LEXINGTON, N.C. — A federal judge has given the receiver of defunct ZeekRewards.com permission to begin making the first round of distributions to victims of the Ponzi scheme starting Sept. 30, according to the Winston-Salem Journal.
In August 2012, the U.S. Securities and Exchange Commission accused Rex Venture Group LLC, Zeekler and ZeekRewards.com, and Paul Burks, their principal owner, of raising $850 million through unregistered securities. The companies were shut down and their assets frozen.
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.
On Thursday, U.S. District Court Judge Graham Mullen approved the request of receiver Kenneth Bell. The judge also approved Aug. 15 as the deadline for determining whether a participant’s claim would be accepted and made payable by Sept. 30.
Bell has said he would pay 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.
Victims are being notified by email about the status of their claims.
In a separate legal filing, Bell’s latest status report indicated he has reached settlement agreements with Burks, Dawn Wright-Olivares and Daniel Olivares.
“Each of these defendants agreed to a consent judgment of $600 million, to be satisfied with substantially all of their assets,” Bell said in the filing. He could not be immediately reached for comment today to explain how the defendants would pay the judgment amounts.
In February, the U.S. Attorney’s Office for the Western District of N.C. reached agreements with Dawn Olivares, the company’s chief operating officer, and Daniel Olivares, 31, senior technology officer. The Olivares are stepmother and stepson.
Dawn Olivares pleaded guilty to an investment fraud conspiracy charge and to tax fraud conspiracy. She is facing up to 10 years in prison and up to a $500,000 fine. Daniel Olivares pleaded guilty to an investment fraud conspiracy charge. He is facing up to five years in prison and up to a $250,000 fine.
Bell filed lawsuits in June against two attorneys — Kevin Grimes and Howard Kaplan — who represented Rex Venture from January to August 2012. He accused the two of legal malpractice, aiding and abetting breach of fiduciary duty, and seeking the imposition of a constructive trust.
Bell said the attorneys’ actions caused an injury to Rex Venture in excess of $100 million, for which he is pursuing damages. Bell said both attorneys “played an indispensable role in the scheme.”
“Because of the lucrative, seemingly ‘too good to be true’ claims being made by RVG and ZeekRewards, many potential investors were skeptical of whether the scheme was legal and legitimate. So, RVG enlisted the aid of Kaplan, Grimes and other legal counsel to assist in promoting and legitimizing the scheme.”
On Thursday, Bell listed about 9,400 net winners living in the United States in a 217-page legal filing available at www.zeekrewardsreceivership.com. Bell defines net winners are those who had a net gain of at least $1,000 from the Ponzi scheme.
The list contained 15 individuals from Forsyth County, 105 from the Triad and Northwest North Carolina, and 390 statewide. Bell said net winners combined received more than $283 million.
Bell has recovered $336.3 million in assets as of June 30, the latest available total. He has $324.1 million in available assets after paying administrative and other costs.
Bell said he has obtained $3.98 million of a disputed $13 million from financial institution NxPay, as well as $1 million of a dispute $5.8 million from Preferred Merchants.
Bell said his pursuit of net winners outside the United States will involve legal actions in their respective countries. Bell said he “is evaluating the most efficient means of pursuing these individuals that will generate the greatest possible return for the receivership estate.”