Zeek Rewards: Agreed Order For Preferred Merchants Production of Added Documents
It seems that Preferred merchants Solutions and Jaymes Meyer have not quite followed the Court’s Orders. On December 11th, Judge Mullen ordered Jaymes Meyer to appear for a deposition, and on December 16, there was an Order for the production of documents no later than December 17th. After a review of the documents produced, the Receiver found them to be “insufficient” as they missed “key information that the Court ordered” Preferred Merchants and Jaymes Meyer to provide.
If that wasn’t bad enough, Meyers was unable to answer a number of the Receiver’s counsel’s questions about various accounts and assets as he claimed he needed to review additional documents. Meyers was “unable to provide detailed information about a single bank account concerning the cash held in the Cooks Island trust.”
Apparently, $200,000 had been distributed from that account on or after November 14th, 2014, with $150,000 being distributed to Meyer on November 14 and another $50,000 distributed to “IBF Ltd.” on November 28, 2014 (After the Court hearing held November 24th).
The Receiver and Preferred Merchants counsels agreed to continue the deposition on January 5, 2015, to give Meyer time to look over more documents and better answer questions. There would also be a Consent Order that memorializes the terms of the agreement entered so any violation could be enforced by the Court’s contempt powers.
I have uploaded the full filing onto the Files website.
Zeek Rewards: Receiver Files Suit Against Australian “Net Winners”
Yesterday, Kenneth Bell filed a Federal lawsuit entitled “Bell v. Bjerring et al”. The case has been assigned to Senior District Judge Graham Mullen, who also presides on the many other Zeek cases.
The named defendants are:
- Gert Bjerring of Queensland, Australia, $826,801.73 under one or more usernames
- David Mitchell of New South Wales, Australia, $298,802.10 under one or more usernames
- Nicola Holloway of Queensland, Australia, $273,009.36 under one or more usernames
- Sam Fawahl of Victoria, Australia, $232,564.55 under one or more usernames
- Warren Hickey of Queensland, Australia, $159,757.73 under one or more usernames
- Lars Frederiksen of Western Australia, $139,365.49 under one or more usernames
- Paul Mandelt of Western Australia, $128,913.02 under one or more usernames,
- Kelvian Hansen of Queensland, Australia, $111,799.43 under one or more usernames
- Anni Thompson of Queensland, Australia, $95,566.00 under one or more usernames
- Ann Audrey Hickey of Queensland, Australia, $83,487.05 under one or more usernames
- R&J Thumm Family P/L as Trustee for Thumm Investment Trust, Australia, $80,130.26 under one or more usernames
- David Cane of Queensland, Australia, $77,296.57 under one or more usernames
- Donna Walton of Queensland, Australia, $76,730.36 under one or more usernames
- Michael Georghiou of Victoria, Australia, $74,968.93 under one or more usernames
- Thomas von Eitzen of Queensland, Australia, $74,854.07 under one or more usernames
- Bradley Ferries of Queensland, Australia, $72,325.96 under one or more usernames
- Robin Reid of Queensland, Australia, $61,114.41 under one or more usernames
- Linda Welch of Queensland, Australia, $60,274.22 under one or more usernames,
- Maureen Fisher of Queensland, Australia, $55,797.49 under one or more usernames
- Barry Goodsell of Western Australia, $53,650.26 under one or more usernames
- David Joseph of Western Australia, $52,581.70 under one or more usernames
- Birthe Seaton of New South Wales, Australia, $52,477.31 under one or more usernames
I have added this newly filed case to the Files website, 14-cv-724.
BehindMLM: TelexFree’s Sann Rodriguez At It Again?
Sannderly Vasconcelos Rodrigues (Sann Rodrigues for short), was one of the top investors in the billion dollar Ponzi scheme, TelexFree.
For his part in stealing over three million dollars from investors who joined after him, Rodrigues (right) saw himself named as a defendant in an April 2014 SEC complaint.
As part of that case, which is on hold until the criminal case against TelexFree’s founders is concluded, Rodrigues saw himself slapped with a preliminary injunction back in May.
Among other things, this injunction saw Rodrigues ‘ordered to cease conducting any further fraud involving securitiesor otherwise‘.
Today I thought I’d raise the question of whether Rodrigues is meeting this court-ordered obligation.
Zeek Rewards: Clerk’s Entry of Default Issued Against Catherine Parker
On December 19th, we have a “Clerk’s ENTRY OF DEFAULT as to Catherine Parker”. In the original Complaint in Bell v Parker, et al (14-cv-444), the Receiver states:
‘Catherine Parker is, upon information and belief, a resident of Hamilton, Ontario, Canada. She is a former ZeekRewards “affiliate” and was a “net winner” of $179,656.05 ‘
I am guessing that prejudgment interest will be added to this judgement. I will post further filings once I find them.
Zeek Rewards: Receiver’s Announcement for December 19
ANNOUNCEMENT FROM THE RECEIVER – December 19, 2014
The Receivership will no longer withhold taxes from distributions paid to affiliates. If the Receivership previously withheld taxes from a distribution, we will issue a new check on December 23, 2014 to distribute the previously withheld funds to that affiliate. As I have said before, so that we do not expose the receivership to potential fines and penalties that would dramatically decrease the amount of money available to those claimants eligible for a distribution, we have sought assurance from the United States Internal Revenue Service that no withholding is required. We have not been able to get such assurance. However, I have received a tax opinion from a professional that persuades me that tax withholding is not necessary.
On December 23, 2014 we will mail approximately 58,000 checks to claimants that were mailed a distribution on September 30, 2014 from which a withholding was made. Those checks will be in the amount of the taxes previously withheld for tax purposes from that affiliate’s distribution. On that day we also will mail checks to those individuals who requested (through a formal request on the claim status portal) that their September 30 check be reissued because the original check out was not properly delivered, was lost or was made payable to the wrong name through inadvertent error of the claimant.
In late January 2015, we also will send distributions to those qualified affiliate claimants who completed the online claim allowance requirements after August 15, 2014 and have not yet received a check. Somewhat frustratingly, there are nearly 62,000 affiliate claimants that have received a letter of determination but have not yet accepted (or objected to) the recognized claim. We have the funds on reserve to make a distribution to all these claimants in the same manner we did for approximately 90,000 affiliate claimants in September. But, unless a claim is accepted (or has had an objection resolved) and the affiliate claimant completes the release and OFAC certification, a distribution check cannot be mailed. I encourage all of these affiliate claimants to go online and complete the process to be eligible for a distribution check in late January 2015. For cost efficiency reasons, we will issue checks only quarterly, so if an affiliate claimant has not completed these steps by December 31, 2014 the next opportunity to receive a distribution check will not be until late April 2015. I would much rather send all qualified affiliate claimants a check than hold those funds in a bank account.
Finally, we are making great progress in recovering and marshalling additional funds which, together with the funds we currently hold, will be later distributed to all qualified claimants.
SEC Litigation Release: Permanent Injunctions Against Zhunrize, Inc.
U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 23164 / December 19, 2014
Securities and Exchange Commission v. Zhunrize, Inc., Civil Action No. 1:14-cv-3030-RWS, United States District Court, Northern District of Georgia
SEC Obtains Permanent Injunctions Against Zhunrize, Inc. and Jeff Pan
The Securities and Exchange Commission (“Commission”) announced today that the Honorable Richard W. Story, United States Judge for the Northern District of Georgia entered permanent injunctions against Zhunrize, Inc. (“Zhunrize”) and its CEO, Jeff Pan (“Pan”) (collectively “Defendants”). These judgments enjoin Defendants from future violations of Sections 5(a), (c) and 17(a) of the Securities Act of 1933 and Section 10b of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The judgments further provide that upon motion of the Commission, the Court will set disgorgement, prejudgment interest, and civil penalties. Defendants consented to the entry of these judgments without admitting or denying the allegations of the Commission’s complaint.
The Commission’s complaint, filed on August 22, 2014, alleges that Zhunrize is operating as a pyramid scheme because its commission structure is based on the continual recruitment of new members, with the most lucrative returns dependent on the downline recruitment of other members through store sales irrespective of any product sales. According to the complaint, Zhunrize has taken in approximately $105 million from approximately 77,000 investors since 2012.
The Commission’s complaint further alleges that in its promotional materials, Zhunrize touts the ability to earn commissions from the sale of products, both through the owner’s store and through downstream owners’ stores. For example, a Zhunrize promotional video differentiates Zhunrize from other on-line multi-level marketing plans, claiming that Zhunrize has “sustainability.” According to the video, the Zhunrize “model will sustain itself because we will have millions more customers than distributors.” Later, the narrator in the video claims “we have the Vendor Relationships, the Logistics, the Payment Gateways to reach millions of new customers each month.” The Commission’s complaint also alleges that Zhunrize does not disclose, however, that to date substantially all of its revenue has comes from the sale of memberships (referred to as stores) and the corresponding monthly internet hosting fees associated with operating those stores, rather than the sale of products. Indeed, Pan testified that the company currently derives 80-90% of its revenue from selling online stores and the monthly internet hosting fees for them, as opposed to actual products from these stores. Thus, contrary to the representations to potential investors, Zhunrize is actually a fraudulent pyramid scheme.
See also L.R.-23091
Zeek Rewards: Another Default Judgement Ordered
It seems we will be seeing more Zeek Rewards net winners and serial promoters hit with Default Judgements. The latest, following Todd Disner, is David Sorrells. He had the bright idea of copying whatever Todd Disner had filed Pro Se; it worked out much the same way for each of them, a default Judgement was Ordered.
The Judgement entered for Sorrells is $1,039,568.49 including interest.
Zeek Rewards: Over $2 Million Default Judgement Ordered Against Todd Disner!!
Today Senior Judge Graham Mullen issued a 5 page Order in which he granted Default Judgement, denied Disner’s Motion to Set Aside and Motion to Strike. Judge Mullen ordered the Clerk to enter a default judgement pursuant to Federal Rule of Civil Procedure 55(b)(1). The Clerk of Court has entered the Ordered judgment against Disner which will cost him about $2,079,757.88.
In his ORDER, Judge Mullen states the following:
The Court finds that Disner has failed to act with reasonable promptness. He was personally served with the Summons and Complaint three months before he finally filed a substantive document in this lawsuit, which was a request to set aside the default. Moreover, it is clear that he had notice of the action and claims against him and the knowledge to act on his own behalf because he filed a Notice of Appearance to appear pro se nearly a month before the answer was due. Disner states that he “had not received any responsive pleadings from any of his co-Defendants” as an excuse for his failure to file an answer. (Doc. No. 49 at 2). He further suggests in a general fashion that he was seeking to obtain counsel. However, Disner never contacted the Court or the Receiver to request additional time. His assertions fall short of excusing his failure to act with reasonable promptness.
Furthermore, Disner fails to assert a meritorious defense. He does nothing more that state in a conclusory fashion that he “believes that he has a valid defense to the Plaintiff’s complaint . . . .” (Doc. No. 49 at 3, ¶ 8). This vague statement falls well short of asserting a meritorious defense. See Consolidated Masonry, 383 F.2d at 251.
Disner is personally responsible for his failure to plead. He has had previous experience with Ponzi scheme litigation and filed a twenty-nine page pro se Complaint for Declaratory Relief against the federal government in late 2011 claiming wrongful seizure of his Ponzi scheme winnings in another Ponzi scheme.
[The other Ponzi scheme mentioned above was AdSurfDaily (ASD)]
Judge Mullen also was not pleased with Disner’s lack of expedience:
To allow a single, unresponsive Defendant to proceed on a different track than the rest of the Defendants, or to delay the entire proceeding as to all parties due to Mr. Disner’s dilatory filings, would cause additional costs and burdens upon the Receivership Estate, including increased legal fees.
You can read the Order and Clerk’s Order here.
Zeek Rewards: Preferred Merchants Solutions and NXSystems Orders
Today, Senior District Judge Graham Mullen issued the following orders; one orders the production of documents from Preferred merchants Solutions, the other denies NXSystems Motions for added time:
This matter is before the Court upon the Receiver’s Supplemental Brief in Support of his Contempt Motion (Doc. No. 294), in which he requests a production of certain documents in advance of the deposition of Mr. Meyer. Pursuant to the Court’s broad discretionary power in supervising this equity receivership, the Court hereby orders Preferred Merchants and Mr. Meyer to produce to the Receiver by 10:00 a.m. Wednesday morning, December 17, the following: A full accounting of the use and location of the RVG funds transferred to Preferred Merchants /Meyer in August 2012 from the date of the transfer to the present and all documents related to the creation, governing documents, transfer of assets into and current holdings of the “Cook Islands Trust” described by Preferred Merchants’ and Mr. Meyer’s counsel to the Court on November 24, 2014.
IT IS SO ORDERED
Signed: December 16, 2014
This matter is before the Court upon NxSystems, Inc.’s Motion for Extension of Time to Respond to the Receiver’s Motion for an Order Directing NxSystems, Inc. to Turn Over Receivership Assets and/or Find it in Contempt of the Court’s Agreed Order (Doc. No. 303). A brief hearing was held on this matter on December 16, 2014. For the reasons stated in open court,
IT IS HEREBY ORDERED that NxSystems, Inc.’s Motion for Extension of Time to Respond is hereby DENIED; and NxSystems, Inc. is directed to provide to the Receiver an accounting of the funds at issue within thirty days.
Signed: December 16, 2014
Liberty Reserve: Chief Technology Officer Sentenced
FOR IMMEDIATE RELEASE Friday, December 12, 2014
Chief Technology Officer of Liberty Reserve Sentenced to Five Years in Prison
The former chief technology officer of Liberty Reserve was sentenced today to serve five years in prison for conspiring to operate an unlicensed money transmitting business that processed more than $16 billion through Liberty Reserve’s digital currency system. The Court found that Marmilev understood the illegal nature of Liberty Reserve’s business and that he knew that a wide array of criminal enterprises used Liberty Reserve to further their criminal activity.
Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Preet Bharara of the Southern District of New York made the announcement.
“Marmilev used his technical expertise to create a virtual currency business that was used extensively by criminals throughout the world,” said Assistant Attorney General Caldwell. “Marmilev boasted that the crime group was beyond the reach of U.S. law enforcement, but he couldn’t have been more wrong. Today’s prison sentence shows that those who hide their illegal activities on-line and off-shore will be caught and sent to prison.”
“Mark Marmilev spent years designing and maintaining the technological architecture that allowed Liberty Reserve to operate a global payment processor and money transfer system that catered to criminals,” said Manhattan U.S. Attorney Preet Bharara. “Now, he will pay for that crime with five years in federal prison.”
Mark Marmilev, 35, of Brooklyn, New York, pleaded guilty on Sept. 11, 2014, for his role in designing and maintaining the technological infrastructure for Liberty Reserve, a company that operated one of the world’s most widely used digital currency services. In addition to the prison sentence, U.S. District Judge Denise L. Cote also ordered Marmilev to pay a $250,000 fine.
According to allegations contained in the indictment, and statements made in other court documents filed in Manhattan federal court and related court proceedings:
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 was created, structured, and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes. 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 because it provided an infrastructure that enabled cybercriminals to conduct anonymous and untraceable financial transactions.
Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than five million user accounts worldwide, including more than 600,000 accounts associated with users in the United States, and processed tens of millions of transactions through its system, totaling more than $16 billion in funds. These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking, and other crimes.
According to court documents, Marmilev was a longtime associate of Liberty Reserve founder Arthur Budovsky, and he served as Liberty Reserve’s chief technology officer. In that role, Marmilev was principally responsible for designing and maintaining Liberty Reserve’s technological infrastructure. Marmilev also promoted Liberty Reserve to criminals on the Internet, where, using aliases, he touted Liberty Reserve’s lack of anti-money laundering policies and its tolerance for “shady businesses.”
In conjunction with the sentencing, a civil forfeiture complaint was filed today seeking the forfeiture of Gourmet Boutique, a retail grocery business located in Brooklyn, New York, and the forfeiture of Marmilev’s interest in Grimaldi’s, a pizzeria located in the Coney Island area of Brooklyn, New York; according to the complaint, Marmilev purchased these business interests using more than $1.6 million in Liberty Reserve proceeds.
This case is being investigated by the Internal Revenue Service-Criminal Investigation, and U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, with assistance fromthe United States 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 Spanish National Police’s Financial and Economic Crime Unit, 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 and Cybercrime Unit and Money Laundering 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 Mosley of AFMLS and Assistant U.S. Attorneys Serrin Turner, Andrew Goldstein and Christine Magdo 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.
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