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
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.