LEXINGTON, N.C. — Nearly 174,000 claims have been filed for a combined $550 million in refunds from the ZeekRewards.com Ponzi scheme, the company’s receiver said Friday.
The 3½-month deadline for filing a claim expired Thursday.
Kenneth Bell said in a letter at www.zeekrewardsreceivership.com that almost 200,000 individuals were involved in filing claims. Bell said “the overwhelming majority” of the claims were submitted by what he called “affiliate-investors and retail auction users.”
Bell said July 31 that he had collected $325.1 million in assets, or more than half of the $600 million that the defunct Lexington company is accused of raising through unregistered securities. Involved in the case are Rex Venture Group LLC, ZeekRewards.com and Paul Burks, their principal owner.
At $550 million, the filed claims – if all approved – would take 92 percent of the money raised by the companies.
The U.S. Securities and Exchange Commission said the defendants raised the money from at least 2.2 million customers, including more than 230,000 customers in the United States and 47,000 in North Carolina. The companies were shut down and their assets frozen Aug. 17, 2012.
Bell said the next step is determining the validity of each claim and the correct amount that a legitimate claim should receive.
“Due to the overwhelming response to the claims process and the volume of claims submitted, we cannot estimate how long this reconciliation process will take to complete,” Bell said. “However, we are undertaking every effort to complete the process as soon as is practicable.”
Bell said he plans to file his next update by Oct. 30, which will involve the claim process and issuing claim determination letters. He said the letters would state “whether a claimant’s claim(s) has been allowed or disallowed, the amount allowed (if applicable), any amounts the claimant received from ZeekRewards during its operation, and how the claimant may object to the claim determination.”
“It is still my intention to make an interim distribution to claimants who hold allowed claims as soon as possible. The amount available for distribution, the timing of the distribution, the distribution reserves, and the method of distribution all must be approved by the court.
“It is anticipated that this motion will be filed prior to the end of this year. A final distribution will be made at the close of the receivership once all recovery efforts are complete.”
Bell seek he plans to request court approval to permit the late filing of certain claims by affiliate-investors or financial institutions in limited circumstances.
Bell repeated his plans to pursue court action this fall against net winners who are not willing to reach a settlement. He defines net winners as participants who took more money out of the alleged Ponzi scheme than they had paid in. At least 135 net winners have pledged to return a combined $1.82 million, representing an overall 56.1 percent return on the net winnings.
A U.S. District Court judge authorized this week paying Bell and law firm McGuireWoods LLP a combined allowance of $1.07 million for legal services, as well as $16,271 for expense reimbursement. FTI Consulting Inc., which has provided data-mining services on the ZeekRewards.com system, was paid $925,235.
Credit: The Winston-Salem Journal