Zeek Rewards Receiver Files 3rd Quarter Report, Mentions Clawbacks

Here are a few excerpts from the receiver’s 3rd Quarter report: (Emphasis added)

Identifying and Pursuing Fraudulently Transferred Funds Held by Net Winner Affiliate-Investors

The Receiver’s litigation team continues to evaluate the most efficient and cost-effective method for pursuing fraudulent transfer claims. As reported previously, the Receiver’s clawback litigation is likely to be a combination of individual actions, group actions, defendant class actions, and other alternative dispute resolutions as approved by the Court. Such proceedings will establish the key findings applicable to most, if not all, recipients of fraudulently transferred funds (findings such as the existence of a Ponzi and/or pyramid scheme). They will also separately provide a forum for the efficient determination of the proper amount of each net winner’s repayment obligation.

The group of net winners identified to date includes numerous individuals residing outside of the United States, with the largest foreign winners living mainly in countries with established legal systems which are signatories to the Hague Convention for international service of process. While the pursuit of “clawback” claims against these foreign net winners raises various challenges, the Receiver intends to include these winners as parties to domestic litigation based on their contacts with the Zeek Rewards Program in the United States so long as doing so will not delay the litigation against domestic winners. The Receiver will also pursue cost effective foreign litigation to establish the repayment obligation and/or to collect judgments where necessary and appropriate. The first clawback claims are now imminent, and a lawsuit against multiple named defendants along with a class of net winners will be filed during the fourth quarter of 2013.

Settlements with Net Winner Affiliate-Investors

In an attempt to resolve as many claims against net winners as possible prior to litigation, the Receiver has encouraged net winner Affiliate-Investors to voluntarily enter into settlement discussions with the Receiver. The Receiver has now reached settlement agreements with more than 155 net winners. These promised settlement payments total approximately $2,235,000 on net winnings of $3,940,000, an approximate 56.7% return. The individual settlements range from approximately 45% to 100% of a given individual’s net winnings, reflecting the different circumstances of the various winners and the Receiver’s judgment as to the appropriate amount, taking into consideration the amount won, the winner’s financial resources, the extent and nature of the winner’s recruitment of others to join the Scheme, when the settlement was sought, and other individual situations. During the third quarter, the Receiver entered into settlement agreements with 21 net winners, who agreed to return approximately $418,000. The Receiver will next seek the Court’s approval of the more recent settlement agreements, which the Receiver entered into subsequent to filing his June 28, 2013 Motion to Approve Settlement Agreements and for Leave to Settle Certain Claims Against Net Winners (Doc. No. 150)

The full 3rd Quarter Report is on the Files Website.

BREAKING: Co-founder of Liberty Reserve Pleads Guilty to Money Laundering in Manhattan Federal Court

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Thursday, October 31, 2013

Co-founder of Liberty Reserve Pleads Guilty to Money Laundering in Manhattan Federal Court

Vladimir Kats, 41, of Brooklyn, N.Y., pleaded guilty today in federal court before U.S. District Judge Denise L. Cote to money laundering and operating an unlicensed money transmitting business.  The charges stem from his role in running Liberty Reserve, a company that operated one of the world’s most widely used digital currency services and allegedly laundered more than $6 billion in suspected proceeds of crimes.

Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division and U.S. Attorney Preet Bharara of the Southern District of New York made the announcement.

“Vladimir Kats, by his own admission, helped to create and operate an anonymous digital currency system that provided cybercriminals and others with the means to launder criminal proceeds on an unprecedented scale,” said Acting Assistant Attorney General Mythili Raman. “His conviction reinforces what we said when Liberty Reserve was first brought down: banking systems that allow criminals to conduct illegal transactions anonymously will not be allowed to stand, and professional money launderers will be brought to justice.”

“As a co-founder and operator of Liberty Reserve, Vladimir Kats served as a global banker for criminals, giving them an anonymous, online forum to hide the proceeds of their illegal and dangerous activities,” said U.S. Attorney Preet Bharara. “With his guilty plea today, we take a significant step toward punishing those responsible for creating and running this international den of cybercrime.”

According to court records, Liberty Reserve was incorporated in Costa Rica in 2006 and billed itself as the Internet’s “largest payment processor and money transfer system.”  Liberty Reserve allegedly was created and structured, and operated, to help users conduct illegal transactions anonymously and launder the proceeds of their crimes, and it emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their illegal activity.  Liberty Reserve allegedly was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals to conduct anonymous and untraceable financial transactions.

According to the indictment, before being shut down by the government in May 2013, Liberty Reserve had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system and allegedly laundered more than $6 billion in suspected proceeds of crimes, including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and narcotics trafficking.  Kats co-founded Liberty Reserve and helped operate the company until in or about 2009.

Kats was arrested in Brooklyn in May 2013 and pleaded guilty today to one count of conspiring to commit money laundering, which carries a maximum sentence of 20 years in prison; one count of conspiring to operate an unlicensed money transmitting business, which carries a maximum sentence of five years in prison; one count of operating an unlicensed money transmitting business, which carries a maximum sentence of five years in prison; one count of receiving child pornography, which carries a maximum sentence of 40 years in prison and a mandatory minimum sentence of 15 years in prison; and one count of marriage fraud, which carries a maximum sentence of five years in prison.  A sentencing date has not yet been scheduled.

This case is being investigated by the Secret Service, the Internal Revenue Service-Criminal Investigation and the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, with assistance from the Secret Service’s New York Electronic Crimes Task Force.  The Judicial Investigation Organization in Costa Rica; the National High Tech Crime Unit in the Netherlands, the Financial and Economic Crime Unit of the Spanish National Police; the Cyber Crime Unit at the Swedish National Bureau of Investigation; and the Swiss Federal Prosecutor’s Office also provided assistance.
This case is being prosecuted jointly by the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS) and the U.S. Attorney’s Office’s Complex Frauds Unit and Asset Forfeiture Unit in the Southern District of New York, with assistance from the Criminal Division’s Office of International Affairs and Computer Crime and Intellectual Property Section.

Trial Attorney Kevin Mosely of AFMLS and Assistant U.S. Attorneys Serrin Turner and Andrew Goldstein of the Southern District of New York are in charge of the prosecution, and Assistant U.S. Attorney Christine Magdo is in charge of the forfeiture aspects of the case.

The charges in the indictment against Kats’s co-defendants remain pending and are merely accusations.  Those defendants are presumed innocent unless and until proven guilty.

13-1163                                                            Criminal Division


From BehindMLM: More Woes for WCM777 In Hong Kong

Chinese protesters demand Hong Kong MLM regulation

Oct.31, 2013 in companies, MLM, WCM777

Barring and unforeseen last minute entrants, 2013 will undoubtedly go down as a the year the MLM industry’s underbelly ruthlessly targeted both China and South America.

Whereas efforts by South American regulators  over the past few months have finally begun to stem the tide of thinly veiled Ponzi schemes masquerading as legitimate MLM companies, over in China, specifically Hong Kong, things have been comparatively quiet.

In the face of several Hong Kong based schemes that are increasing in both exposure and scope, Chinese citizens who feel cheated by one particular company have taken to the streets.

Digital Crown Holdings Limited (DHCL) is the parent company of Billion Venture International, a company that launched in the US earlier this year but thus far has apparently failed to gain any traction.

Both DCHL and Billion Venture National market lamps that cost well over a thousand dollars US. And by lamps, I do mean those things that provide light. Along with said lamps the company also markets other luxury tier products.

With what can only be described as the narrowest of narrow niche markets, not surprisingly DCHL and Billion Venture’s business model and compensation plans are geared towards affiliate recruitment.

Taken from the BehindMLM Billion Venture International Review published earlier this year:

Of particular concern is a complete lack of a retail storefront, with affiliates only able to enter something called an e-calculator in order to purchase product directly from the company.

All in all, this appears to be the focal point of the Billion Venture International business. You sign up as an affiliate, buy a bunch of products from the affiliate that recruited you and then go out and recruit new affiliates who buy from you.

I suspect revenue wise Billion Venture International would be generating revenue overwhelmingly sourced from affiliates.

Indeed this would appear to have been going on locally in China for thirteen years (DCHL was founded in 2000), with over a decade of luring Chinese mainland citizens to buy into DCHL in Hong Kong prompting a series of public protests against the company.

Continue reading “From BehindMLM: More Woes for WCM777 In Hong Kong”

From BehindMLM: More on WCM777

President of Colombia orders WCM777 investigation

Oct.28, 2013 in WCM777 10 Comments


On the 26th of October Columbian news network Noticias Uno (“News One), aired on the “Canal Uno” (Channel One) network), ran a story about Ponzi investment scheme WCM777 being a pyramid scheme.

Noticias Uno’s report (screenshot below),

showed footage of a meeting in a hotel located near the airport of Bogota Eldorado, during which was announced the launch of a new investment system that would allow investors to multiply their money in a few days.

During the meeting, as demonstrated by the images, it presented a video of the founder of the company 777 World Capital Market, Chinese Ming Xu who explained the investment model, referring to the need for people to deal with the collapse of the economy world.

A few minutes later the speaker of the event, Renato Rodriguez told the 400 attendees pyramid scheme with promised benefits and profits.

“Every time you enroll someone is six, six, six, when full forward averaged 396,000 dollars”, he said.


WCM777 offers affiliate investors five levels to invest at, each guaranteeing a >100% ROI after 100 days. The Ponzi element comes into play as WCM777′s ROIs are paid out of newly invested affiliate money. With no other recorded source of revenue, WCM777 simply takes newly invested affiliate money and pays it out to existing investors.

Additionally WCM777 also pays out referral commissions on the investments made by recruited affiliates, paid out down six levels of recruitment. This introduces a pyramid scheme element to the business model, rendering it a Ponzi pyramid hybrid (see full BehindMLM WCM777 review here).

In response to Noticias Uno’s WCM777 report, Colombian President Juan Manuel Santos took to Twitter to personally request a WCM777 police investigation.

[Read the rest of this entry…]

From LA Times: FTC Urged To Investigate MLM

FTC urged to investigate multilevel marketing firms such as Herbalife

Herbalife Herbalife Ltd. of Los Angeles has been fighting allegations it operates a pyramid scheme. (Mark Boster / Los Angeles Times)
By Stuart PfeiferOctober 24, 2013, 9:36 a.m.

Dozens of people have called on the Federal Trade Commission to investigate multilevel marketing, a controversial industry that includes companies such as Herbalife Ltd., Amway, Avon and others.

In a letter delivered to the FTC’s Washington offices Thursday, the group, led by Massachusetts attorney Douglas M. Brooks, urged the agency to crack down on an industry it says preys on low-income and unemployed workers with false hopes of easy wealth.

“The MLM industry has proved incapable of regulating itself, is rife with fraudulent and deceptive earnings claims and has caused — and will continue to cause — untold financial harm and misery to the poorest and most vulnerable of the consumers whom the commission was formed to protect,” the group’s letter said.

In addition to an investigation of the industry, the group asked the FTC to implement rules that would require multilevel marketing companies to disclose the past earnings and attrition rates of its salespeople.

Multilevel marketing is a business model in which companies allow the public to buy and sell their products, paying them commission for their sales as well as the sales made by others they recruit into the business.

The industry was put under pressure after hedge fund manager Bill Ackman made highly publicized claims Herbalife is a pyramid scheme. He called for an investigation of the company and announced his fund had bet more than $1 billion that its stock would fall, a position he recently trimmed after Herbalife’s stock doubled in value.

The company has denied Ackman’s allegations, noting it has been in business since 1980 and its business model is legal. Herbalife uses a network of hundreds of thousands of private distributors worldwide to sell a line of protein drink mixes, bars, vitamins and health and beauty products.

The call for an FTC crackdown follows several other complaints, including some from Latino rights groups, that Herbalife victimizes its distributors by selling false hopes of easy wealth when most of them fail.

Zeek Rewards: Judge Mullen Issues Order Granting Time Extension To File Claims For Certain Affiliates

Judge Mullen has issued the following Order:


1. The Motion is GRANTED.

2. The Bar Date for Claims established in the May 8, 2013 Order Approving (I) Claims Process, (II) Setting of Bar Date, and (III) Approving Notice Procedures (the “May 8 Order”) is hereby extended to December 1, 2013 only for (i) affiliates whose financial institutions pay the Receiver on or after August 1, 2013 for stopped payment instruments and are thereafter charged or debited by their financial institutions for these items, and (ii) financial institutions seeking to file a subrogation claim on behalf of their affiliate customers after paying stopped payment instruments to the Receiver on or after August 1, 2013.
3. All Claims Submission Forms relating to payments made to the Receiver on or after August 1, 2013 for stopped payment instruments must be filed so that they are actually received by 11:59 p.m. (prevailing Eastern time) on December 1, 2013.

6. The Receiver is authorized to take all actions necessary to effectuate the relief granted pursuant to this Order in accordance with the Motion. The Court retains exclusive jurisdiction with respect to all matters arising from or related to the implementation of this Order.
7. Except as expressly modified herein, all other provisions of the May 8 Order remain in full force and effect.

You can read the full Order here:  ZeekDoc161

From BehindMLM: i-Payout defend handling TelexFree ewallet money


 i-Payout defend handling TelexFree ewallet money

Oct.24, 2013 in TelexFree 1 Comment


Following weeks of commission delays for non-Brazilian TelexFree affiliates just over a moth ago, ewallet provider Global Payroll Gateway (GPG) abruptly announced that they could ‘no longer support TelexFree‘.

The announcement was made in mid September, with GPG informing TelexFree’s affiliates that International Payout Systems (i-Payout) would be taking over the supply of ewallet services to TelexFree.

No official reason was given for GPG’s dropping of TelexFree, however on their website GPG state

GPG maintains strict accordance with the USA Patriot act and a wide variety of other international financial regulatory and banking regulations.

GPG is very careful to follow all international regulations and laws concerning Anti-Money Laundering, Identity Protection and Payroll in general.

TelexFree is currently under criminal investigation in Brazil, with pending charges of money laundering and embezzlement being touted by Public Prosecutors.

About a month after my article on GPG dumping TelexFree went live I received an email from i-Payout, with the company wishing to clarify a few things.

In addition to informing me that I’d used the wrong domain to calculate their comparative size to GPG, i-Payout also insisted that they had

done a complete due diligence on TelexFree, assessed its needs, and confirmed the product as compliant with all US laws.

“Complete due diligence” you say? Go on…

[Read the rest of this entry…]

From BehindMLM: Zeek affiliates urge each other to blackmail government


Zeek affiliates urge each other to blackmail government

Oct.22, 2013 in Zeek Rewards 3 Comments


I don’t know what’s up in Zeek Rewards ex-affiliate circles this week but after only days ago Robert Craddock dropped his “Zeek Rewards wasn’t a Ponzi scheme cuz we didn’t say it was” comedic bombshell, now we’ve got other angry Zeek Rewards net winners suggesting they should sue the government…

…and then use the lawsuit as blackmail leverage to get out of having to pay back their Zeek Ponzi winnings.

Want to know the grounds these Zeek Rewards affiliates are proposing they sue the government on? Read on… [Read the rest of this entry…]

October 15 Update From Zeek Rewards Receiver

October 15, 2013

To Affiliates and Other Creditors of Rex Venture Group, LLC:

Now that September 5 has passed and the 120 day period to file claims has expired, I want to provide an update of where we stand and where we go from here. There were approximately 175,000 claims filed that total in excess of $590 million. We are in the process of reconciling those claims against our records. We expect to begin sending Determination Letters by email to tens of thousands of claimants in the next few weeks. These letters will inform claimants whether we are able to accept the claim as filed or whether we need to discuss a discrepancy between the claim and what our records support. Many other claims will take additional time to evaluate, but Determination Letters will be emailed to all claimants as quickly as we are able to evaluate them. Determination Letters will be issued on a rolling basis. Please do not contact us if you have not yet received a Determination Letter. I will announce on the website when I have completed sending Determination Letters so that you may contact the Receiver Team if you did not receive a Determination Letter.

ZRWDeterminations@tgcginc.comPlease add the email address to your spam filter as an authorized sender so that no emails from that address are blocked by your spam filter or internet service provider. This will be the email address used to provide your Determination Letter. Adding that email to your spam filter will ensure that you receive your Determination Letter once it is sent. Emails sent to that email address will not be monitored, so please do not send emails to that email address.

Additionally, many thousands of claims were made without providing a ZeekRewards User Name, or provided a User Name that does not appear in the ZeekRewards database. We are sending emails to all these claimants asking that they follow a link in the email to the Claims Portal and provide the User Name used while an affiliate of ZeekRewards. If we don’t have an identifiable ZeekRewards User Name we may not be able to validate your claim, which may lead to a denial of the claim. We will try to verify all claims, with or without a User Name, based on other identifiers, but ZeekRewards’ records do not always contain such information. Also, it is much more expensive to verify claims that do not provide a ZeekRewards User Name, and that is money I would rather return to victims than spend verifying claims. If you do not receive an email asking for this information you do not need to take any action.

We have asked the Court for permission to extend the date for filing a claim until November 15, 2013 for a very small number of potential claimants. For more information please review FAQ 29 on the receivership website. Potential claimants that fall into this category will receive notification if and when the Court grants our motion.

I have received a great many requests to generally allow claims to be filed after the Court ordered Bar Date of September 5, 2013. I am truly sorry that anyone who might have had a valid claim against the Receivership failed to file a timely claim, for whatever reason. However, after giving these requests much consideration, I have decided not to ask the Court for authority to reopen the claims process for individuals who fall outside of those addressed in FAQ 29, and I want to tell you my reasoning for not deviating from the previously entered Court order approving the claims process.

A significant reason for not reopening the claims process for all potential claimants is that we would need to provide notice, again, to more than 2 million potential claimants. We estimate that this notice process would deplete the Receivership Estate’s assets by nearly $500,000. There would also be additional increased database charges for permitting the continued filing of claims and amendments of claims. These costs would result in a dollar for dollar reduction in the amount that we have to distribute to the victims of the Ponzi scheme that timely filed claims.

Another concern of mine is that reopening the claims process for all would delay the return of funds to the victims of the scheme who timely filed claims. By the end of this year I still hope to ask the Court for permission to make an interim partial distribution. We have recovered more than $300 million cash that I want to distribute to victims. However, we can’t make an interim distribution until we know the maximum amount of all potential allowable claims. Extending the claims period would delay that process for many months at least. Extending the date for filing claims for the limited number of affiliates and institutions addressed by FAQ 29 will not delay this process, as we know with a fair degree of certainty the maximum amount of the potential claims that arise in that context.

Finally, reopening the claims process for all individuals would unfairly affect those claimants that complied with the Court’s order establishing the claims process. If we accepted additional claims after September 5, 2013 it would dilute the recovery of all those who timely filed claims by increasing the claims pool. This prejudices the claimants that complied with the Court’s order approving the claims process to the benefit of those claimants that did not comply with that order. My team and I worked diligently to provide notice to all parties possible. Notice of the claims process was published in newspapers, published on MLM websites, emailed directly to all parties in the ZeekRewards database (not only net losers, but all entities in the ZeekRewards database), directly mailed to all parties whose email addresses failed, and was sent to financial institutions through direct mail and through notification of industry groups. Additionally, there was vast press coverage of the claims process by numerous organizations. Once online, the claims process remained open for 120 days. In that time, more than one-hundred and fifty thousand claimants worked diligently to get their claim timely filed. I do not think it is fair to them to reopen the claims process for the few individuals who did not comply with the Court’s order establishing the claims process.

To summarize, extending the period to file claims would be expensive for all claimants and significantly reduce the amount of money we will be able to return to victims. It would delay for months our intention to make a partial interim distribution to validated claimants. And it punishes the more than one-hundred and fifty thousand claimants who timely filed claims for the sake of those who did not.

Many of you have written to say that you did not receive acknowledgment that your claim has been received. I have looked into this, and all those who completed claims were sent an email confirming receipt. Please check your email, including your spam folders, for this notice.

Finally, I realize everyone is anxious to know when you will receive the partial interim distribution I have often referred to. There are lots of moving parts to this, some of which are out of our control, but here are the basics. As I said above, we are working quickly to reconcile the tens of thousands of filed claims and send Determination Letters by email. I expect that we will accept the vast majority of properly filed claims at the amount requested. For the minority for whom we are unable to verify the claimed amount, we will be required to review the claim that the claimant filed, issue a Determination Letter and, to the extent the claimant objects to that determination, we will have to enter into discussions to resolve the discrepancy. If we are unable to resolve the issue by agreement, we will have to provide due process to allow claimants to take the dispute through a Court approved process for resolution. All of this will take time, but I still believe that in the next few months we will be able to get a partial distribution out to the victims.

Let me close by asking again that you not send emails to me directly, nor call my office. With hundreds of thousands of affiliates, it would be impossible, and expensive, for me or a member of our team to take individual calls. We have posted FAQs to address the questions that commonly arise, and add to them when appropriate. You may also send questions to info@ZeekRewardsReceivership.com. Every email sent to that address is read, and many are forwarded to me for attention. Please take advantage of these resources.

As always, thank you for your patience and support.

Kenneth D. Bell