LEXINGTON, N.C. — The receiver for ZeekRewards.com has gained court permission to delay his next status report on the defunct Lexington company until May 10. The report had been due Thursday.
It is the first development on the case since a court-appointed judge was approved in March to review Kenneth Bell’s submissions for paying certain affiliate claims involving the $850 million Ponzi scheme.
Bell said in a posting at www.zeekrewardsreceivership.com that he has issued about 160,000 email notices to people who have filed claims for refunds of their losses in the scheme.
“Our goal is to distribute now an amount equal to 40 percent of each reconciled claim using the rising tide method of calculation already approved by the court,” Bell said.
A rising tide distribution is used by courts as a method to pay recovered assets to defrauded investors. The method serves to distribute money in a way that leaves as many investors as possible with the same percentage recovery of their total investment.
“This month, we will file a motion with the court asking permission to make an interim, partial distribution on claims,” Bell said. “I will also be reserving cash to distribute to holders of claims that have not yet been determined and allowed.
“My best guess is that we will begin making distributions in mid-summer.”
In August 2012, the U.S. Securities and Exchange Commission accused Rex Venture Group LLC, Zeekler, ZeekRewards.com and Paul Burks, their principal owner, of raising the money through unregistered securities.
The companies raised the money from at least 2.2 million customers, including more than 230,000 in the United States and 47,000 in North Carolina. The companies were shut down and their assets frozen.
Bell said he has about 10,000 more letters of determination to send out. “Bottom line, we will have letters out to more than 95 percent of the claimants in the next few weeks,” he said.
Frank Bullock Jr., the judge approved to review Bell’s payment claim submissions, is retired from the U.S. District Court of the Middle District of North Carolina. His role also includes addressing claimant objections. It is not clear when Bullock would begin reviewing claims. Bullock is required to report on how many claims he reviewed and decisions he made within 30 days at the end of each quarter.
Bell had recovered $333.5 million in assets as of Dec. 31, the latest available total. He is trying to recover more than $200 million in additional assets.
He said more than 9,000 so-called net winners received combined more than $283 million.
“We continue to collect receivership assets from financial institutions and those who took more money out of Zeek Rewards than they put in,” Bell said. “We have sued more than 9,000 of these net winners in the United States. We will soon sue net winners who live outside the United States.
“I remain hopeful that we will add tens of millions of dollars to the pool from which we will make final distributions to claimant victims.
“Unfortunately, these efforts will take quite a long time, maybe years,” Bell said. “I will not be permitted to make final payments until all recoverable assets have been collected, but there will be an additional, final distribution at some point.”
In Bell’s complaint against the company officers, filed Feb. 28, he alleges breach of fiduciary duty, unjust enrichment, the return of fraudulent transfers and other claims. Bell said Burks received at least $10 million from the scheme.
Bell is suing two officers – Dawn Wright-Olivares and her stepson, Daniel – who already have entered guilty pleas in U.S. District Court in Charlotte and face up to 10 and five years in prison, respectively. Dawn Olivares, 45, served as chief operating officer, and Daniel Olivares, 31, as senior technology officer.
Dawn Olivares received more than $7.8 million, and Daniel Olivares received more than $3.1 million.
Burks will pay a $4 million penalty as part of his agreement with the SEC.
Bell said his group will send thousands of amended IRS Forms 1099 for 2011 and 2012 to claimants.
“We have determined that Rex Venture Group often miscalculated the amount of money that should have been on the 2011 forms. There also were some errors for 2012 because of inadequate and erroneous records of the company,” Bell said.
“Thousands of affiliates may have paid taxes for 2011 and/or 2012 that they did not owe because of incorrect 1099s. If you receive an amended 1099, I encourage you to consult with a tax professional.”