Nearly two years after his appointment, the court-appointed receiver for the $600 million Zeek Rewards Ponzi scheme has asked a North Carolina federal court for approval to make an initial 40% distribution to over 100,000 victims. The Receiver, Kenneth D. Bell, filed his Motion to Authorize First Interim Distribution, Establish Record Dates, and Set First Interim Distribution Date (the “Distribution Motion”) yesterday. In the Distribution Motion, the Receiver seeks to begin making distributions to victims as soon as September 30, 2014.
The Securities and Exchange Commission filed an emergency enforcement action against Zeek Rewards in August 2012, alleging that the wildly popular online penny-auction site was, in reality, a massive pyramid and Ponzi scheme that was on the verge of collapse. After a claims process was initiated last year, Bell ultimately received approximately 175,000 claims asserting cumulative losses of over $650 million.
Given the sheer number of claims received, which is believed to be (by far) the largest number ever involved in a Ponzi scheme receivership, Bell’s team was forced to adopt several unique procedures to timely and efficiently process each claim. This included the appointment of a special master to resolve disputes between claimants and Bell, as well as the discretion to utilize Bell’s discretion to approve claim discrepancies that did not exceed the amount contained in the company’s database by more than $10,000.
As of the filing of the Distribution Motion, Bell’s team had issued more than 150,000 Claim Determinations to victims. Claimants that subsequently returned the required Release and OFAC Certification had their claim converted to an Allowed Claim – and thus eligible for a distribution. To date, more than 80,000 claims are considered Allowed Claims by Bell’s team. According to the Distribution Motion, those approximately 67,000 claimants that have received a claim determination but have not yet returned the required Release will have until August 15, 2014 to do so to be considered eligible to receive a distribution on September 30, 2014.
Previous Ponzitracker coverage of ZeekRewards is here.
The Distribution Motion is below: