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.