The receiver appointed to recover assets for victims of the massive $600 million ZeekRewards Ponzi scheme hosted an hour-long conference call earlier this evening in which he provided new updates on the eve of the four-month anniversary of his appointment. In the call, Receiver Kenneth Bell revealed a wealth of new information, including estimates on total recoveries, the establishment of a claims process, and the number of victims and clawback targets. Mr. Bell also addressed several recent filings challenging his authority and the legitimacy of the receivership, dismissing them as "absurd."
With the benefit of now having several months to comb through financial records and other documents detailing the inner-workings of Zeek, Mr. Bell provided an update on loss and victim figures. First, Mr. Bell estimated that approximately 840,000 affiliate ID's invested more with Zeek than they withdrew. Conversely, Mr. Bell estimated that 77,000 affiliate ID's were fortunate enough to withdraw an amount in excess of their total investment. In total, and in adherence with previous estimates, Zeek investors suffered collective losses of approximately $500 million to $600 million. Since his appointment, Mr. Bell has secured the recovery of over $300 million - with a majority of that recovery consisting of funds returned from various financial institutions.
One of the most popular topics was the establishment of a claims process in which investors could eventually be permitted to receive distributions based on their loss amounts. Mr. Bell stressed that he is working strenuously to institute a claims process, which would first require the submission of a proposed claim form and procedure to United States District Judge Graham Mullen. According to Mr. Bell, he has set an internal deadline of submitting this information to Judge Mullen by January 31, 2013. Once the claims form and procedure receives court approval, the claims form will likely be posted to the website and distributed to victims, who will have until a court-imposed deadline by which to submit relevant requested information. The claim form will also specify what proof is required to substantiate claims. Upon the approval of claim forms and submission by victims, Mr. Bell also indicated his preference to proceed with an 'interim' distribution rather than waiting to make one final distribution at the end of the Receivership.
Another popular topic was the issue of "clawbacks" against those 'net winners' that were fortunate enough to profit off their investment by withdrawing funds in excess of their investment. The Receiver sent out a first wave of 1,200 subpoenas to those 'net winners' that were deemed to have profited most off Zeek. According to Mr. Bell, "scores" of investors responded in a cooperative manner seeking to pay back their false profits. However, a "whole lot" of recipients have fought back against the requests for information. If the Receiver is not able to reach an amicable resolution with each clawback target, he will likely proceed with the filing of a lawsuit. The Receiver took steps last week to ensure that he may properly bring clawback lawsuits in various federal districts around the United States by filing a copy of the SEC Complaint and the Order Appointing Receiver in districts where clawback suits are likely under 28 U.S.C. 754.
Mr. Bell also addressed the various recent filings that have sought to both contest his authority as receiver and challenge the SEC's decision to shut down Zeek in the first place. This included the filing by Fun Club USA of a motion seeking the appointment of an examiner, as well as a filing by several clawback targets seeking to dissolve the Receivership. Mr. Bell saved his harshest words for these efforts, calling them "absurd" and disputing their accuracy. As to the motion for appointment of examiner, Mr. Bell pointed out (as Ponzitracker did here) the inherent conflict of interest that would present itself since the nominee for examiner currently represents "several hundred net winners," as well as the implications of paying such an examiner our of receivership funds. Mr. Bell also indicated he will oppose the motion seeking the dissolution of the receivership, saying that the "receivership is here to stay," and represented the only and best way to make victims whole.
In closing, Mr. Bell stated that his goal was to ensure that the Receivership was the most cost-effective Receivership to date, and urged victims to regularly check his website, www.zeekrewardsreceivership.com, for updates. A copy of the conference call is expected to be available on the website as well.