LEXINGTON, N.C. — Nearly half of the claimants in the ZeekRewards.com Ponzi scheme have accepted the settlement amount presented to them, the company’s receiver said in a legal filing today.
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.
More than 72,000 out of 150,000 claimants have agreed to those conditions and submitted the required information to receive a payment.
Bell has said his goal is to “distribute an amount equal to 40 percent of each reconciled claim using the rising tide method of calculation already approved by the court.”
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.
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 May 1 that he planned to file a motion with the court asking permission to make an interim, partial distribution on claims. “My best guess is that we will begin making distributions in mid-summer.”
Bell said about 400 claimants have objected to the payment amount.
Frank Bullock Jr., the judge approved to review Bell’s payment claim submissions, will tackle claimant objections. Bullock is required to report on the number of claims he reviewed and decisions he made within 30 days at the end of each quarter.
Altogether, there have been 175,000 claims for a combined amount of $645 million. Bell said he is waiting for the remaining claimants to declare whether they will accept or dispute their individual payment distribution.
Bell said the estate received $1.22 million in additional money between Jan. 1 and March 31, as well as paid out $1.64 million.
As of March 31, the estate had regained $334.6 million in assets and dispersed $12.3 million. Bell is trying to recover more than $200 million in additional assets.
Bell said his investigative group is reviewing $5.8 million in a trust account set up by Jaymes Meyer, chief executive of Preferred Merchants, for which Rex Venture Group was a beneficiary.
Bell said that one ZeekRewards.com creditor, which he did not identify, “appears to have taken numerous actions that were in direct violation of the freeze order and greatly damaged the estate.” Bell said he is determining what legal actions should be taken for the violations.
Two lawsuits were filed in February by Bell. The first affects more than 9,000 so-called net winners who received more than $283 million combined. Each net winner had gains of at least $900,000.
“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.”
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 that Burks received at least $10 million from the scheme.
Besides Burks, 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; Daniel Olivares, 31, was 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.