The court-appointed receiver overseeing the recovery of
funds for victims of the $600 million ZeekRewards Ponzi scheme issued an update
today to address several pending issues. Kenneth D. Bell, the Receiver,
posted a three-page letter on the court-approved website, www.zeekrewardsreceivership.com,
in response to 'many' requests for an update on his efforts. In the
letter, Bell provided a brief update that addressed the claims process and
potential third-party litigation.
The first item addressed by Mr. Bell, and arguably the
most important, was the eventual claims process that would be available to
victims. Because of the large number of potential victims and the likely
costs that would accompany any attempt to conduct the claims process through
the postal service, Mr. Bell indicated that the claims process would be carried
out electronically "with few exceptions." On or before March
31, 2013, Mr. Bell will file a motion seeking Court approval of the proposed
claims process, which includes the proof of claim form that will be provided to
all potential claimants.
Once approved by the Court, Mr. Bell indicated that he
would provide notice to all affiliates within fourteen (14) days that will
contain a website address where a proof of claim form may be filled out and
submitted. Upon receipt, the proof of claim forms will be analyzed to
first determine whether the claimed losses match up with the losses determined
by the Receiver's forensic team. Each claimant will then be notified of
the Receiver's determination.
In the event that the Receiver disagrees with
any affiliate's claimed amount, that individual will then have thirty (30)
days to respond to the Receiver's determination. If no response is
received within that thirty-day period, the amount of loss determined by the
Receiver's team will be deemed correct, and the Receiver will proceed with a
distribution based on that amount. If an objection is received, the
Receiver will attempt to resolve the dispute with the claimant, and if that
attempt is not successful, the Receiver will submit the dispute for the court's
While the Receiver has not provided an exact estiamte of
the total losses suffered by victims, he did indicate that he had recovered
more than $300 million to date. While it is unlikely that an initial
distribution would include the entire amount to date, as the Receiver must maintain
some reserves, the first distribution is likely to be close to 50% of approved
losses should previous estimates of $600 million in losses prove correct.
After the Receiver has recovered all possible assets, including those
through "clawback" litigation, he will then proceed with a final
Potential Litigation Claims
According to Mr. Bell, 'clawback' lawsuits against those
'net winners' that profited from the scheme will commence "in the next few
months." Mr. Bell issued his strongest statements to date concerning
the substance of those lawsuits, stating that those winnings currently held by
'net winners' were "really just other peoples' money." Many of
those net winners are currently in negotiations with Mr. Bell's team to amicably
resolve their situation without litigation, and Mr. Bell encouraged other net
winners to contact his office. While it is estimated that nearly $300
million is currently in possession of these 'net winners', Mr. Bell stated that
he was unable to estimate with specificity any potential future recoveries.
In addition to clawback claims, litigation is also being considered
against insiders, such as employees, contractors, and other third-parties that
provided services to the scheme.
Mr. Bell also addressed the ongoing efforts "fending
off what we believe to be unnecessary and meritless motions brought before the
Court by large 'net winners.'" Labeling these efforts as nothing
more than "delaying tactics," Mr. Bell indicated that a great deal of
time and money had been spent to respond. Unfortunately, the money
expended to fight these efforts is a dollar-for-dollar reduction in the total
amount of funds eventually available to victims.
Mr. Bell expects to file his motion seeking court
approval of the claims process on or before March 31, 2013.
A link to Mr. Bell's letter is here.
For more news and analysis of Ponzi schemes, visit
Ponzitracker, a blog by Jordan Maglich, an attorney at Wiand Guerra King P.L.
For more information about LexisNexis
products and solutions connect with us through our corporate site.