Ponzitracker

"Hundreds of thousands of Zeek victims have waited patiently for months as the Receiver has completed the work necessary to provide an easy to use, fair and efficient claims process. But yet again, it appears that counsel pursuing their own agenda has come forward to delay and raise the costs of the Receiver moving forward in the best interest of all Zeek victims."

The court-appointed receiver tasked with recovering assets for victims of the $600 million ZeekRewards Ponzi scheme addressed objections to his proposal for the establishment of a claims process, dismissing the objections as meritless and questioning the underlying motivations of those objectors. Kenneth Bell, the receiver, asked that the Court deny the objections, which currently stand in the way of the court's approval of a claims process that could begin returning funds to the estimated 800,000 victims of ZeekRewards. The objections come from counsel for a parallel class action that was filed on behalf of Zeek victims, captioned as Belsome, et al v. Rex Venture Group, and raise three primary issues: (1) that the proposed notice to be send to interested parties somehow violated attorney rules of professional conduct prohibiting an attorney's interaction with represented parties, (2) whether a claimant's use of an attorney is permitted, and (3) that the proposed release sought in the Claims Process is improper.

The first objection takes issue with the proposed procedure of the mailing of a court-approved notice to all potential claimants, whether or not they are represented by counsel, notifying them of the beginning of the claims process. Belsome's counsel claims that this would violate attorney rules of professional conduct governing communication with individuals that are currently represented by an attorney. The Receiver dismissed this claim, noting that the rule was intended to protect adverse parties, which is clearly different than the current situation where the victims are those parties that the Receiver and the Court are attempting to help. Additionally, while not noted in the response, it is axiomatic that the Receiver functions as an arm of the Court in his official functions as Receiver. Indeed, the Receiver notes in a footnote that the only possible basis for such an objection could whether the lawyers' financial interests

will be harmed by their alleged clients visiting the receivership website and considering whether they want to pay counsel in connection with the claims process, which is intended to be simple and easy to use.

The Receiver indicated that he has already received communications from victims expressing their fear that they may be victimized by attorneys seeking to take advantage of their uncertainty in the claims process.

Second, the Receiver brushed aside any insinuation that he was seeking to limit a claimant's access to legal representation, noting that the Belsome clients and any potential claimants are free to seek the assistance of counsel on their behalf - that is, as long as appropriate notification is provided to the Receiver of that representation.

Finally, the Receiver addressed the objection to the release sought in the claims process. As part of the claims process, and in exchange for a claimant being permitted to receive pro rata distributions, the Receiver is requiring each claimant to release all claims a victim has against the Receiver, his team, and the Receivership Estate. This arises partly due to the fact that, legally, each victim currently holds a claim against the Receivership Estate for the return of their pro rata share of funds. In essence, if a claimant was permitted to retain that claim and receive pro rata distributions, they could theoretically recover more than their losses - which would be contrary to the intent and function of an equity receivership. Bell states that the release is narrowly tailored to address these issues, and notes that each claimant remains free to pursue claims against current or former Zeek employees or entities.

In closing, Bell again takes aim at a growing group of counsel that, in "pursuing their own agenda," have only succeeded at "delay[ing] and rais[ing] the costs of the Receiver." Ironically, it is this same group that also has been vocal about the Receiver's costs in maintaining the Receivership. The Receiver asks that the objections be denied, and that his motion for the approval of a claims process be granted.

A copy of the Motion is here.

More Ponzitracker coverage of Zeek is here.