Zeek Rewards: October 30th Receiver Announcement

Posted by ASDUpdates on October 30, 2014No Comments

ANNOUNCEMENT FROM THE RECEIVER – October 30, 2014

Various foreign claimants have reported that their banks have refused to deposit the distribution checks I have sent to you. It is likely that these banks are mistakenly seeking to deposit the checks in the local currency instead of in United States dollars. ALL checks issued by the Receivership are issued in United States dollars. Please inform your bank when you are depositing your check that it is in United States dollars. I am unable to issue checks in any currency other than United States dollars.

PatrickPretty: SEC Official Speaks On TelexFree Case

Posted by ASDUpdates on October 30, 2014No Comments

“We know of at least one victim who borrowed, I think, $50,000 from his mother and gave it all to [TelexFree]. And it was her entire retirement.” Melissa Armstrong, assistant chief litigation counsel, U.S. Securities and Exchange Commission, Oct. 29, 2014

 

Read the story here.

Zeek Rewards: Receiver Files 3rd Quarter Status Report

Posted by ASDUpdates on October 30, 2014No Comments

The Receiver has filed his Status Report for the 3rd Quarter of 2014, and below are a few of the highlights from this filing:

Marshaling and Preserving Receivership Assets

a. Accounts for Holding Receivership Assets
In addition to the four interest-bearing bank accounts holding Receivership Assets that the Receiver has reported on in previous status reports (the “Affiliate Account,” the “Seized Asset Account,” the “Pre-Filing Account,” and the “Settlement Account”), the Receiver opened two new accounts during the third quarter: one for the purpose of withholding amounts that may be owed to the IRS on distributions made to affiliates (the “Withholding Account”), and another for the purpose of maintaining payments owed for professional services provided to the Receivership Estate (the “Holdback Account”).

Excluding transfers between accounts, the Receiver deposited the following funds into its accounts during the third quarter of 2014:
• $259,294.00 into the Affiliate Account from payments from various financial institutions relating to previously dishonored cashier’s checks, teller’s checks and bank money orders; and
• $1,868,251.77 into the Settlement Account from settlements with net-winners.
As of September 30, 2014, the Receivership Estate held approximately $90.7 million in the Affiliate Account, approximately $204 million in the Seized Asset Account, approximately $295,000 in the Pre-Filing Account, approximately $4.3 million in the Settlement Account, approximately $23 million in the Withholding Account, and approximately $858,000 in the Holdback Account.

b. Cashier’s Checks

During the quarter, EBCM collected payments on these dishonored instruments and transferred those payments to the Receiver, resulting in the deposit of $259,294.00.
As of September 30, EBCM was working thirty-nine (39) unresolved claims currently valued at $506,258.

c. Funds Held by E-Wallets

As stated in our prior report, the Receiver Team recovered approximately $3.98 million from NxPay.

It is likely that the Receiver will commence litigation against NxPay to recover the approximately $9 million in outstanding assets that should have been frozen and remitted to the Receiver.

d. Additional Asset Recovery

The Receiver Team, with FTI, continues to investigate and pursue the recovery of Receivership Assets from Preferred Merchants and its CEO Jaymes Meyer. The Receiver Team filed an opposition to this motion requesting that the Court maintain the litigation stay and decide the issues in a contempt proceeding to prevent Preferred Merchants from circumventing the Court’s claims process and the onslaught of similar suits.

The Receiver Team also moved for an order finding Preferred Merchants and Jaymes Meyer in contempt for violating the Court’s freeze order by failing to return the $4.8 million that Preferred Merchants fraudulently transferred to itself from an account held in trust for the benefit of RVG upon notice of the asset freeze and imminent shutdown of RVG.

e. Foreign Accounts

The Receiver Team is continuing its investigation and pursuit of outstanding funds from Payza, Payment World, Solid Trust Pay, and Cyber Profit. With respect to the approximately $13.2 million outstanding from Payza and/or Payment World, during the third quarter, the Receiver Team reviewed numerous documents that Payment World produced in response to the Receiver’s subpoena. The Receiver Team also continues to pursue avenues of communication with, and options to recover assets directly from, VictoriaBank in Moldova, the bank that purportedly holds these outstanding Receivership Assets. Finally, the Receiver Team is working with various United States and international government agencies in efforts to recover the outstanding funds.

This is a rather lengthy filing and these are but the pertinent parts from the beginning of the filing; you can read the full document and the 2 Exhibits on the Files website.

SEC and FINRA Warn Investors About Penny Stock Scams

Posted by ASDUpdates on October 30, 2014No Comments
10/30/2014 11:00 AM EDT

The Securities and Exchange Commission’s Office of Investor Education and Advocacy and the Financial Industry Regulatory Authority (FINRA) today issued an alert warning investors that some penny stocks being aggressively promoted as great investment opportunities may in fact be stocks of dormant shell companies with little to no business operations.

The investor alert provides tips to avoid pump-and-dump schemes in which fraudsters deliberately buy shares of very low-priced, thinly traded stocks and then spread false or misleading information to pump up the price.  The fraudsters then dump their shares, causing the prices to drop and leaving investors with worthless or nearly worthless shares of stock.

“Fraudsters continue to try to use dormant shell company scams to manipulate stock prices to the detriment of everyday investors,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy.  “Before investing in any company, investors should always remember to check out the company thoroughly.”

Gerri Walsh, FINRA’s Senior Vice President for Investor Education, said, “Investors should be on the lookout for press releases, tweets or posts aggressively promoting companies poised for explosive growth because of their ‘hot’ new product.  In reality, the company may be a shell, and the people behind the touts may be pump-and-dump scammers looking to lighten your wallet.”

The investor alert highlights five tips to help investors avoid scams involving dormant shell companies:

  • Research whether the company has been dormant – and brought back to life.  You can search the company name or trading symbol in the SEC’s EDGAR database to see when the company may have last filed periodic reports.
  • Know where the stock trades.  Most stock pump-and-dump schemes involve stocks that do not trade on The NASDAQ Stock Market, the New York Stock Exchange or other registered national securities exchanges.
  • Be wary of frequent changes to a company’s name or business focus.  Name changes and the potential for manipulation often go hand in hand.
  • Check for mammoth reverse splits. A dormant shell company might carry out a 1-for-20,000 or even 1-for-50,000 reverse split.
  • Know that “Q” is for caution.  A stock symbol with a fifth letter “Q” at the end denotes that the company has filed for bankruptcy.

For more information about how to avoid fraud, visit www.investor.gov.

Zeek Rewards: Preferred Merchants Solutions Back in the Spotlight

Posted by ASDUpdates on October 29, 2014No Comments

The Zeek Receiver is going after Preferred Merchants and Jaymes Meyer for transferring $4.8 Million dollars of what he believes were Zeek Rewards proceeds only minutes after the Asset Freeze. (emphasis added)

Kenneth D. Bell, the Receiver for Rex Venture Group, LLC d/b/a ZeekRewards.com (“RVG” or “Rex Venture Group”), respectfully submits this Memorandum of Law in Support of his Motion for Temporary Restraining Order Enforcing the Court’s Asset Freeze pursuant to Federal Rule of Civil Procedure 65. Specifically, the Receiver seeks an order directing Preferred Merchants Solutions, LLC (“Preferred Merchants”) and Jaymes Meyer (“Meyer”) to immediately deposit with the Receivership $4,854,010.40 that they transferred from RVG’s trust account to Preferred Merchants’ account after Preferred Merchants and Meyer had knowledge of the asset freeze and had been asked by the SEC to freeze all RVG assets. Pending further order of the Court, these funds will be kept by the Receiver in a segregated account.

The Receiver is filing this separate Motion for Temporary Restraining Order because he has received new evidence that definitively establishes that Preferred Merchants and Meyer (1) knew of the asset freeze on August 16, 2012 before they directed the transfer of $4.8 million from RVG’s trust account to Preferred Merchants’ account; (2) made material misrepresentations and omissions to the SEC regarding their custody and control over and transfer of RVG funds; and (3) made material misrepresentations in their submission to this Court regarding the circumstances under which they received notice of the freeze and directed the transfers at issue. Given Preferred Merchants’ and Meyer’s deliberate refusal to follow the directives of federal law enforcement agencies and the Court regarding RVG assets, and the very large amount of funds at stake, the Receiver seeks a temporary restraining order (“TRO”) to immediately secure these funds and ensure that they remain available for the eventual benefit of RVG’s victims.

Along with this filing is a “Supplemental Declaration of James Lee Buck, II” who is an Assistant Director in the SEC’s Enforcement Division in which he states:

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TelexFree: Status Update on Discovery in Criminal Case

Posted by ASDUpdates on October 29, 2014No Comments

Yesterday, the US filed an Interim Status Report, and stated “The government has provided substantial discovery to date, but discovery is not complete. As of the date of this report, the government has produced an electronic database containing most of the data and records the government has collected via subpoena while investigating this case (about 100,000 pages).”

At this stage, the following discovery remains to be produced:

  • About 40 boxes of documents seized from TelexFree’s offices in Marlborough,
    Massachusetts, in April 2014. These materials are being scanned and processed by a
    vendor, a process that will take several weeks.
  • About 81 gigabytes of data (about 355,000 pages) received in October 2014 from the
    Trustee supervising TelexFree’s affairs in bankruptcy.
  • Additional financial records received from the U.S. Securities & Exchange Commission
    pursuant to an access request, and from Homeland Security Investigations, totaling
    approximately 12 boxes of material.
  • The results of five email search warrants served on or about September 25, 2014. As of
    this date, the government has only received materials for one of the email accounts and
    is following up with the other internet service providers.
  • The results of a search warrant served on Google, Inc., on or about October 16, 2014,
    for a substantial amount of video content held by its subsidiary, YouTube. Google has
    reported that compliance will take several weeks.
  • Various recordings made by undercover HSI agents at TelexFree conferences and in
    conversations with a TelexFree promoter.

The government also asks for an an interim status conference in approximately 60 days.

Zeek Rewards: US Attorney Press Release, Paul Burks Indicted!!!

Posted by ASDUpdates on October 24, 2014No Comments

ZeekRewards President Indicted On Federal

Charges For Operating $850 Million Internet

Ponzi Scheme

FOR IMMEDIATE RELEASE
October 24, 2014
United States Attorney Anne M. Tompkins Western District of North Carolina

CHARLOTTE, N.C. – The president of ZeekRewards, Paul Burks, has been indicted on federal charges for operating an Internet Ponzi scheme that took in more than $850 million dollars, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina. The criminal indictment was returned today by a federal grand jury sitting in Charlotte, charging Burks, 67, of Lexington, N.C., with wire and mail fraud conspiracy, wire and mail fraud, and tax fraud conspiracy.

Russell F. Nelson, Special Agent in Charge of the United States Secret Service, Charlotte Field Division and Thomas J. Holloman III, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation Division (IRS-CI) join U.S. Attorney Tompkins in making today’s announcement.

According to allegations contained in the indictment, from January 2010 through August 2012, Paul Burks was the owner of Rex Venture Group, LLC (RVG), through which he owned and operated Zeekler, a sham Internet-based penny auction company, and its purported advertising division, ZeekRewards (collectively “Zeek”). The indictment alleges that Burks and his conspirators induced victims – including over 1,500 victims in the Charlotte area – to invest in their fraudulent scheme, by falsely representing that Zeekler was generating massive retail profits from its penny auctions, and that the public could share in such profits through investment in ZeekRewards. Indeed, the indictment alleges that Burks and others claimed, at one point, that investors would be guaranteed a 125% return on their investment.

The indictment alleges that Burks and his conspirators represented that victim-investors in ZeekRewards could participate in the Retail Profit Pool (RPP), which supposedly allowed victims collectively to share 50% of Zeek’s daily net profits. The indictment alleges that Burks and his conspirators did not keep books and records needed to calculate such daily figures, and that Burks simply made up the daily “profit” numbers. The indictment further alleges that, contrary to the conspirators’ claims, the true revenue from the scheme did not come from the penny auction’s “massive profits.” Instead, approximately 98% of all incoming funds came from victim-investors, which were then used to make Ponzi-style payments to earlier victim investors.

In addition to promising massive returns on investments, the indictment alleges that the conspirators also used a number of ways to promote Zeek to current and potential investors. For example, according to the indictment, the conspirators hosted weekly conference calls and leadership calls, where participants could call in listen to Burks and others make false representations intended to encourage victim-investors to continue to invest money and to recruit others to invest in Zeek. The indictment further alleges that Burks also organized and attended “Red Carpet Events,” where victim investors came to hear details of the scheme in person. During these events, according to the indictment, Burks and his conspirators made false representations about the massive retail profits generated by Zeek. The conspirators also used electronic and print media, including websites, emails and journals, to make false and misleading statements about the success of Zeekler to recruit victim investors.

The indictment alleges that as the Ponzi scheme grew in size and scope, it began to unravel as the outstanding liability resulting from the bogus 125% return on investment continued to rise beyond control. According to the indictment, by August 2012, the conspirators fraudulently represented to the collective victims that their investments were worth approximately $2.8 billion, but had no accurate books and records to even determine how much cash on hand was available to pay such liability. According to the indictment, by August 17, 2012, Burks and his conspirators had only $320 million (or approximately 11% of $2.8 billion) available to pay out investors. The indictment alleges that over the course of the scheme, Burks diverted approximately $10.1 million to himself.

Burks is also charged with tax fraud conspiracy for failing to file corporate tax returns or to make corporate tax payments for his companies, among other things. In addition, the indictment alleges, for tax year 2011, Burks issued fraudulent IRS Forms 1099s, causing victim-investors to file inaccurate tax returns for phantom income they never actually received.

The court has issued a summons against Burks and he is expected to appear in federal court for his initial appearance in the coming days. The wire and mail fraud conspiracy charge, the mail fraud charge and wire fraud charge each carry a maximum prison term of 20 years and a $250,000 fine. The tax fraud conspiracy charge carries a maximum prison term of five years and a $250,000 fine.

The details contained in this indictment are allegations. The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

Two of Burks’ conspirators, Dawn Wright Olivares, Zeek’s Chief Operating Officer, and her step-son and Zeek’s Senior Technology Officer, Daniel C. Olivares, pleaded guilty in December 2013 to investment fraud conspiracy. Dawn Wright Olivares also pleaded guilty to tax fraud conspiracy. Both defendants await sentencing.

In making today’s announcement, U.S. Attorney Tompkins thanked the U.S. Secret Service and IRS-CI for investigating the case, and the U.S. Securities & Exchange Commission, Division of Enforcement for its assistance with the investigation.

The prosecution is handled by Assistant United States Attorneys Jenny Grus Sugar, Corey Ellis and Mark T. Odulio of the U.S. Attorney’s Office in Charlotte.

Additional information and updated court filings about this and related cases filings can be accessed at the district’s website: www.justice.gov/usao/ncw/ncwvwa.html.

Zeek Rewards: Announcement from Receiver, Paul Burks Indicted!!!

Posted by ASDUpdates on October 24, 2014No Comments

PaulBurksToday, a federal grand jury returned a criminal indictment against Paul Burks. The indictment alleges four felony counts, including conspiracy to commit wire and mail fraud, wire fraud, mail fraud, and conspiracy to commit tax fraud.

The press release is available here.

The bill of indictment is available here.

Zeek Rewards: Receiver’s Announcement for October 22, 2014

Posted by ASDUpdates on October 22, 2014No Comments

ANNOUNCEMENT FROM THE RECEIVER – October 22, 2014

I want to address the question many of you are asking about why a percentage was withheld from some distribution checks.

On September 30, 2014 we mailed more than 90,000 checks to claimants as part of the first partial interim distribution. These payments were calculated to equal 40% of an accepted claim using the rising tide method of distribution previously ordered by the Court. For those claimants to whom checks were mailed that did not provide an IRS Form W-9 (for US residents) as requested on the claims portal we withheld a certain percentage for tax purposes. For non-US claimants a percentage was withheld whether or not an IRS Form W-8 was provided. I have heard from many of you that this withholding should not have been made because these distributions are not taxable. The tax laws on this issue are not entirely clear. We have attempted to get a definitive opinion from the IRS but have not yet been able to do so. Given this uncertainty we acted on the side of caution and made the withholding.

If and when we receive assurance that withholding from distributions to Affiliates is not necessary we will send additional checks to those claimants from whom a withholding was made in the first interim partial distribution in the amounts that were withheld. For US residents, online completion of an IRS Form W-9 will allow us to send an additional check in the amount that was initially withheld. Click here to provide tax form.

While I am gratified that we were able to send 90,000 Affiliates a distribution, there were approximately 48,000 claimants to whom I wanted to send a check but was not permitted to pursuant to the Court’s orders. If you have received a letter of determination, in order to be sent your first partial interim distribution, you must accept the determination (or have had an objection resolved) and complete the release and OFAC certification provided on the claims portal. At the end of January 2015 we will make a first partial interim distribution to those claimants with allowed claims who were not mailed a distribution check on September 30, if these steps are taken by December 31, 2014.

Approximately 12,000 Affiliates with approved claims were not mailed a check because the amount would have been less than $100. It was not cost efficient for the receivership to mail these checks at this time. At the end of the receivership Affiliates holding approved claims due a payment of less than $100 will be mailed a distribution check.

If you have questions regarding whether your claim determination has been issued, the general status of your claim or to provide the required release and OFAC certification, please log into the following website: https://cert.gardencitygroup.com/zrwdet/fs/home.

I want to re-emphasize that these distributions are the first, and partial, distributions I believe you will receive. We continue to pursue and recover additional funds that will be distributed on later dates.

Kenneth D. Bell
Receiver