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”