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Wednesday
May082013

Judge Approves Claims Process For Zeek Victims, Claims Due By September 5th

A federal judge overseeing the ZeekRewards Receivership has issued an order approving a claims process that clears the way for hundreds of thousands of victims to eventually recoup some of their losses.  Judge Graham C. Mullen granted a motion by the Receiver, Kenneth D. Bell, seeking to establish a claims process, set a bar date, and approve notice procedures in what is likely the most complicated receivership process in history.  Notably, in his order, Judge Mullen did not even address the objections lodged by counsel involved in a separate class action proceeding on behalf of Zeek victims, which had been lambasted by the Receiver as meritless and done only in pursuit of "their own [financial] agenda."

In his Order, Judge Mullen ruled that all claims must be received by the Receiver within 120 days, which would fall on September 5, 2013.  This date is known as the claims "bar date," which, by its name, means that any claim(s) not received on or before that date is forever barred from participating in the claims process.  This was also reiterated in Judge Mullen's Order.  The Order also approved the Receiver's request to establish a centralized claims website that would be the primary means by which a claimant could submit a Proof of Claim Form.  That website, which will be avaialble through the Receiver's website at www.zeekrewardsreceivership.com, will be functional within 14 days of the Order.

Because of the sheer number of potential claimants, which the Receiver estimated at nearly 1 million, extensive notice procedures were proposed to ensure that all potentially interested parties would receive notice that they had a limited period of time to submit a claim.  Additionally, the Receiver sought to utilize methods that would not result in exorbitant costs to the Receivership Estate, such as email and publication.  For example, the cost of postage alone for nearly 1 million pieces of mail would approach nearly $500,000.  The Receiver proposed several methods to provide notice to parties, which the Court approved in its Order.  These methods were:

  1. Making the Claims Process publicly available on the Receiver's website at a soon-to-be-functional Claims Portal;
  2. Emailing all known affiliates through email addresses obtained from Receivership records and collected at the Receiver's website; 
  3. By U.S. Mail to trade creditors and other known, non-affiliate creditors; and
  4. Publishing the Receiver's Notice on the Receiver's website, certain multilevel marketing sites, certain newspapers, and sending the Notice to certain trade groups in the financial industry.

In the event that an email was no longer found to be valid, the Receiver will attempt service of the notice by an alternative method, which includes a different email address or postcard to the last known address.  The Court approved the Claim Submission Form that will be utilized on the Claims Portal. 

Another issue worth noting is the Court's affirmation of the Receiver's determination that "Retail Profit Points" accumulated by affiliates could not serve as the basis for any claim and would not be included in any calculation of an approved loss amount.  These "VIP Points", as they were also known, were essentially interest payments that were disguised in the form of a daily 1.5% payout purportedly resulting from daily profits.  Courts have universally rejected attempts by victims to recover anything other than investors' principal balances, since allowing fictitious interest payments would serve only to reward investors that had been involved in the scheme longer at the expense of newer victims.

In the event that the Receiver determines that an investor's claim should be rejected, that victim will then have 30 days from that date to submit an objection to the Receiver.  

A copy of the Order is here.

Questions or Comments regarding the claims process?  Contact Ponzitracker here.

Special Thanks to ASDUpdates.

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