May 1st Update From Zeek Receiver

 

UPDATE FROM THE RECEIVER – May 1, 2014

It has been several weeks since I have given you an update because I wanted to be able to give you accurate numbers and dates you can rely on. I can now do that.

As you know, we have been reviewing approximately 175,000 timely filed claims. By Friday May 9 we will have issued about 160,000 letters of determination regarding those claims. Another 10,000 or so letters of determination will be sent before the end of May. There are a few thousand claims that will require additional time to review, because of conflicting information regarding the amounts claimed. We will send letters to this last group of claimants as quickly as we are able. Bottom line, we will have letters out to more than 95% of the claimants in the next few weeks.

If you have not yet received your letter of determination, please be patient; it is coming. If you have already received a letter, or when you do, I encourage you to respond as soon as you are able.

You also are anxious to know when we will begin making distributions on claims. This month we will file a motion with the Court asking permission to make an interim, partial distribution on claims. Our goal is to distribute now an amount equal to 40% of each reconciled claim using the “rising tide” method of calculation already approved by the Court. My best guess is that we will begin making distributions in mid-summer.

I will also be reserving cash to distribute to holders of claims that have not yet been determined and allowed. When your claim is allowed, you will receive distributions in the same total amount you would have received if your claim was allowed in the first batch of claim determinations.

This first distribution will not be of all the funds I’m confident we will ultimately be able to return to claimant victims. We continue to collect receivership assets from financial institutions and those who took more money out of Zeek Rewards than they put in. We have sued more than 9,000 of these “net winners” in the United States. We will soon sue net winners who live outside the United States. I remain hopeful that we will add tens of millions of dollars to the pool from which we will make final distributions to claimant victims. Unfortunately, these efforts will take quite a long time, maybe years. I will not be permitted to make final payments until all recoverable assets have been collected, but there will be an additional, final distribution at some point.

Also, next week we will send out thousands of amended IRS Forms 1099 for 2011 and 2012. We have determined that Rex Venture Group often miscalculated the amount of money that should have been on the 2011 forms. There also were some errors for 2012 because of inadequate and erroneous records of the company. Thousands of affiliates may have paid taxes for 2011 and/or 2012 that they did not owe because of incorrect 1099s. If you receive an amended 1099 I encourage you to consult with a tax professional.

I know this process has taken longer than you, or I, would have liked. I can only assure you that the receivership team has worked diligently to return as much money as possible, as quickly as possible, to victim claimants. Our efforts on your behalf continue. Thank you for your continued support and patience.

Kenneth D. Bell
Receiver

One comment on “May 1st Update From Zeek Receiver

  1. I am not happy with this announcement.

    Bell said, “we have been reviewing approximately 175,000 timely filed claims. By Friday May 9 we will have issued about 160,000 letters of determination regarding those claims. Another 10,000 or so letters of determination will be sent before the end of May. There are a few thousand claims that will require additional time to review, because of conflicting information regarding the amounts claimed. Our goal is to distribute now an amount equal to 40% of each reconciled claim — I will also be reserving cash to distribute to holders of claims that have not yet been determined and allowed.”
    The reserve Bell sets mystified me.
    The total claim amount is supposed to be around $550 million, then 40% of that amount is $220 million. The current recovered asset is $334 million as of end 2013. So, $334 – $220 = $114 million will be reserved. Discounting $16 million allocation for Not Determined Claims (5,000 such claims accounts only 3% out of total 175,000 claims then $550 million x 3% = $16 million), $98 million seems to be reserved for future expenses.

    According to Bell, he pursues $312 million as clawback and he has confidence on recovering more than cost, then why does he need to reserve such huge amount of nearly $100 million (17% of the total claim), Bell should be able to manage future expense using the recovering assets without such huge reserve but with minimum reserve amount.

    Bell also comments “We have sued more than 9,000 of these “net winners” in the United States. We will soon sue net winners who live outside the United States. I remain hopeful that we will add tens of millions of dollars to the pool from which we will make final distributions to claimant victims. Unfortunately, these efforts will take quite a long time, maybe years.“
    I am pretty sure suing a lot of defendants internationally takes years, probably decade to complete or even indefinite because Bell may not be able to reach many defendants with little cooperation of foreign jurisdictions (I understand Bell tries to use HCCH – Hague Conference on Private International Law, yes the member countries recognize foreign judgement but when it comes to enforcement, it’s still extremely weak, don’t forget this convention is about just a civil matter not a criminal matter, once the defendants ignore the notice the case virtually becomes dismissed in many occasions because each country usually doesn’t have enough resources & time to pursue persistently to help other jurisdiction to deprive money from her own country), so from practical standpoint it will not work as people may expect .

    What I can read from these facts are;
    1) Bell anticipates enormous profits (fee) during the lengthy process of thousands of litigation which he describes years of efforts
    2) Bell doesn’t seem to have full confidence to recover the money that can cover all the costs including his own fee (now he says only“ adds tens of millions despite over $300 million target.

    That said, the worst but possible scenario (, which actually happened in many other Ponzi cases) is that Bell will eat up large parts of the reserved funds & even future collection, and the final distribution could be equivalent or even smaller than the amount Bell reserves currently after years of waiting.

    What are the bottom-line?
    – the only winner is the receiver who keeps earning based on hourly fee
    – the victims may have to wait years for the distribution they could get now (another 17%)

    Bell said “We continue to collect receivership assets from financial institutions“, which may bring about solid net recovery but I’m not sure from individual net winners, some may not have enough money to repay and some hide their money, a lot of uncertainties exist not at judgement level but at collection level, so recovery from individuals has huge risks therefore unpredictable.

    At first, I thought the receiver’s defendants class action was cost efficient approach, but after finding the receiver’s plan of the huge reserve fund together with his comment of “I will not be permitted to make final payments until all recoverable assets have been collected”, targeting enormous number of small profiteers would be Bell’s cunning tactics to delay the whole process at his best to maximize their hourly based fee.

    I heard that a hearing has been set for July 23 to hear a request by a group of participants (I guess these are net-winners) to end the receivership over the companies. The Securities and Exchange Commission requested a continuance. The request is scheduled to be heard in U.S. District Court in Charlotte.
    I’m not sure if ending the receivership is the most beneficial way for the victims though, I believe Bell should at least change their fee agreement from hourly based to contingency based, and pay out most of the reserve funds in the first distribution, which sounds only fair for the net-losers.

    Since Bell said “there will be an additional, final distribution at some point”, means he assures the positive net recovery, he doesn’t have any issue to get compensated based on contingency from the amounts he recovers in the future.
    I believe many victims will be happy to get additional distribution from the reserve fund NOW (possibly over 10% extra distribution) rather than waiting for years even the contingency fee costs more than hourly fee (which I personally feel less likely).

    Bear it in mind that there has been so many evidences that Ponzi receivers eat up the assets that could have returned to victims if they hadn’t done costly & lengthy clawback, such as Stanford case (Ralph Janvey), Legisi case (Robert D. Gordon), J.V. Huffman case (William Walt Pettit) and more & more.
    Now, Bell seems to disguises his efforts on maximizing own profit with the word “efforts on your behalf” same as the other unethical receivers.

    Hall

Leave a Reply