zhunrize-logoLast we checked in on the Zhunrize Ponzi scheme bust, $70.7 million USD had been recovered and a Receiver put in charge of the company.

Now, after working for over four months to secure funds and establish a claims process through which Zhunrize victims can be compensated, the Zhunrize Receiver has filed his first quarter Status Report for 2015.

Receiver Michael Fuqua’s report was filed on April 30th, 2015 and spans activity between December 19th, 2014 and March 31st, 2015.

In it, the Receiver reveals forensic recovery of Zhunrize data that was “limited, at best”.

Despite this obstacle, the Receiver still managed to recover ‘$45,695,546.95 from 17 Defendant accounts that were identified and frozen by the SEC‘.

At this time, the Receiver believes that there is approximately $1.4 million remaining to be recovered: approximately $750,000 held at the Agriculture Bank of China in China, and a $638,000 prepaid tax to the IRS.

The Receiver plans to file a motion for Court approval to engage counsel to assist in the repatriation of the Chinese funds.

As part of the settlement agreement reached between Zhunrize CEO Jeff Pan and the SEC, Pan had his material assets seized.

There are only 2 material assets to be liquidated in this matter, Jeff Pan’s residence located in Suwanee, GA, and a 1996 Acura MDX.

The residence has been appraised and it has little to no equity. The estimated value of the vehicle is approximately $2,500.

The Receiver is negotiating with Pan regarding a payment in lieu of turnover and will file a motion for Court approval once an agreement is reached

Additional stolen funds are still held overseas, with ongoing negotiations between Pan and the Receiver taking place:

The Receiver and his team have communicated with Jeff Pan through his attorney, and the Receiver has communicated with Pan directly via email regarding questions about assets, location of documents, and repatriating funds from foreign banks.

Pertaining to payment to Zhunrize and Pan’s victims, the Receiver filed a “liquidation plan” with the court on April 17th.

The Liquidation Plan sets forth a 4-phase plan for the validation of claims and distribution of funds:

(a) During Phase I, the Receiver will reconcile the Zhunrize books and records to investor data. The Receiver anticipates completing Phase I within the next forty-five (45) days.

(b) During Phase II, the Receiver will file a motion to approve the claims form and process and to request the Court to set a bar date for all claims that will expire ninety (90) days after distribution of the claims forms.

(c) During Phase III, the Receiver will conduct the claims analysis and calculate the pro-rata recoveries. The Receiver anticipates that he will need approximately sixty (60) days following the bar date to conduct the analysis, at which time the Receiver will notify victim investors, and each victim investor will be given sixty (60) days from the date of notice to object.

(d) During Phase IV, the Receiver will disburse the funds to victims within thirty (30) days following the Court’s approval of the Receiver’s proposed recovery amount and pro-rata distribution plan.

Unfortunately consolidating investor information for the purpose of verification of claims is proving tedious.

This is due to Vodaware only having Zhunrize as a customer:

The Receiver is working with Vodaware to extract investor information from the investor databases to reconcile it with the financial data recovered in QuickBooks, outside merchant processors, and the bank statements.

While the Receiver and his team are hopeful that reconciliation is achievable, the data recovery efforts are challenging because Zhunrize was Vodaware’s only customer.

As a result of the closing of Zhunrize, Vodaware was effectively closed as well, and it laid off its programmers that were developing and maintaining the Zuhnrize software.

Consequently, the Receiver is reliant on Vodaware to coordinate former Vodaware employees to assist during their “spare time.”

Evidently Vodaware existed solely to facilitate the Zhunrize Ponzi scheme.

The Court approved the Receiver’s motion to retain Vodaware employees to assist with the reconciliation project.

This activity is critical to the success of the Receivership because it will allow victims to submit claims data online that should be able to be verified by the Receivership data and financial records.

It’ll happen eventually, just accept for now that the going is slow.

The Receiver’s final point meanwhile is bad news for Zhunrize’s top investors:

Additionally, the reconciliation (of investor data) will allow the Receivership to pursue and defend any potential “claw-back” actions.

How exactly that’s going to work I’m not sure, with the SEC revealing that a sizeable amount of Zhunrize’s investors are from China and South Korea.

Guess we’ll have to see how the Zhunrize clawbacks play out. Certainly Jeff Pan wasn’t working alone, so one would expect Zhunrize management to be coughing up what they stole at some point.

The Receiver and his team continue to research and evaluate potential claims against third parties.

All in all,

The Receivership currently has $45,672,727.59 of cash on deposit in a Receivership account with Wells Fargo Bank.

Stay tuned…