provides us with some new tidbits of information.
The report comes in at thirty-one pages in length, with much of what is presented having already been reported on here at BehindMLM (check our Zeek Rewards archive articles between October and December 2014).
Due to the size of the report, for simplicity’s sake I’ve broken it down into new information under various subheadings below.
One of the long-running issues in the Zeek Ponzi cleanup has been that of cashiers checks sent in by affiliates.
Prior to the shutdown, Zeek Rewards held a large number of uncashed checks. After the Receiver was appointed these became property of the Receivership (Rex Ventures Group).
Trouble is a number of investors panicked following the SEC shutdown, and had their banks dishonor the checks.
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.
In an effort to resolve these issues, a claims process was set up to initiate a dialogue between the Receivership and financial institutions who dishonored the checks in question.
EBCM also assisted the Receiver by preparing and administering claim stipulations for eligible banks and related parties that paid money to the Receivership to resolve claims for dishonored instruments after the court-authorized extended December 1, 2013 claims deadline for certain financial instruments.
As of December 31, 2014, claim stipulations are complete or in process for thirty-two financial institutions.
Thirty financial institutions that are potentially eligible to file claims against the estate did not respond to the Receiver’s invitation to enter into a claim stipulation.
The Receiver is at an impasse in negotiations with several banks over the cashier’s check claims.
As a result, the Receiver has decided to pursue those claims through turnover / civil contempt motions under the freeze order.
Expect those lawsuits to hit sometime later this year.
Payza currently hold $13.2 million in Zeek Rewards funds, which the Receiver continues to negotiate the return of.
With regard to the approximately $13.2 million outstanding from Payza and/or Payment World, the Receiver Team met and conferred with Payment World’s counsel, seeking the production of outstanding information and documents responsive to the Receivership’s subpoena and information about individuals who may have information to assist in recovering the assets from VictoriaBank in Moldova.
The Receiver Team also continues to pursue avenues of communication with and options to recover assets directly from VictoriaBank in Moldova and will continue to explore all available options in its efforts to recover the outstanding funds.
In November 2014 the Receiver sued the top Zeek Rewards Canadian net-winners.
The Receiver worked closely with Canadian counsel and an investigation firm to locate and serve the defendants with legal process.
The Receiver obtained entries of default against eight Canadian net winners. Two of these net winners subsequently
settled with the Receiver.
The Receiver is pursuing default against the remaining defendants who have failed to answer the Amended Complaint and will file these motions in the first quarter of 2015.
BehindMLM reported on default judgement granted against Canadian net-winners in early January.
Settlement with Zeek Rewards insiders
The Receiver has now settled with each of the defendants named in the lawsuit against insiders of the ZeekRewards scheme other than Darryle Douglas, against whom the Receiver has obtained a default judgment.
Other Zeek Rewards insiders first named back in March of 2014 include Paul Burks, Dawn Wright-Olivares and Roger Pyler.
Lawsuit against Kevin Grimes and Grimes & Reese (now R&R Law)
In June 2014 the Zeek Receiver sued Kevin Grimes for “legal malpractice”.
Grimes, a well-known MLM attorney, was paid almost a million dollars to assist Zeek Rewards.
In the Receiver’s action against attorney Kevin Grimes and his former law firm and business entity, the defendants filed motions to dismiss.
The Receiver filed responses in opposition to these motions to dismiss, and the Court is in the process of resolving these motions. The parties are now discussing the prospects of a settlement conference, which may occur during the first quarter of 2015.
I’m not sure whether that conference has as of yet taken place.
Lawsuit against Howard Kaplan
Filed around the same time as the Kevin Grimes lawsuit, the Zeek Rewards Receiver also went after Howard Kaplan for “legal negligence”.
In the Receiver’s lawsuit against attorney Howard Kaplan, the Court is in the process of resolving the defendant’s motion to dismiss.
The Receiver will pursue discovery in this matter during the first quarter of 2015.
The Receiver seems pretty confident that Kaplan’s Motion to Dismiss will be denied.
For anyone interested, here’s the financial status of the Zeek Rewards Receivership as of December 31st, 2014:
$323,592.12 (was deposited) into the Settlement Account from settlements with net winners.
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.
Personally I’m looking forward to the conclusion of the Grimes and Kaplan lawsuits, as well as the check issue with the banks.
Whether or not the Receiver can get back the $14.2 million Payza are holding on to should also be interesting to watch.
One thing I hope we might see resolved by the end of the year is the US clawback litigation. Two of the designated Class Representatives are heading towards default judgement, will we see others settle if it’s granted?
As we barrel on towards the third anniversary of the Zeek Rewards Ponzi shutdown, as always – stay tuned…
Footnote: Our thanks to Don@ASDUpdates for providing a copy of the Zeek Receiver’s 2014 Fourth Quarter Fees and Expenses Report.