Zeek receiver clarifies timing of refund checks

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WINSTON-SALEM, N.C. — The receiver for defunct ZeekRewards.com said last week about 48,000 refund checks have not been mailed to date, likely because of incomplete claims filed by victims of the Ponzi scheme, according to the Winston-Salem Journal.

The Winston-Salem Journal has received phone calls and e-mails from claimants who said they did not receive a check while a family member did. They claim to have followed the same certification procedures and filed all their claims at the same time.

Kenneth Bell, the court-appointed receiver, mailed Sept. 30 a total of 90,297 checks – valued at a combined $134.3 million – in his first distribution of refunds from the Lexington Internet company.

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 $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.

Bell stated in August that the payout for most recipients is 40 percent of what they were owed “using the rising-tide method of calculation already approved by the federal 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.

Claimants mailed checks in the first distribution had verified claims. They agreed to the monetary value assigned to them by the receivership and provided the required release and certification.

Bell said he will mail another round of checks by late January to claimants with allowed claims. Those claimants must adhere to the same certification requirements by Dec. 31.

Bell said 12,000 claimants with approved claims have not been mailed a check because the amount would have been less than $100. Although Bell said it was “not cost efficient for the receivership to mail these checks at this time,” he added a check could be mailed at the end of the receivership’s legal responsibilities.

The website https://cert.gardencitygroup.com/zrwdet/fs/home was created to provide updates on claim status.

A combined $23 million was withheld for tax purposes from the first round of checks. Bell said he has received a large number of complaints about the tax withholding.

“For those claimants to whom checks were mailed that did not provide an IRS Form W-9 for U.S. residents, as requested on the claims portal, we withheld a certain percentage for tax purposes,” Bell said.

“I have heard from many of you that this withholding should not have been made because these distributions are not taxable. The tax laws on this issue are not entirely clear. We have attempted to get a definitive opinion from the IRS, but have not yet been able to do so.

“Given this uncertainty, we acted on the side of caution and made the withholding,” Bell said.

Bell said if IRS declares the tax withholding is not necessary, he will send another check for that amount.

“We continue to pursue and recover additional funds that will be distributed on later dates,” Bell said.

Bell has listed about 9,400 “net winners” living in the United States in a 217-page legal filing available at the website. He is pursuing legal action against those net winners to recover their net gains.

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.

He had recovered $336.3 million in assets as of June 30, the latest available total. He had $324.1 million in available assets after paying administrative and other costs.