Judge Approves $1.2 Million Settlement with Four Oaks Bank and Trust

Zeek Rewards related – Four Oaks was an ACH Processor for Rex Ventures

From NewsObserver.com, Business section

Judge approves Four Oaks Bank’s $1.2 million settlement

Posted by David Ranii on April 28, 2014

A federal judge in Raleigh has approved a settlement that calls for the corporate parent of Four Oaks Bank & Trust in Johnston County to pay a $1.2 million civil penalty.

The settlement between Four Oaks Fincorp and the U.S. Justice Department was approved Friday by Judge Terrence Boyle.

Four Oaks agreed to the settlement in January a day after federal prosecutors filed a civil lawsuit accusing it of facilitating fraud by routing more than $2.4 billion in transactions for “fraudulent Internet payday lenders” through the national money transfer system. Four Oaks received more than $850,000 in fees for this service.

The bank, which has more than a dozen branches, didn’t admit to any wrongdoing. However, the bank’s board of directors “felt that this settlement was in the bank’s best interest in order to avoid a lengthy and protracted legal fight and so that the bank could continue to focus on its primary business, which is serving its local communities.”

The lawsuit accused Four Oaks of deliberately ignoring warning signs that the fraudulent payday lenders were “deceiving consumers about the terms of payday loans, making loans that are unlawful and unenforceable under state and federal laws.”

Reinvestment Partners, a Durham consumer advocacy group, praised the civil penalty when it was announced in January.

“Four Oaks has put its profits ahead of the interest of consumers,” Adam Rust, research director with Reinvestment Partners, said in a prepared statement. “Hopefully this will make all banks think twice about being passive accomplices to illegal lending.”


The Court’s Judgement:  Judgement – Doc 23

Four Oaks Bank Agrees To $1.2 Million Settlement With DOJ

Four Oaks Fincorp, Inc. And Four Oaks Bank & Trust Company Agree To Settlement Terms With The United States Department of Justice

Company Release – 01/09/2014 16:21

FOUR OAKS, N.C., Jan. 9, 2014 /PRNewswire/ — Four Oaks Fincorp, Inc. (OTCBB: FOFN) (the “Company”), the holding company for Four Oaks Bank & Trust Company (the “Bank”), announced that the Company and the Bank have negotiated a civil settlement with the United States Department of Justice. The settlement remains subject to approval by the United States District Court for the Eastern District of North Carolina.  As a part of the terms of the proposed settlement, the Bank has agreed to pay a $1.2 million civil penalty and to abide by certain conditions relating to the provision of banking services for some categories of merchants.  Also as part of the proposed settlement, the Bank does not admit any facts alleged in the accompanying complaint nor does the Bank admit to any liability.

The Company’s Board feels that this settlement is justified in order to avoid a lengthy and protracted legal fight and so that the Bank can continue to focus on its primary business, which is serving its local communities.  The Bank is a community-based bank, and its mission is to build a stronger bank by helping its neighbors and customers.

In addition, the Company and Bank have cooperated fully with the U.S. Department of Justice.

This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended.  These forward-looking statements are based on the Company’s current beliefs and assumptions and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks and uncertainties that are often difficult to predict, are beyond the Company’s control, and which may cause results to differ materially from expectations.  For a discussion of the most significant risks and uncertainties associated with the Company’s business, please review the Company’s filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2012 and subsequent reports.  You are cautioned not to place undue reliance on these forward-looking statements, which are based on the Company’s expectations as of the date of this press release and speak only as of the date of this press release.  The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

SOURCE Four Oaks Fincorp, Inc.

DOJ Files Suit Against Four Oaks Bank, A Former Zeek Payment Processor

I have posted the Docket File for this case and the relative other filings on the Files website. Here is a snippet from the Complaint:

81. In Spring 2012, Four Oaks Bank agreed to provide ACH access to a TPPP-TX merchant-client, Rex Venture Group, LLC, despite knowing that: (1) Rex Venture’s principals could not be identified through business database searches; (2) the Bank could not independently verify the type of legitimate business in which Rex Venture Group was engaged; (3) one of the two addresses reported by the company was a vacant lot, and the other was a different business; and (4) the Social Security Number of one of the company’s purported principals was associated with a different person. A Bank official even concluded that the purported owner of Rex Venture Group “keeps changing company names so his reputation will not catch up with him.”

82. These red flags did not stop Four Oaks Bank from providing access to the ACH network through TPPP-TX and another nested payment processor to Rex Venture Group. By August 17, 2012, the public learned what Four Oaks Bank already knew or should have known – Rex Ventures Group allegedly was a massive Ponzi and pyramid scheme. In S.E.C. v. Rex Ventures Group, LLC d/b/a/ Zeekrewards.com, et al., Civil Action 12-CV-519 (W.D.N.C.), the government alleged that Rex Venture Group had illegally raised more than $600 million from approximately one million investors. Four Oaks Bank had allowed Rex Ventures Group (through TPPP-TX and a nested relationship) to process close to $60 million in ACH transactions in furtherance of the illegal scheme.

i am glad to see the DOJ going after the facilitators of these scams and schemes. It’s about time!!!  Maybe this will send a clear message to the other co-conspiratorial payment processing companies.