Archives for PIMPs

Obopay/Payza Under Criminal Investigation

Posted by ASDUpdates on October 20, 2015No Comments

Zeek Rewards Activity From Receiver and “Net Winners”

Posted by ASDUpdates on September 26, 2014One Comment

From 3:12-cv-00519-GCM, the original SEC v Rex Ventures case, we have a filing from Kenneth Bell, the receiver, in which he asks the Court to find Preferred Merchant Solutions, LLC in Contempt and gives the following reasons:

  • it is critical that, in whatever process the Court determines would be best for resolving these issues, if the Court does not order the immediate repayment of the $4.8 million, the Court should exercise its rights in equity and under the Agreed Order to require that the $4.8 million immediately be deposited with the Receiver, who can, if necessary, maintain the funds in a segregated account pending a final resolution. If Preferred Merchants and Jaymes Meyer are allowed to continue to retain these funds, there is a risk that the money will be dissipated or otherwise unavailable in the future, further limiting the Receiver’s ability to compensate the victims of the scheme.
  • Specifically, the Court must determine whether the $4.8 million constitute Receivership and/or Recoverable Assets that should have been remitted to the Receiver’s custody and control as Receivership Property instead of being applied as a prohibited set off.
  • Whether or not the transfer came before or after the Agreed Order, if it is a fraudulent transfer, then the funds are Recoverable Assets frozen by the Agreed Order that must be returned to the Receiver.
  • In sum, Preferred Merchants and Jaymes Meyer violated the Agreed Order by failing to freeze and remit the $4.8 million in Receivership Assets and/or Recoverable Assets and Receivership Property, regardless of the claimed improper “set off” against its purported claims.
  • For the reasons discussed above, the Receiver respectfully requests that the Court continue the litigation stay, grant the Receiver’s Contempt Motion, find Preferred Merchants and Jaymes Meyer in contempt for violating the Court’s Agreed Order, order them to remit $4,854,010.40 to the Receivership Estate or, at a minimum, deposit the funds with the Receiver to be held in a segregated account pending a final resolution, award the Receivership the cost and fees incurred in connection with this Motion and the Receiver’s Opposition to Preferred Merchants’ Motion to Lift the Stay, and such other relief that the Court deems proper.

And next we have a filing in the civil case against Net Winners, 14-cv-00091, better known as Bell v Disner, et al, in which they state: (emphasis added)

  • Defendants Trudy Gilmond, Trudy Gilmond, LLC, Jerry Napier, and Darren Miller ask the Court for an order staying discovery until fifteen (15) days following resolution of Defendants’ Motion to Dismiss.
  • Because a favorable resolution of Defendants’ Motion to Dismiss would eliminate the need for discovery, good cause exists to stay discovery pending resolution of Defendants’ Motion to Dismiss.
  • Without jurisdiction, there is no case: The Receiver’s claimed authority to file the instant lawsuit is derived from the Court’s jurisdiction in the SEC Matter; if the Court lacks subject matter jurisdiction in that matter, the appointment of the Receiver was improper and this lawsuit must be dismissed.
  • The Defendants should not have to pay for the fees associated with the legal work necessary to respond to the Receiver’s discovery requests while a dispositive motion is pending before the Court. If the Motion to Dismiss is denied, the Defendants deserve a ruling as to whether the Receiver will pay some or all of their legal fees, as requested in Defendants’ Opposition to Receiver’s Motion for Class Certification, before they expend the costs and effort associated with responding to discovery.
  • To allow discovery to go forward will result in unnecessary expense and effort pending resolution of the Defendants’ Motion to Dismiss. The Defendants are sufficiently impoverished that they should not be compelled to incur the substantial expense of responding to expansive discovery requests before a ruling on the pending Motion to Dismiss, as this motion may either obviate any need to respond to discovery.

Some of these Defendants took out over $1 Million from Zeek and now the claim poverty?  Right, let’s see how this flies with the Court. I will keep you advised on how the Judge responds to this one.

 

Zeek Rewards: Kaplan Replies to Receiver’s Response to Motion to Dismiss

Posted by ASDUpdates on September 22, 2014No Comments

This is the opening statement in this Reply:

In their brief in opposition to Defendant Kaplan’s motion to dismiss, counsel for Plaintiff Bell devote significant effort offering purported equities to evade the defense of in pari delicto and permit Plaintiff’s claims against Howard N. Kaplan to proceed. Plaintiff cannot, however, escape the allegations in his Complaint:

  • Corporate insiders who exercised complete control over Rex Venture Group (“RVG”) conducted a Ponzi scheme to defraud investors; (Compl., ¶¶ 1, 20, 21, 56);
  • Such scheme, by its very nature, cannot last and will always lead to the ultimate downfall of the company (Compl., ¶ 6);
  • The corporate insiders were well underway with their scheme, for at least a year, before they engaged Kaplan (Compl., ¶¶ 5, 24);
  • Such scheme did lead to the downfall of the company (Compl., ¶ 6); and
  • Plaintiff, now standing in the shoes of RVG and seeking to assert whatever civil actions RVG might have, asserts a legal malpractice case against Kaplan for failing to stop the very enterprise that RVG’s insiders themselves created, implemented, and ran (Compl., ¶¶ 2, 49-67).

I have uploaded the full document onto the Files website, Doc 12.

Zeek Rewards: Reply in Support of Motion for Class Certification

Posted by ASDUpdates on September 18, 2014No Comments

In the case entitled “Bell v Disner, et al” (14-cv-00091) we have this:

REPLY IN SUPPORT OF RECEIVER’S MOTION FOR CLASS CERTIFICATION

The Receiver, through the undersigned counsel, provides the following Reply in support of his Motion for Class Certification. In their response, Defendants all but concede that a class action is the only means to reasonably and efficiently resolve the Receiver’s claims against the more than 9,400 Net Winners at issue, but argue – primarily based on arguments related to the irrelevant individual details of each Net Winners’ participation – that the rules do not allow this beneficial class to be certified. For the reasons set forth below, the Court should reject Defendants’ arguments, grant the Receiver’s Motion and certify a defendant class pursuant to Federal Rule of Civil Procedure 23.

…..

Instead of arguing that the core Ponzi scheme and fraudulent transfer issues are not common to the class, Defendants argue there may be differences in the Net Winners’ “relationships with insiders,” potential counterclaims related to funds in electronic accounts,1 possible reliance on the advice of counsel, potential third party claims or other issues related to the details of each net winner’s participation in the scheme. However, Defendant’s Response cited little to no case law in support of their argument and, as discussed above, even if there were some individual issues that does not mean that the core common class issues do not satisfy the “commonality” requirement.

……

Defendants further suggest that individual counterclaims might defeat class certification, but the facts and case law do not support their argument. First, as a factual matter, Defendants argue that the named Defendants’ counterclaims might somehow be different from the potential counterclaims of the other class members. However, the counterclaims asserted so far focus on common issues involving NxPay funds and breach of contract issues.3 Second, as a matter of law, the Fourth Circuit has recognized the effect of a counterclaim in and of itself “simply does not create the kind of conflict” that would defeat class certification.

I have uploaded this filing onto the Files website, Doc 82.

Zeek Rewards: TRO Aimed at ‘mynetworkingpro’

Posted by ASDUpdates on September 18, 2014No Comments

This is the first many of us have heard about “mynetworkingpro.com” and Mr. Weber.  Also, I cannot find anything on the docket regarding Doc 249, so I am guessing it is sealed. Here’s the gist of the filing:

Kenneth D. Bell, as the Receiver for Rex Venture Group, LLC (“Receiver”), and through his undersigned counsel, moves this Court for a thirty (30) day extension and modification of the Temporary Restraining Order Enforcing the Court’s Asset Freeze (the “TRO”) (Doc No. 249). Mr. Weber and mynetworkingpro.com, as the adverse parties to the TRO, consent through counsel to all relief requested herein. See Fed. R. Civ. P. 65(b)(2).

Pursuant to the Court’s directives in the TRO, the Receiver communicated with Wells Fargo regarding the account into which the $2 million of RVG funds was originally transferred, account number XXXX-XXXX. While only $18,000 remained in this account, Wells Fargo informed the Receiver that a separate Wells Fargo account related to Mr. Weber contained approximately $1.35 million. Pursuant to the Asset Freeze in the Court’s Agreed Order, Wells Fargo has “restricted” the account pending further direction from this Court.

The Receiver believes this money came from the original $2 million transfer of RVG funds. In addition to the above thirty-day extension, the Receiver therefore respectfully requests that the Court modify the TRO to specifically freeze the funds located in this second Wells Fargo account, which is related to or controlled by Mr. Weber and/or mynetworkingpro.com. The Receiver also requests that the TRO be modified to freeze funds in any other financial account to which money was transferred from that account or the original Wells Fargo account.

The same day, Judge Mullen issued this Order:

ORDER
IT IS, THEREFORE, ORDERED, ADJUDGED, AND DECREED that:
The Receiver’s Motion for Extension of the Temporary Restraining Order Enforcing the Court’s Asset Freeze is GRANTED

This could prove interesting; I will follow developments with this new party and post things as I find them.

Zeek Rewards: Non-Party “Preferred Merchants Solutions” Files Combined Response and Reply

Posted by ASDUpdates on September 15, 2014No Comments

NON-PARTY PREFERRED MERCHANTS SOLUTIONS, LLC’S
COMBINED RESPONSE AND REPLY

Preferred Merchants Solutions, LLC (“Preferred”) seeks to lift the stay of litigation in order to file a declaratory judgment action against the Receiver, Kenneth D. Bell (the “Receiver”), to determine the parties’ respective rights to certain funds in a plenary proceeding. Apparently lacking a principled basis from which to oppose Preferred’s request, the Receiver has filed a Motion for Contempt 1 and opposed Preferred’s request on the grounds that ownership over the funds can be decided in a summary contempt proceeding—despite Preferred’s claim of right, which it has described in its proposed complaint. Put simply, the Court cannot decide this question in any type of summary proceeding, much less a contempt motion.

1 The Receiver’s Contempt Motion also alleges that Jaymes Meyer, Preferred’s Chief Operating Officer, violated the Receivership Order. The Contempt Motion, however, includes no allegations that Mr. Meyer acted in an individual capacity and thus offers no basis for finding him in contempt. [See Contempt Mem. at pp. 2-3, 10-11, 13.] Accordingly, Mr. Meyer is not appearing before this Court.

Preferred transferred funds before the Court entered the Receivership Order and it did so pursuant to the Funds Transfer Management Agreement, which allowed it to transfer funds without prior notice to Rex Venture Group, LLC d/b/a Zeek Rewards.com. 2 Because Preferred acted before the entry of the order freezing assets and has a claim of right as to the assets it transferred, the Receiver has to pursue his claim in a plenary proceeding, in the same manner he would have to pursue a so-called net-winner. Since it will require a plenary proceeding to resolve the competing claims of the Receiver and Preferred, the Court should grant Preferred’s Motion to Lift Stay and deny the Receiver’s Contempt Motion.

2 The Receiver has mocked Preferred for referring to this agreement as something other than the “Declaration of Trust.” A thorough reading of the document demonstrates why Preferred has used Funds Transfer Management Agreement to describe this document: it sets up the framework for Preferred to manage all funds transfer issues for RVG and to be compensated for such management. The agreement does not, as the Receiver asserts, simply require Preferred to manage a trust account and receive compensation accordingly.

I have uploaded the full 13 page document onto the Files website.

Zeek Rewards: Kenneth Bell Responds to Kaplan’s Motion to Dismiss

Posted by ASDUpdates on September 11, 2014One Comment

ZeekRESPONSE IN OPPOSITION TO DEFENDANT’S MOTION TO DISMISS

Kenneth D. Bell (the “Receiver”), through the undersigned counsel, provides the following Response in Opposition to the Defendant’s Motion to Dismiss. For the reasons set forth below, the Defendant’s Motion should be denied.

Summary of the Argument

Howard Kaplan is an attorney who was hired by RVG to provide accurate legal advice to RVG concerning tax matters. Instead of fulfilling this important fiduciary duty, he gave RVG bad legal advice and actively participated in promoting a Ponzi and pyramid scheme that caused RVG enormous harm. As a result, RVG’s Receiver has brought this action against him. In response, Kaplan argues that despite his wrongful conduct he is effectively immune from liability because the court appointed Receiver for the company cannot bring claims against him. However, Kaplan’s claimed defense of “in pari delicto” does not bar a federal equity Receiver from asserting claims on behalf of the company he is appointed to oversee. Indeed, there is a public policy exception to “in pari delicto” defenses in North Carolina law that does not allow those – like Kaplan – who failed their fiduciary duty and assisted company insiders in harming the company to evade justice.

Further, the Receiver has adequately stated a claim for each of the causes of action asserted against Kaplan. Accepting as true the facts alleged in the Complaint that Kaplan failed to give accurate legal advice, Kaplan was at least negligent in providing legal services to RVG and thus committed professional malpractice / breach of fiduciary duty under North Carolina law. Also, under the law of Nevada, RVG’s state of incorporation, (which applies to RVG’s internal corporate duties under North Carolina’s choice of law rules) Kaplan aided and abetted RVG’s insiders’ breach of their fiduciary duties by giving RVG and its victims bad legal advice as a cover for the Ponzi scheme and otherwise assisting in promoting the unlawful scheme. Finally, the Complaint states a claim for constructive trust against Kaplan because it would be inequitable for Kaplan to retain the funds that he received for his participation in promoting the Ponzi scheme and prolonging its existence. Because Kaplan has received property which he “ought not, in equity and good conscience, hold and enjoy” a constructive trust should be imposed on the funds Kaplan received.

Therefore, Kaplan’s motion to dismiss should be denied in all respects.

I have uploaded the 24 page document onto the Files website.

Zeek Rewards: “Net Winners” File Opposition Motions (of course they did)

Posted by ASDUpdates on August 30, 2014No Comments

Our friendly “Net Winners” have filed yet another Opposition to one of the Receiver’s motions. Back on July 30th, Mr. Bell filed a “Motion for Class Certification” in which he wants to lump together

all persons or entities who were Net Winners (i.e. received more money than they paid) in the ZeekRewards Ponzi and/or pyramid scheme of more than one thousand dollars ($1,000) (the “Net Winner Class”).

Mr. Bell’s motion asserts that

class certification is particularly appropriate in this action because there are approximately 9,400 class members whose liability rests on the central question of whether the Receiver may recover funds fraudulently transferred to the Net Winner Class in connection with the ZeekRewards scheme.

Yesterday’s Opposition to Class Certification was file in the interests of Defendants Trudy Gilmond, Trudy Gilmond, LLC, Jerry Napier and Darren Miller. They refer to themselves in this filing as the “Nexsen Pruet Defendants” or “NP Defendants”, which is the name of the law firm (Nexsen Pruitt) where their attorney,William R. Terpening, is employed.

This Opposition is 28 pages long; I have uploaded it onto the Files website for those who wish to wade through it.

Zeek Rewards: Defendants File Reply in Support of Motion to Dismiss

Posted by ASDUpdates on August 20, 20143 Comments

As if this case could get any more odd, we have this filing (ZeekDoc75) in which defendants:

Trudy Gilmond, Trudy Gilmond, LLC, Jerry Napier, Darren Miller, Durant Brockett, Rhonda Gates, Innovation Marketing LLC, Aaron Andrews, and Shara Andrews (“Defendants”) file this Reply in Support of Defendants’ Motions to Dismiss in response to the Receiver’s Consolidated Response in Opposition to Defendants’ Motion to Dismiss (“Response”)(Doc. No. 67) and in further support of Defendants’ Motions to Dismiss Pursuant to Rules 9, 12(b)(1) and 12(b)(6) (Doc. No. 21) (“Motion”) and Memorandum in Support of Defendants’ Joint Motions to Dismiss Pursuant to Rules 9, 12(b)(1), and 12(b)(6) (Doc. No. 25) (“Brief” or “MTD Brief”).

I got tired just typing that….. but, I digress… One of the more moronic defense points made is this:

the real issue is this: must the Court finally consider whether the SEC Action1 involved a security? The only asserted basis for subject matter jurisdiction in the SEC Action was the SEC’s unsupported claim that the case was based on securities. No security; no jurisdiction. (I wonder if anyone else ever used this self-same argument??)

Since subject matter jurisdiction can be raised at any time and cannot simply be agreed to by the parties, the Court should consider now whether these cases are based on securities. At a July 23, 2013 hearing in the SEC Action, the Court said it would do so. See infra, Section II.B. At the same hearing, both the SEC and the Receiver (contrary to what he now claims) agreed that the issue could be considered now on the merits. See infra, Section II.B. Defendants attach the entire transcript of that hearing as Exhibit A.

I will refrain from going further with snippets from the filing; if you would like to read the Motion and the Hearing Transcript (Exhibit A) as mentioned above, they are both available on the Files website.

 

TelexFree: Motion for Complex Case Designation and Exclusion of Time

Posted by ASDUpdates on August 20, 2014One Comment

On Monday, August 18th, the government filed a motion (Doc 105) which contains these points:

The government hereby moves to have this matter treated as a complex case pursuant to 18 U.S.C. § 3161(h)(7)(B)(ii) and to have the Court enter an interim order of excludable delay pursuant to 18 U.S.C. ‘3161(h)(7)(A).1 As grounds therefore, the government states that this case is sufficiently unusual and complex that it is unreasonable to expect adequate preparation for trial within the time limits established by 18 U.S.C. § 3161:

1. The Indictment in this case says in part that the defendants operated a company, TelexFree, Inc., and related entities (“TelexFree”), that sold telephone service based on a voiceover-internet (“VOIP”) protocol, but alleges that TelexFree was in fact a pyramid scheme. The company was global, with approximately 785,000 participants in dozens of countries. Telexfree also operated out of countries besides the United States, most prominently Brazil, where a TelexFree owner and several employees live.

……..

5. Because the evidence underlying this case is closely tied to certain foreign countries, especially Brazil, it is likely that the parties will need to review evidence in foreign countries and arrange for foreign witnesses and/or law enforcement officers to travel to the United States to testify at trial. If the parties require authenticated evidence from foreign countries, the process for securing that evidence by formal request is extremely time-consuming, including review of the request by U.S. authorities (locally and at the Office of International Affairs), review by authorities in the host country, collection and transmittal of the evidence, and certified translation.

WHEREFORE, the government respectfully moves the Court

a. To treat this case as a complex case pursuant to 18 U.S.C. § 3161(h)(7)(B)(ii), for purposes of Speedy Trial Act calculations; and
b. Pursuant to 18 U.S.C. § 3161(h)(7)(A), to enter an order of excludable delay of 90 days, commencing on September 10, 2014, after which either party may seek a further extension of the tolling period depending on their progress on the above issues.

So far, that Order has not been issued by the Court. I will keep an eye on this situation.