LEXINGTON, N.C. (Winston-Salem Journal) — The receiver for two collapsed Lexington online companies said today he wants approval to extend his deadline for filing a final liquidation plan to Jan. 31.
Rex Venture Group LLC, ZeekRewards.com and Paul Burks, 65, their principal owner, are accused by the Securities and Exchange Commission of running a Ponzi scheme, raising the money through unregistered securities from at least 2.2 million customers nationwide.
That includes more than 230,000 in the United States and 47,000 in North Carolina.
Bell said the failure of the company could result in losses of $500 million to $600 million. More than $300 million has been recovered since Bell was given approval to freeze the companies’ assets.
Bell filed a preliminary liquidation plan Oct. 8 and initially was scheduled to file the final plan Nov. 15. A judge in the U.S. District Court for the Western District of N.C. approved delaying the filing until today. Bell said in today’s motion it would be his final request for additional time. He said the SEC has approved both delay requests.
The motion was filed the same day he conducted a one-hour audio and online presentation on the status of the case.
Bell said, as he did in the first delay motion, that the “sheer numbers of affiliates and their corresponding records have required the receiver to spend considerable resources to develop a claims process, which we are continuing to work on.”
He said the receivership team has collected at least 115 boxes of documents, preserved more than 10.4 terabytes of electronic data and issued more than 1,200 subpoenas and voluntary document requests to participants.
“While we have made significant progress toward a final liquidation plan in the last month, we have been delayed by the magnitude of the transactions, the inadequate and incomplete nature of the defendant’s financial records, and the sheer quantity of data and affiliates.”
That includes reconstructing more than 18 months of ZeekRewards financial information involving more than 931 million transactions, Bell said.
Bell also said he continues to work on his strategy for “clawback litigation.”
“We are still in the process of analyzing the risks associated with this litigation, its cost effectiveness and the issues created by the 100 countries represented by the affiliates.”
There are at least three examples of the litigation challenges facing Bell.
Trudy Gilmond and Kellie King filed a motion Friday wanting the receivership dissolved as part of their motion that participants should not be subject to clawback for profits they made in the companies. Neither participant is identified by name or location.
Bell said the asset freeze includes all the money invested in ZeekRewards.com through the Aug. 17 shutdown. Bell has pledged to take legal action if necessary to get back money from those who took more money out of Rex Venture than they paid in “to fill the gap between what we have recovered and what victims lost.”
Gilmond and King also argue the SEC “never had jurisdiction” to intervene with the companies because they say what the companies provided was not a security.
“What the SEC purports are investment contracts are nothing more than contractual rights entitling independent contractors to a share of a company’s profits in return for their efforts in promoting the company,” according to the motion.
“Because there is no security to justify the SEC’s jurisdiction in bringing this action, the individual appointed at the SEC’s request must be relieved of his duties, and the clawback suits must not go forward.”
A different group of three ZeekRewards.com participants has filed two motions this month with a U.S. District Court judge, asking that third-party assets be unfrozen. They also argue that Bell does not have the authority to claw back assets not belonging to Burks, his family members or the companies.
Source: Winston-Salem Journal