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 avaialble 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 determination.
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 distribution.
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.