Zeek Rewards: Preferred Merchants Solutions Back in the Spotlight

The Zeek Receiver is going after Preferred Merchants and Jaymes Meyer for transferring $4.8 Million dollars of what he believes were Zeek Rewards proceeds only minutes after the Asset Freeze. (emphasis added)

Kenneth D. Bell, the Receiver for Rex Venture Group, LLC d/b/a ZeekRewards.com (“RVG” or “Rex Venture Group”), respectfully submits this Memorandum of Law in Support of his Motion for Temporary Restraining Order Enforcing the Court’s Asset Freeze pursuant to Federal Rule of Civil Procedure 65. Specifically, the Receiver seeks an order directing Preferred Merchants Solutions, LLC (“Preferred Merchants”) and Jaymes Meyer (“Meyer”) to immediately deposit with the Receivership $4,854,010.40 that they transferred from RVG’s trust account to Preferred Merchants’ account after Preferred Merchants and Meyer had knowledge of the asset freeze and had been asked by the SEC to freeze all RVG assets. Pending further order of the Court, these funds will be kept by the Receiver in a segregated account.

The Receiver is filing this separate Motion for Temporary Restraining Order because he has received new evidence that definitively establishes that Preferred Merchants and Meyer (1) knew of the asset freeze on August 16, 2012 before they directed the transfer of $4.8 million from RVG’s trust account to Preferred Merchants’ account; (2) made material misrepresentations and omissions to the SEC regarding their custody and control over and transfer of RVG funds; and (3) made material misrepresentations in their submission to this Court regarding the circumstances under which they received notice of the freeze and directed the transfers at issue. Given Preferred Merchants’ and Meyer’s deliberate refusal to follow the directives of federal law enforcement agencies and the Court regarding RVG assets, and the very large amount of funds at stake, the Receiver seeks a temporary restraining order (“TRO”) to immediately secure these funds and ensure that they remain available for the eventual benefit of RVG’s victims.

Along with this filing is a “Supplemental Declaration of James Lee Buck, II” who is an Assistant Director in the SEC’s Enforcement Division in which he states:

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TelexFree: Status Update on Discovery in Criminal Case

Yesterday, the US filed an Interim Status Report, and stated “The government has provided substantial discovery to date, but discovery is not complete. As of the date of this report, the government has produced an electronic database containing most of the data and records the government has collected via subpoena while investigating this case (about 100,000 pages).”

At this stage, the following discovery remains to be produced:

  • About 40 boxes of documents seized from TelexFree’s offices in Marlborough,
    Massachusetts, in April 2014. These materials are being scanned and processed by a
    vendor, a process that will take several weeks.
  • About 81 gigabytes of data (about 355,000 pages) received in October 2014 from the
    Trustee supervising TelexFree’s affairs in bankruptcy.
  • Additional financial records received from the U.S. Securities & Exchange Commission
    pursuant to an access request, and from Homeland Security Investigations, totaling
    approximately 12 boxes of material.
  • The results of five email search warrants served on or about September 25, 2014. As of
    this date, the government has only received materials for one of the email accounts and
    is following up with the other internet service providers.
  • The results of a search warrant served on Google, Inc., on or about October 16, 2014,
    for a substantial amount of video content held by its subsidiary, YouTube. Google has
    reported that compliance will take several weeks.
  • Various recordings made by undercover HSI agents at TelexFree conferences and in
    conversations with a TelexFree promoter.

The government also asks for an an interim status conference in approximately 60 days.