Zeek Rewards Receiver files 2016 third quarter Status Report
With Paul Burks is going to jail and the SEC’s case against Zeek Rewards resuming shortly, the Receivership is all but winding down.
Pretty much all that’s left is getting $13.1 million dollars back from Roman Balanko and seeing through net-winner litigation.
Roman Balanko and PaymentWorld
In a nutshell, Roman Balanko used PaymentWorld to steal $13.1 million dollars from Zeek Rewards victims.
The money has purportedly been laundered through Russia, with the Receiver attempting to get it back.
As a precaution, $13.1 million of money held in a VictoriaBank account in the US has been frozen.
During the third quarter, the Receiver subpoenaed and received additional data and documents from PaymentWorld and PaymentWorld CEO Roman Balanko, much of which had not been produced in response to the Receiver’s prior subpoenas and requests for information.
The Receiver also deposed Roman Balanko, obtaining information relevant to the processing relationship and transfer of funds after the Court’s Freeze Order.
The Receiver has also issued subpoenas to BNY Mellon, which holds VictoriaBank’s correspondent bank account, and Deutsche Bank Trust Company, which was involved in certain wire transfers as part of the Payza/PaymentWorld processing relationship.
The Receiver Team is working with these entities to obtain the requested information in the most efficient and cost effective
Upon completion of this additional discovery, the Receiver will work with VictoriaBank to set a briefing schedule on supplemental briefing for VictoriaBank’s Motion to Dismiss and a hearing date on VictoriaBank’s Motion to Dismiss and to address future proceedings in connection with the Receiver’s Contempt Motion.
Balanko really doesn’t want to give up the $13.1 million, so it’s looking like a court order is the only way it’s going to happen.
Paul Burks’ sentencing hearing
Paul Burks, owner and operator of Zeek Rewards was convicted of mail, wire and tax fraud back in July.
His sentencing hearing has yet to be scheduled but when it is, the Zeek Receiver intends to make an appearance.
The Receivership Team collected statements and information regarding these hardships from numerous victims of the ZeekRewards scheme.
The Receiver used these statements and information to appear as Special Master and represent the victims of the ZeekRewards scheme at the sentencing hearings of Dawn Wright-Olivares and Dan Olivares.
The sentencing hearings took place on September 13, 2016.
Ms. Wright-Olivares received a sentence of 90 months in prison, and Mr. Olivares received a sentence of 24 months in prison.
The Receiver intends to use statements and information provided by the victims of the ZeekRewards scheme at Paul Burks’ sentencing hearing as well.
Federal Tax Penalties
Last quarter, the Receiver Team received a letter from the IRS regarding civil penalties.
The IRS letter came in response to correspondence from the Receiver Team regarding the reason for penalties and who was liable for them.
During the third quarter, the Receiver Team received an updated letter from the IRS notifying the Receiver of the removal of such penalties and liabilities.
Net-Winner clawback lawsuits
The Zeek Receiver continues to pursue litigation against US and offshore net-winner affiliates.
During the third quarter, the Receiver Team engaged in settlement negotiations with U.S. net winners who sought to settle the claims the Receiver had filed against them.
The Receiver filed for summary judgement back in July and is awaiting a decision.
The Receiver Team worked with collections counsel to pursue collection efforts against net winners against whom the Receiver has already obtained judgment.
Further, the Receiver’s counsel engaged in discussions with third parties regarding the collection and/or sale of potential future judgments against U.S. net winners, including the net winner class.
The Receiver continued litigation against the remaining defendants in the U.S. lawsuits against Canadian, Israeli, British Virgin Islands, Norwegian, French, and Swedish defendants.
The majority of these actions have been stayed pending the Court’s resolution of the Receiver’s summary judgment motion in the U.S. net winner lawsuit.
For those U.S. lawsuits against foreign net winners that are not currently stayed, the Receiver will seek a stay prior to the deadline for summary judgment in each of the respective lawsuits.
In addition, the Receiver Team continued to pursue fraudulently transferred assets from foreign net winners against whom the Receiver has already obtained judgments.
These efforts included correspondence with foreign counsel and conducting analysis to determine the best and most efficient course of action based on a given country’s legal framework.
In a handful of countries, new actions had to be filed against large net winners, where the U.S. judgments against these defendants will be used as evidence of a debt to the Receiver.
During the third quarter, the Receiver Team also prepared and coordinated the service of additional demand letters to foreign net winner judgment debtors.
The Receiver Team also engaged in settlement negotiations with foreign defendants and finalized settlements with four foreign net winners during July and August 2016 for a total of approximately $157,000.
Gary Bessoni (zCustomers)
In 2015 the Receiver sued Gary Bessoni and his company Peak USA as Zeek Rewards insiders.
Through zCustomers, Bessoni provided leads to Zeek Rewards affiliates.
The lawsuit is still in the discovery phase, and the Receiver’s counsel communicated with counsel for defendant Sam Adlerman regarding the defendant’s failure to produce sufficient responses to the Receiver’s discovery requests.
As alleged in the Complaint, Mr. Adlerman introduced RVG Insiders to Bessoni for the purpose of purchasing leads for use in the scheme’s “bid giveaway” system.
As a result of this introduction and the resulting relationship, Adlerman received a “commission” on every lead Bessoni sold to RVG.
Altogether, Adlerman received more than $630,000 in RVG funds through this arrangement.
In 2015 the Receiver sued Howard Kaplan for legal negligence.
Kaplan doesn’t appear to be interested in returning money to Zeek Rewards victims, with the case slowly progressing towards trial.
The parties are set to begin discovery in the fourth quarter of 2016.
USHBB, Oscar Hubert Brown and James Moore
In 2015 the Receiver sued USHBB, OH Brown and James Moore for $750,000.
Through USHBB, Brown and Moore provided marketing services to Zeek Rewards.
In the lawsuit against USHBB and its principals, the Receiver Team prepared and filed a response to defendant James Moore’s motion to set aside default judgment.
The Receiver’s counsel also engaged in discussions regarding a potential settlement of the Receiver’s claims.
The Court denied defendant Moore’s motion to set aside the default judgment against him.
In addition, the Receiver filed a motion to extend the deadline for submission of dispositive motions until after the U.S. net winner summary judgment motion is decided.
The Court granted the Receiver’s motion for extension.
As above, the lawsuit is on hold until a decision on summary judgement in the US net-winner case is made.
- $639,536 was paid to 422 Zeek Rewards victims on July 29th, 2016
- 41,000 affiliates with allowable claims have not provided a court-ordered release and OFAC Statement (the Receiver intends to release funds held in reserve for these claims on December 31st and distribute the funds to victims with allowed claims)
- $284,236 was received from settlements with third parties
- $109,830 was received as initial payment from the liquidation of James Meyer’s Turks and Caicos Islands property ($375,000 coming in 2017, another $500,000 from the liquidation of Meyer’s Napa property to be received in 4th quarter 2016)
- as of September 30th, the Receiver has $91 million in affiliate payment accounts yet to be disbursed
- $958,319 in total was paid to Zeek affiliates in the third quarter of 2016
- since the inception of the Receivership and as of the end of the third quarter 2016, the Receiver has agreed to approximately $3.55 million in settlements with net winner affiliates
- $25.3 million has been collected by the Receiver as a result of litigation-related settlements
- between July 1, 2016 and September 30, 2016, the Receivership Estate deposited $412,557 and disbursed $1,696,190.51
- to date the Receiver has marshaled total assets of approximately $361.8 million while disbursing approximately $269.8 million
Footnote: Our thanks to Don@ASDUpdates for providing a copy of the Zeek Receiver’s “Status Report for the Third Quarter of 2016” (filed 31st October).
Update 29th December 2016 – As per a December 27th order, the Receiver has been given until January 24th, 2017 to file a reply to VictoriaBank’s Motion to Dismiss.
VictoriaBank will then have until February 7th to file a response, with a hearing scheduled for February 20th.