Welcome

4 Apr

On March 27, 2013, the Commodity Futures Trading Commission filed a civil complaint against James Harvey Mason as Defendant and The JHM Forex Only Pool (f/k/a The JHM Forex Only Pool, LP), and Forex Trading At Home as Relief Defendants, case number 3:13-cv-196, in the United States District Court for the Western District of North Carolina.  The CFTC alleges that Defendant fraudulently solicited, accepted and pooled funds to trade off-exchange foreign currency contracts and ultimately misappropriated a significant portion of those funds for purposes other than forex trading, all in violation of the Commodity Exchange Act, 7 U.S.C. §§ 1 et seq.

Also on March 27, 2013, the Honorable Graham C. Mullen issued an order appointing Joseph W. Grier, III of Grier Furr & Crisp, PA as temporary receiver (the “Receiver”) for the Defendant and Relief Defendants.  This order directs the Receiver to, among other things, take custody, control and possession of all funds, property and other assets in the possession or control of Defendant and Relief Defendants and to perform all acts necessary to hold, manage and preserve the value of such assets.

Defendant has every right to defend against the CFTC’s complaint and has not yet been adjudicated liable for the claims alleged.  Although the Court may ultimately order the Receiver to liquidate Defendant’s and Relief Defendants’ assets and to make a pro rata distribution of the proceeds to investors, the Receiver’s initial focus is on investigating the financial affairs of Defendant and Relief Defendants and preserving assets available to the best of his ability.  Accordingly, individual investor information is not needed at this time.

This website will be the Receiver’s primary means of communication with investors and the public.  The Receiver will use this site to provide updates on the status of the receivership and to post pleadings entered in the civil action.  Please be encouraged to post questions on this site, and the Receiver will answer those questions as time and resources allow, with a focus on fielding inquiries that have general applicability to all investors and/or the public.  You may also communicate with the Receiver at masonreceivership@grierlaw.com.  Please check back periodically for additional information.

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41 Responses to “Welcome”

  1. Clawback April 28, 2013 at 12:46 am #

    Curious if any of you ‘investors’ knew he was a convicted felon when you gave him your money. I sure didn’t or I wouldn’t be writing this now and be a lot richer.

    • rob May 4, 2013 at 11:48 am #

      Nope, I searched, friends searched, even had my Wells Fargo investment fund manager search for info on James and came up with nothing. It appears that his charges were somehow kept out of public records until now.

    • Illana May 6, 2013 at 7:42 pm #

      I certainly did not know that he had served time.

      • jon May 9, 2013 at 4:19 pm #

        He is now in jail on civil and criminal charges. Civil case is ruling on a preliminary injunction. The criminal case is on commodities and security’s fraud. He is getting it handed to him in spades. I am grateful that he was caught. He also was going to escape to Barbados but was caught before that. He was such a chameleon.
        He showed so many faces to so many people from being religious to being a successful financier.

      • Illana May 12, 2013 at 10:03 pm #

        Jon – He was going to escape to Barbados??!!! This is incredible – how he took us all in like that. I am glad he was caught. Does anyone here know any other “sneaky ” stuff about him?

  2. PantherFan May 13, 2013 at 10:27 pm #

    When he was arrested, he had his passport & at least a $50,000 cashiers check on him. I would say he wasn’t going to the bank to trade more currencies and he was obviously was not on the way to the dentists office. He had more more holes in his teeth than Swiss cheese. I was one of the 3 people the NC Dep’t of the Secretary of The State visited on 3-27 and was questioned in my office and was asked to make copies of the original documents and my contract. Mason called me later that evening to find out what they were wanting to know and he called them &%$)*&^%##@ liars and he maintained that he had done nothing wrong. The scumbag had us all fooled but hopefully he will never see light outside of bars

  3. Clawback May 14, 2013 at 2:14 am #

    For those that have not read the details on his felony wire fraud years ago, here it is.
    http://www.ca4.uscourts.gov/Opinions/Unpublished/014055.U.pdf

    • Illana May 16, 2013 at 5:41 pm #

      Thank you PantherFan and Clawback for the very interesting information. I did read the court document that was attached. Very interesting, and disturbing reading. Mason is a fraud from way back, I wish we all had known this before we invested in his scheme. In my opinion, the law should do much more than just put him in jail – they should make him pay us all back what he stole from us.

      • Dragonheart June 3, 2013 at 7:25 pm #

        I have an even more interesting questions. Does anyone know if his associates have past criminal or civil charges?

  4. Charlie June 12, 2013 at 10:24 pm #

    This is so sad, to see the people hurting one another for a little gain and life is so short.

  5. Russ August 28, 2013 at 9:19 am #

    anymore news?

  6. Upset December 2, 2013 at 9:38 pm #

    This is disgusting … when will we know when something is going on!!! Will we never hear anything??

  7. Richard Smith December 3, 2013 at 9:47 am #

    Everyone,

    I just found that the new bill “H.R. 3482: Restoring Main Street Investor Protection and Confidence Act” was proposed on Nov 14 2013 – the copy of the bill is here: https://www.govtrack.us/congress/bills/113/hr3482/text

    The key point is “'(g)Prohibition on certain recoveries Notwithstanding any other provision of this Act, a trustee may not recover any property transferred by the debtor to a customer before the filing date unless,—– “.

    This Ponzitracker site http://www.ponzitracker.com/main/2013/11/24/proposed-ponzi-legislation-seeks-sweeping-and-controversial.html explains this bill that:
    – The Bill also purports to enact a sweeping prohibition against “clawback” lawsuits.
    – The Bill envisions that the sweeping reforms would be applicable retroactively to SIPA liquidation proceedings (1) in progress as of the date of the enactment of the Bill; and (2) initiated after enactment of the Bill.
    , which means if the bill is finally enacted, any clawback litigation that will not have been settled by the date of enactment will become void.

    Everybody can check the progress of the bill here: https://www.govtrack.us/congress/bills/113/hr3482 .

    Given the condition, regardless of the final result (whether this bill is eventually enacted or not), any Ponzi receivers’ future move into clawback litigation can’t be justified because the receivers will be considered to take unreasonable risks that whole efforts (time & money) may end up with complete waste for victims. (this bill may encourage defendants of on-going clawback litigation to make every efforts to linger their cases and must make all net winners who accepted settlements to avoid litigation regret a bit).

    This new bill proposal may insure all my rationale that the receiver in our case should never be in the position to do any clawback action but move into payback the available money to us victims asap before any depletion by unnecessary expenses.

    FYI

    Richard

  8. Richard Smith December 5, 2013 at 2:16 pm #

    To Our Receiver,

    Firstly, a few facts,
    – the receiver of Zeek ( $600 million with 2 million participants) started to open the claimers’ process exactly 9 months after the program shut down (SEC closed Zeek on 17 Aug ’12 and the receiver started taking the victims’ claim from 15 May ’13), and you (only $4.7 million with 500 participants) haven’t been able to show even any sign of our claim process & schedule after nearly 9 months.
    – you haven’t been able to complete process & sale of just only a handful of properties the receivership estate holds for many months even in the middle of favorable property market recovery, and with the anticipation of forthcoming Fed’s QE tapering there is no reasons to wait for better market environment that involves a lot of uncertainties.

    Having said, I’m very disappointed with your slow move toward restitution to us victims, which we believe your important objective & priority as the appointed receiver.

    Just keep spending time for identifying / discovering assets including each customer’s final account balance determination has no longer been justified because Zeek’s receiver basically completed these tasks within several months after the appointment under the far more complicated operation with over 100 times in alleged $ amount and over 1,000 times for involved participants compared with our case.

    As explained many times in this site, you can’t be in the position to proceed any clawback actions / litigations – if required, I will provide more rationales & evidences including clawback threshold $ amount study model (although it’s a case for international clawback) based on many real experiences developed by the prominent Ponzi receiver which is incontestable logic explaining why any clawback action in our case favors only you at the expense of us.

    Given all the above conditions, I believe there is no room for you to drag out this case now therefore please accelerate your process into final distribution of the recovered assets which should be the most beneficial for us victims both financially (without further depletion by unnecessary expense) and mentally (move forward by leaving this bad memory behind as quickly as possible).

    Don’t let us make any objection or argument with you & your actions in any occasions including the court in the future which will be absolutely wasting everybody’s time.

    Hope you agree and act accordingly.

    Richard

  9. frank December 5, 2013 at 11:52 pm #

    Seems like the only ones receiving money are the Lawyers involved who didn’t put anything into this ponzi.

  10. Richard Smith January 9, 2014 at 11:08 am #

    First point:
    – 3rd Report paragraphs of 2. Continued Investigation of assets, 5. Discovery & 6. Determination of Amount Invested by Each Customer / Customer Claim – basically the same explanations & activities continued as your 2nd report.

    Let me reiterate my last comments on 5 Dec ’13 in Welcome section:
    “Just keep spending time for identifying / discovering assets including each customer’s final account balance determination has no longer been justified because Zeek’s receiver basically completed these tasks within several months after the appointment under the far more complicated operation with over 100 times in alleged $ amount and over 1,000 times for involved participants compared with our case.”

    Given the massive working hours your staffs devoted to these specific tasks over the last 9 months, we assume you already have fully explored, examined & finalized all 2, 5 & 6 items otherwise your efficiency will be challenged & thoroughly investigated. Unless you happen to obtain positive news such as hidden assets passively, there would be no reasons for you to work on these subjects with your own initiative.

    To be straight forward, any further activities such as review & analyse financial information etc. related with 2., 5. & 6 section in your third report should no longer be appeared to in your activities records to justify your fee before official customer claims starts. Just trying to make sure we will avoid unnecessary dispute on these topics in the future.

  11. Richard Smith January 9, 2014 at 11:11 am #

    2nd Point:

    – 3rd report paragraph of 6. Determination of Amount Invested by Each Customer / Customer Claim – you said “The receiver contemplates contacting these Customers in the near future to resolve claims that the receivership may have against such Customers. “, which implies clawback settlement negotiation action.

    Let me summarize what I posted a few times in this site as below, I believe these Zeek’s facts proved you that clawback negotiation doesn’t work:
    Zeek Receiver Clawback Chronological Summary;
    – 1st Negotiation: Oct ’12 Sent Subpoena to net winners — until Apr ’13 No single settlement was realised, means no money returned
    – 2nd Negotiation: Apr ’13 – July ’13 — despite strong threat of future litigation & average 40%+ discount offer for each payback amount, only 135 people out of 77,000 net winners (just 0.2%) and $1.8 million out of $292 million originally paid to the net winners (accounts only 6%) was settled
    – 3rd Negotiation: July ’13 – Oct (effectively by end of Nov) ’13 — ultimatum threat to the rest of the net winners ended with miserable result of only 21 additional net winners out of total 77,000 (accounts 0.03%) accepted settlement and recover $418,000 out of $740,000 they owe (means 44% discount), this $418,000 recovery accounts 0.14% out of total $292 million paid to the net winners.

    In summary, the Zeek receiver’s 13 month negotiation achieved 156 people surrender (only 0.2% out of 77,000 net winners) with $2.2 million recovery (at 44% discounted compared with the original winning amount of $3.94 million for the 156 winners) that accounts merely 0.75% out of $292 million paid to net winners.
    Remember, no single settlement was accomplished during the 1st 6 months under they call voluntary subpoena condition, and all the settlements happened in the last 7 months with extremely aggressive litigation threat.

    Now, you need to approach to our net winners without litigation threat due to the newly proposed bill I posted (pls see here https://masonreceivership.wordpress.com/2013/04/04/welcome/#comments ) and importantly, by now, I believe most of our members have already recognized that clawback should not be done in our case because it will not be financially viable.

    Honestly, under this circumstances, what makes you believe your action will create any value for us?

    Unless you have a convincing strategy that can negotiate with net winners better than Zeek receiver, I strongly against any of your action related with this matter because regardless of the result you will receive hourly fee that reduces the final payment to us.

    If we find such activities in your next fee application, we will demand clear rationale via court unless you show net $ amount you recovered (means settled $ – all related fee / charge / expenses related with the recovery).

  12. Richard Smith January 9, 2014 at 11:12 am #

    Third Point:

    – 3rd report paragraph of 8. Distribution procedure – you said the receiver can’t make distribution until both criminal & civil case are finalized in the courts and your footnote says that the trial in criminal case is planned on 2 June ’14.

    OMG, years of waiting will give a lot of hardship to us victims. We wish we could find logic to convince the court to approve even partial payments asap.

    Anyhow, then all what we have to focus now is preventing you from doing any activities that may deplete the final distribution $ amount to us victims.
    I understand your role as an equity receiver is not punishing somebody by investigating & finding evidences to do so which is the job of law enforcement agencies, but to take custody, control & preserve the assets and protect the interest of customers.

    My point here is that I would like to make sure you should not do any work of the enforcement agencies by charging your hefty hourly rate to the receiver estate that is victims’ money under the name of working together. Please draw a clear line in your work.

    If we have any doubt on your working time, we may ask you to share the full evidences of your work via court in the future.

    As repeatedly said, we would not like you to decrease the value of our assets with any inessential activity but to preserve it for the best interests of us victims for coming yet long periods.

  13. Richard Smith January 9, 2014 at 11:13 am #

    In summary,

    Having said, we would expect you to implement the only 2 tasks of:
    – Liquidating all fixed assets into cash
    – Proceeding customers claim process
    Because these seems to be only valuable activities for us victims until the time of final distribution (to be specific until the time you start verifying the customers’ own claim).

    All other actions can be viewed as something dispensable & only for your own interest and the detail rationale for each activity would be strictly challenged.

    The reasons why I try to contain your activities is we have observed so many tragedies driven by selfish receivers (don’t get me wrong I’m not saying you are such a receiver).

    A few examples:
    – the famous Stanford case shows its receiver’s fee totaled $124 million consisting of $68 million fee & $56 million personnel & other expenses caused by massive litigation which accounts 53% out of the total recovered assets of $235 million, the victims got payment less than a penny on the dollar after 4.5 years.
    – we also went through the terrible experience with $72 million Ponzi scheme in Michigan shut down by SEC in 2008, the case crashed between criminal case and civil case and the penalty levied to the defendants are taken by the governments and restitution to its victims are left till last. The victims got the first repayment merely 5% of lost investments in 2012 (after 4 years) and the receiver has reserved large fund accounting big portion in the total receivership estate to secure their own fee and even now still kept pursuing net winners’ money through clawback litigation which will definitely eat up all the reserved fund for uncertain final recoveries from such litigation.

    Obviously we don’t want our case to become these examples.

    We would really appreciate you professional acts by taking all the victims’ misfortune into account and placing their needs as first priority.

    Hope all my comments make sense and value for all concerned.

    Richard Smith

  14. Richard Smith January 13, 2014 at 4:37 pm #

    I posted 5 comments on 9 Jan ’14 but only 4 posts were publicized as above and the 1st comment is missing which is in fact very critical.
    I’m sure it was not deleted by the moderator intentionally but it’s because of certain technical glitch.
    Anyhow, I’m re-posting the 1st comment as below:

    As explained in https://masonreceivership.wordpress.com/2014/01/07/motion-to-authorize-sale-of-condominium-2222-hickory-run/#comments, I am copying my 4 comments in the receiver’s 3rd report section here in Welcome section for all the members’ convenience since I believe our receiver should act in line with these comments as long as the receiver would like to maximize the payments to us victims.

    Let me stress that our interests & efforts should focus on quick money distribution from the receiver.

    As you may have been aware, Zeek’s receiver has already been in the process of actual payments to the victims.
    They completed checking 170,000 claims and sent out the determination letter to 80,000 claimants on 27th Dec ’13 which were already validated, and the rest of 90,000 are being determined currently.
    The victims are expected to receive the first payout within the 1Q ’14 that is whole amount of $320 million available in the receiver’s hand now.

    Remember, Zeek’s scale is incomparably bigger & more complicated than our case (please re-read my below “First point”).

    The Zeek’s receiver opened up the claim process for the victims 9months after the scheme shut down while we haven’t been able to see any single sign of our claim process from our receiver in the 10th month after the closure.

    Having said, our observation indicates 2 facts of our receiver clearly;
    – Efficiency: unfortunately, we have to cast big doubt over our receiver’s efficiency at this stage
    – Attitude: the receiver’s note that any distribution will not be done until both the criminal & civil cases are finalized doesn’t give us positive impression regarding their attitude of trying to alleviate victim’s pain by making their best effort for earlier payments like Zeek’s receiver, in fact this gives us certain concerns such as why should our receiver keep sitting on the recovered assets possibly for years? Do they just want to secure the money resource for their future fee? etc.

    Anyhow, given the schedule that the next criminal trial is June ’14, still 5 months away, I would really like our receiver to stick to the below directions without spending any single hour that is outside of the scope I articulated.

    The copies of my past comments;

    To Our Receiver,
    There are 3 points I would like to comment in your 3rd Report & Fee Application.

    I’ll spell out one by one.

  15. MAD January 27, 2014 at 8:21 pm #

    Where was it posted that the criminal trial is June 2014? I’d like to see the specifics.

  16. Richard Smith January 28, 2014 at 10:48 am #

    You can find it in the footnote at the bottom of page 5 in the Receiver’s 3rd Report posted on the 5th Dec ’13

  17. sunshine885500rank January 28, 2014 at 11:27 pm #

    There will not be a resolution until the Lawyers Bleed the Account Dry leaving the Investors with nothing. It’s all a game that the Legal System is allowed to play. They are some of the Biggest Crooks in America

  18. Richard February 12, 2014 at 11:04 am #

    So,
    would you like to give up and let the receiver keep eating our money?
    No, I wouldn’t believe you and all other members would.

    The receiver is a court-appointed agent whose duty is to preserve the value of the recovered assets to prevent any loss, damage or injury to customers (victims), and his action is purely gauged & justified by economic sense.
    Pursuing money that has any risk of being smaller than cost is violating this essential duty. Assisting any authority to punish anybody is completely outside scope of the duty.

    Remember, we have right to stop any receiver’s action / motion by filing our objection with the court.
    Therefore, I have kept posting the facts & my objective opinion that help all of you make informed decisions based on not emotional but rational.

    Allow me to repeat, you have power to reject the receiver’s action.

    So far, I haven’t done such objection though, from now on I may do so when I find any activities other than “Liquidating all fixed assets into cash & Proceeding customers claim process” I mentioned before.
    I’ll definitely do if the receiver tries to move into clawback litigation.

    When it happens, I’ll post my objection example in this site, so you may just copy it and file under your name with the court.

    Richard

  19. Upset February 14, 2014 at 8:37 pm #

    Thanks Richard

  20. Richard Smith February 15, 2014 at 9:46 am #

    My pleasure.

    BTW,
    You may wonder how to object the receiver’s action / motion,.

    The receiver’s instruction you find in their motions is:
    “If you don’t want the court to approve this motion herein, or if you want the court to consider your views, then on or before —–, you or your attorney must file with the court a written response explaining your position. The response must be filed electronically with the United States District Court for the Western District of North Carolina, http://www.ncwd.uscourts.gov. if you happen to live or travel to Charlotte, you may hand deliver your written objection to the Clerk of the United States District Court, 401 West trade Street, Charlotte, NC 28202.”

    Let me clarify / elaborate on it:
    – you don’t need attorney but you yourself can object
    – you don’t need to file electronically / hand deliver but you can use mail,
    see the instruction received from Mr. Terry Leitner, US District court Western District of North Carolina who answered to my inquiry as below:
    “You may mail your response to our office and we can file in for you. Please mail to Frank G. Johns, Clerk, U.S. District Court, Rm. 210, 401 W. Trade St., Charlotte, NC 28202 Have a nice day!”

    So, all what you need to do is to write an objection (or copy my sample if you would like to) and mail it to the above address.
    Simple as that.

    Hope these will help.

    Richard

  21. Richard Smith February 17, 2014 at 2:49 pm #

    When it comes to your right / power / influence against the receiver, you also have choices of:

    1. File your complain to North Carolina State Bar – here: http://www.ncbar.gov/public/filing.asp

    2. Post your opinion about the receiver in various lawyer review such as Avvo – here: http://www.avvo.com/attorneys/28246-nc-joseph-grier-1743974.html

    However, bear it in mind that the above moves should be the last resort because your action may damage their professional credibility in public which we don’t have right to do unless we have solid ground to do so.

    Therefore, suggest we need to fully exchange our opinion about the receiver’s actions in this site before doing any rash act.

    I personally believe our receiver is ethically trustworthy based on our observation so far though in case we face the situations that don’t allow us to make free discussion in this site (including any technical glitches) then we should communicate in the JHM private forum where most of you already registered.

    Just a contingency, FYI.

    Richard

  22. Richard Smith March 20, 2014 at 9:34 am #

    As said in the Receiver’s 4th Report section https://masonreceivership.wordpress.com/2014/03/18/receivers-fourth-report/#comments, I have lost my faith in the receiver.

    The receiver kept publicizing the customer list by entirely ignoring my comment (I copy it at the bottom) I posted on 25th Feb ’14 – pls see here:
    https://masonreceivership.wordpress.com/2014/02/18/draft-spreadsheet-of-contributions-and-distributions/#comments .

    On this occasion, let me make it clear that my 25th Feb comment is my specific contrary opinion to the receiver’s specific answer on 21st Feb ’14 with the following clear rationale:
    – The risk of disclosing information outweighs any inscrutable advantage the receiver expects, thus the receiver should stop its publication and focus on private e-mail communication which the receiver has been doing in any case.

    I believe my comment is constructive and I can’t see any reasons the receiver neglects it.
    The fact that keeps doing what he wants without persuading reasons can be considered as Not Proper Communication with the customers, and possibly Violation of Duty Of Confidentiality with lack of duty of care.

    Having observed the above low professional standard & adherence to code of ethics, we might have to consider bringing forth a motion of no confidence against the receiver and dismissing the receiver.
    Anyhow, I may share my above valuation in various places to give caution to any prospective clients Joseph Grier III / Grier, Furr & Crisp’s, which I’m sure the receiver understands.

    Richard

    My Comments on 25th Feb ‘14
    “I completely lost the receiver’s logic in the previous comments.
    Firstly, “Receiver will need to determine customer claim amounts and make a recommendation to the Court on claim amounts.“, the standard practice is to Assign Completely New Claim Number for each investor, which should have nothing to do with the prior deal of the original fraudulent scheme.
    Then anybody who happens to possess / access to the customers list is not able to identify the financial information of each member – Privacy Protection by Segregation of Information is a bare minimal professional practice you should achieve during your said process.
    Secondary, “it is important for customers to know how he arrives at the claim amounts he ultimately recommends to the Court, both as to a customer’s own claim and the claims of others.“, I am utterly shocked with your sense of right / rights, what makes you believe “it’s important for customers to know the other members’ claim details”? I must have misunderstood your point, are you trying to say it’s important for a customer to know the final payment of others to prove fair distribution? Yes, the final repayment must be a pro-rata distribution (if not, please explain the rationale behind), which can be explained by the total financial summary – let’s say Total Customer Loss Claim is $2 million and final Available Amount to Payout is $1 million, so that 50% of every customer’s claim (50 cents for every dollar) will be paid back. Frankly speaking, I can’t foresee any reasons allowing you to make discriminatory payout such as you cover 70% to customer A while 30% to customer B, therefore your comment doesn’t make any sense but only puzzled me.
    Thirdly, “therefore less expensive way of having customers verify the information on the spreadsheet than the receiver contacting each customer individually“, we would appreciate your cost conscious approach, but what you disclosed is individual financial information in numbers with detail investment & withdrawal history of all members which are particularly sensitive, and you are trying to justify it with the incomprehensible reason of “it’s important for customers to know the other members’ claim details”. I would say the possible cost saving you can expect through this practice can’t account for the risk of protecting personal information, in fact your publication of such sensitive data has gone beyond what can be considered acceptable conduct.
    Lastly, “The Receiver is unaware of any list that links account numbers with customer names or contact information that is generally accessible to customers or the public at large. “
    Please be a real professional.
    This is a sucker list, you should assume that the list had already been spreading WITHOUT your knowledge. I hate to admit myself as a sucker but the fact is that our member information is viewed as such. Your disclosure of the list is “Round Off” to complete the “Sucker List”. Such conduct is something you should not / can’t do unless you were ordered by the court which I don’t believe the court did.
    Your effort of “if anyone purports to represent the Receiver but is not employed by Grier Furr & Crisp, PA, please contact the Receiver immediately to verify to veracity of the purported representative of the Receiver. “ doesn’t help because you can’t prevent the members’ from any suffering caused by future new fraudulent scheme.
    Unfortunately, your word of “The Receiver, mindful of the risks and adverse consequences of inadvertent disclosure of personally identifiable information, has made “ sounds unwarranted and if you commit “substantial efforts to protect the privacy of customers of the Defendants. “, please hide the information from public / be responsible for all the consequences we believe we should avoid.
    Otherwise your professional credibility will keep loosing.
    Richard”

  23. Richard Smith March 26, 2014 at 8:36 am #

    This is the follow up information to my above previous post of “How To Object the Receiver’s Action / Motion” on 15 Feb ’13.

    I did make further inquiry to United States District Court for the Western District of North Carolina regarding the following 2 points:
    1) Case Identification Method
    2) Hearing Alternative Method

    The detail questions & answers are;

    1) How could we specify our case & motion we object? We find the initiating case number such as 3:13-cv-196 in the receiver`s motion electronically filed. Surely we have to include this case number though, how can we identify the specific motion we object? Can we just mention the subject such as “Receiver`s Motion for Approval of Offer to Purchase as to Real Property —–” and its submitted date? If we need to add any other particular information, please advise. Thank you for your assistance.
    Response From: Terry Leitner
    Please put the case number, caption of the case and refer to the motion as you suggested. The Court does not expect your response to be in any proper form as you are appearing without an attorney.
    2) The receiver explains “If the court schedules hearing, you or your attorney must attend the hearing, which will be held at a time and date which will be noticed only to any party who files a response, at the United States District Court, 401 West trade Street, Charlotte, NC 28202. If you or your attorney don’t take these steps, the court may decide that you do not oppose the relief the receiver requests and enter an order approving the Motion”. However, there must be many customers (victims of this Ponzi scheme) who are difficult to attend the hearing given the scheme`s international nature (customers are located all over US as well as outside US) and are difficult to employ attorney to represent them due to the financial constraints. Under the circumstance, can we prepare our statements or answers to the questions that the court will ask in the hearing in advance and send it to the court before the hearing? Please advise how the US justice system protect the customers’ right to oppose at the stage of hearing and the way the customers can take as an alternative to the own or attorney’s real presence at the court? I would really appreciate your cordial assistance.
    Response From: Terry Leitner
    If you have an issue with this please contact your receiver when the hearing is scheduled – there are other possibilities for out of country persons such as teleconferences, etc. it will depend on each person’s unique circumstances.

    Don’t be overwhelmed by the hearing which will not necessarily be held as far as our response is clear and convincing and even the hearing is requested there seems to be several alternatives other than physical attendance which to be discussed with our receiver Mr. Michael Martinez (704/332.0209, mmartinez@grierlaw.com) or Mr. Joe Grier (704/332.0201, jgrier@grierlaw.com) who I believe are willing to accommodate our requests as best even under the circumstance that we object to them.

    Hope these will help.

    Richard

  24. Richard Smith March 29, 2014 at 10:22 am #

    Everyone,

    I had a few correspondences with the receiver which I believe quite informative for all the members especially for the clawback threshold information.

    Pls see the excerpts of the correspondences, which originally started with my inquiry about the status of my new posts publication I sent on 20 Mar ’14.

    I must say Michael is at least responsive.

    As you can find, my e-mail address is 77rismith@gmail.com and if anybody wants to communicate with me, please don’t hesitate to do so.

    Richard

    The Correspondences

    From: Michael Martinez Date: Thu, Mar 20, 2014
    To: Richard Smith
    Richard:
    I was particularly interested in a point you made about empirical evidence on the productivity of clawback litigation. A large part of my practice involves representing receivers and it would be helpful for me in other receivership cases (in addition to the Mason case) to be familiar with those sorts of studies. Whenever is convenient, could you email me links to, or pdfs of, some or all of the empirical studies to which you were referring?
    Similarly, the Mason Receiver has clawback claims against many net winners residing outside of the United States (whether we will bring those claims is another issue). I was interested in the quote from R.J. Zayed (is he the receiver in that case?). Anyway, if you could shoot me whatever information you have on that Minnesota receivership case, that would be helpful and cut out some of my attorneys’ fees in researching it myself.
    Thank you in advance for your help.
    MICHAEL L. MARTINEZ

    From: Richard Smith Sent: Friday, March 21, 2014
    To: Michael Martinez
    Michael,
    I’m more than happy to assist you in taking the right action to maximize the final distribution to us victims as your mandate, and the right action is to forget about clawback claims against many net winners residing outside of the United States (whether we will bring those claims is another issue), which no receiver under Contingent Fee will pursue with JHM scale.
    Give me this weekend to compile & organize information in my hand and I also need to check my several associates who have provided such information if I can disclose their original sources.
    Yes, R.J. Zayed is the receiver, and I’ll include their information in my future mail to you.
    I’ll do whatever I can, but you also should do the another right thing that is “Stop Publicizing Members List” in your site, otherwise your firm will face unnecessary trouble / damage I cautioned in my comments, and both of you and I have no time to be bothered by such thing.
    Richard

    From: Michael Martinez Date: Fri, Mar 21, 2014
    To: Richard Smith
    Thank you, Richard. Please do not feel obligated to spend a lot of time on this. I was thinking more along the lines of an “information dump” where you just send me the information that you have access to. But, again, I’ll take whatever help I can get.
    MICHAEL L. MARTINEZ

    From: Richard Smith Sent: Sunday, March 23, 2014
    To: Michael Martinez
    Hi Michael,
    As promised, I’m sending the info required.
    Firstly, go to Zeekreward’s clawback related comments here: http://patrickpretty.com/2013/12/12/urgent-bulletin-moving-lawsuits-against-zeek-insiders-winners-believed-imminent-paul-burks-dawn-wright-olivares-darryle-douglas-among-alleged-insiders-adsurfdaily-figures-todd-disner-and-j/comment-page-1/#comment-72615
    Check Gary’s 14th, 15th & 18th Dec ’13 posts, which are very informative and in fact I quoted some of his comments in the past. His associate professor must have done massive study & analysis on past Ponzi clawbacks, which I don’t have any way to contact and access though, the below 2 Ponzi receivers’ comments substantiate the rationale & the threshold of $200,000 for US domestic and $500,000 for international the associate professor suggested.

    The below 2 receivers’ comments are their response to my friend’s inquiry – my friend is also a victim of Michigan Ponzi scheme where the receiver ate up most of the recovered assets through clawback litigation which I used to quote in my past comments posted in your site, he has been utterly upset with the dishonest / greedy receiver and kept studying clawback for the last 3 years to seek the opportunity to sue the receiver down the road.
    My friend doesn’t allow me to reveal the name of the each receiver because he already bothered these receivers so much for free, and he doesn’t want anybody else to contact them any further. I assure you that both receivers are very reputable, award winning attorneys and probably ranked within top 20 or even 10 when it comes to Ponzi litigation. My friend forwarded abundance of correspondences with the receivers to me though I just extracted key parts which I think the most relevant to your interest and all are textual as received from my friend.

    Answer from the receiver in NY
    I view a clawback action much different than a pure fraud claim against a third party because the defendant in most clawback actions is also a victim, actually the innocent promoter is also viewed as a victim (because in truth it’s extremely difficult to prove his actual knowledge of fraud). I agree with your statement that a clawback action is not intended to punish, but rather it is a mechanism to attempt to promote equality of distribution among victims of the Ponzi scheme. Thus, unless the dollar amount involved is material to the scheme and loss involved, I typically won’t pursue a clawback either domestically or internationally.
    That being said, I do pursue clawbacks where the amount involved is material. In those cases, if a potential investor is overseas, as you acknowledge, the cost of pursuing the matter is significantly higher (higher service of process fees, necessity to engage foreign counsel, travel costs for witnesses, etc…) and the ability to potentially collect is significantly decreased. Therefore, the threshold pursuant to which i will bring a case is much higher.
    You are also correct that sending a letter has minimal cost and we routinely make a letter demand on all potential defendants prior to instituting suit. As you can imagine, very few people respond to these letters. After sending letters to potential defendants, we then institute suits against those that failed to respond or settle based on our letter. We always set a threshold amount because it simply does not make sense to incur professional fees and costs pursuing small amounts. For me, as previously stated, the threshold of potential recovery where I would bring a case and incur the extra cost is much higher in an international clawback case than a domestic case. This is analyzed on a case by case basis and it is difficult to provide you with a set number which is the determining factor in bringing a clawback suit. However, I doubt I would ever bring an overseas clawback action where the potential damages are less than $300,000 as that is simply too low to justify the expense and risk of collection. In fact, i doubt i would ever bring one unless the potential recovery was more than $500,000 (and even that would greatly depend on the country i am dealing with). Importantly, you need to bear in mind that there is typically no right to be reimbursed legal fees under our system in a clawback suit, thus the potential costs of pursuing the action need to be taken into the calculation and netted out against the potential recovery.

    Answer from the receiver in CA
    I completely agree that the receiver’s function is not to punish offenders. That is a role for law enforcement and regulatory agencies. The same principle extends to others against whom we seek clawbacks, but who are not “offenders.” Clawbacks will often be sought from persons who have had no culpability in the operation of a fraud scheme, but who still were recipients of funds paid to them improperly. These can include overpaid investors, honest promoters, charitable organizations, banks and credit card companies, and entities who provided goods or services to a third party – but which were paid by the Ponzi scheme. Examples of the last group include lawsuits we have filed against law firms that provided legal services to affiliates of the fraudster, but were paid by the fraudster. Our suits allege that the receivership entities received no benefit from these payments, so the legal fees need to be returned to the receivership estate and the law firms need to seek recovery from their clients.
    My goal, as a receiver, is to maximize the recovery for the beneficiaries of the receivership estate, which primarily are victims of the Ponzi scheme. Many times, I must choose between two “innocents.” For example, if a fraudster gave receivership money to a charity, the charity is most likely innocent of any misconduct and ignorant of the illegitimate source of the income. The victims of the Ponzi scheme also are innocent. The same is true of overpaid investors and innocent promoters you pointed out. I must choose which of these innocent parties is more deserving of the funds. As a result, I generally seek recovery of all funds that can be recovered – but not always.
    I think the better approach is to predict the average cost of litigation and bring suits where we believe that – on average – we will recover more than the cost of suit. That does not mean that we ignore all amounts under that level. We will still send out demands for the return of monies. We will also conduct an evaluation whether the target is likely to engage in a prolonged fight.
    For targets located in foreign jurisdictions, it is a much more complicated nalysis. We have to consider a number of factors:
    1. Do we believe the defendant still has the funds or that he has assets that can be used to satisfy a judgment if we obtain one?
    a. If he has money, it also means he has the resources to mount a vigorous fight.
    b. In one of my cases, we have millions being sent to several companies in Frankfurt. However, preliminary investigation revealed that these companies are all controlled by Nigerian nationals. Financial records provided to German regulatory authorities indicated that these companies had small bank account balances. We had to decide whether we believed the reports to regulatory authorities were incorrect (and that the companies had large balances in their bank accounts in Germany) or that the funds had already been sent to Nigeria or elsewhere. We decided not to spend more money trying to trace the funds.
    2. How easily can the money be moved or hidden? Bringing proceedings to recover funds from overseas defendants takes a long time and is generally pubic. So, the target knows we are trying to find and seize their funds. If the assets are easily moved, we might end up with a judgment and no assets.
    3. Does the target entity own any bank accounts or assets in the U.S.? If so, the receiver might just go after those assets, instead of trying to get a judgment against a person in another country. It is also much easier to obtain orders freezing assets located in the U.S. if the receiver was appointed by a federal court having power to issue orders that will be enforced around the country.
    4. What is the nature of the target? If it is an individual who can easily run or hide, our task is much much harder. If the target is a large multinational company or a bank, this risk disappears.
    5. In what countries are the assets and the defendants? If the assets and defendant are not in the same country, that doubles the recovery costs.
    6. Are criminal proceedings pending or likely? If so, there is a risk that criminal prosecutors will seize assets and have priority over the receiver’s attempts to recover funds.
    7. What is the nature of the legal system where the defendants and assets are located? Some jurisdictions have strong secrecy and asset protection laws. These increase the costs substantially. Some countries do not have well developed legal systems or strong adherence to the “rule of law.” Some countries have high rates of corruption, meaning the judicial system might not deliver a fair judgment or we cannot collect on a judgment.
    You are right that the first step generally is to contact the target by mail asking for information or demanding repayment, we have to do this legally depending on the jurisdiction. Sometimes this result in payment but this step can just as easily result in putting the target on notice that he should move or hide his funds.
    If the target does not pay voluntarily which you should consider usual, there are two significant hurdles. First, you have to get a judgment against the target. Second, you need to locate and seize assets. Neither of these is easy.
    In order to get a judgment against a foreign target, you must first file suit. This raises the question where you file suit. Do you sue in the U.S., or do you have to file suit in the jurisdiction where the target is located (or where the assets are located)? Where you file suit depends on where you can get personal jurisdiction. Even if you have the cooperation of governmental authorities in the other country, you still first need to have a judgment you can enforce.
    With a judgment, you move to the question of how to seize assets. Generally, you would have identified assets during the litigation (through discovery). If those assets are located in the same jurisdiction that issued the judgment, enforcing the judgment is easier. If not, you have to domesticate the judgment in the other country(ies) where the assets are located. Occasionally, you can get the assistance of the governmental authorities. In most cases, they consider it a private civil matter and you are left to enforcing the judgment on your own.
    These processes take a lot of time — with two different meanings of “time.” It is a lengthy process, often taking years. Moreover, it requires that the receiver and his staff spend a significant amount of time (expensive, billable time) going through this process. Moreover, it is very expensive. It requires that the receiver hire local attorneys in each country in which targets and assets are located. So, the receiver’s local law firm is doing work as well as law firms in other countries – all of which have to understand the case and review documents that bring them up to speed.
    Considering all these factors, I cannot give you a threshold that we would use in deciding when to go after assets located overseas. It is a judgment call that takes into account all these variables. I doubt there would be many cases where I would seek to collect monies outside the U.S. and Canada if the amount being sought was less than $500,000.

    You said ” the Mason Receiver has clawback claims against many net winners residing outside of the United States “, I simply can’t imagine there are many netwinners whose stake in question is over $500,000 outside the US, and also many winners (probably a few though) over $200,000 individuals within the US, therefore I kept saying we don’t have economy of scale / we are too small to justify the risk related with uncertainties of clawback action.

    Lastly, for R.J. Zayed, pls access to http://www.cookkileyreceiver.com/ for his Trevor Cook receivership site which is in fact nearly $200 million ponzi. After checking its work a bit further, I’m not impressed with their merely 4.3% recovery rate that is more or less the same rate we experienced in the Michigan case. So I would not be bothered by his performance although his comment on the international clawback seems to be valid.

    I believe this information is useful for you to take the right action which is to completely rule out clawback in our case to preserve the funds already recovered.
    Despite the above controvertible opinions, if you still show any sign of taking clawback pursuing the money that is below the stated threshold amount, I’ll do all my efforts to stop it by preparing more evidences, because it’s clearly viewed as breach of fiduciary duty by ignoring your mandate to maximize the return to us victims.
    As a matter of fact, I may oppose your move even against the subject with more than the threshold amount if that is an individual & residing outside US, because your firm does not seem to have enough expertise in global clawback litigation, means you need to hire / contract external specialists possibly both in the US & Overseas which will be another sizable cost.

    If you need any further info, don’t hesitate to say so.

    Let me know your thought.

    Richard

    From: Richard Smith Sent: Thursday, March 27, 2014
    To: Michael Martinez
    Hi Michael,
    Can you kindly give me at least your brief feedback / thought by courtesy?
    Richard

    From: Michael Martinez Date: Thu, Mar 27, 2014
    To: Richard Smith
    Richard: Thank you for providing the information appearing below. The North Carolina rules of professional conduct, ethics and a legal duty of confidentiality prohibit me from publicly disclosing the advice that I give my client, regarding clawback actions or otherwise. Whatever the receiver decides to do, Mason’s victims will be notified and given an opportunity to object in advance of the Receiver taking any formal action(s).
    MICHAEL L. MARTINEZ

    From: Richard Smith Sent: Friday, March 28, 2014
    To: Michael Martinez
    Michael,
    Understood, yes you’re right that your reply gives me the opportunity to disclose it in public, thus your response must be appropriately done this time.
    However people will certainly wonder why you loosely apply “The North Carolina rules of professional conduct, ethics and a legal duty of confidentiality ” to customers’ information but strictly apply to your own advice, which gives me the impression that your professional priority appears to protect yourself before everything (everything including your customers) – the customers feel uncomfortable & unprotected by your disclosure of our personal information.

    In the ends it all boils down to how you care for your customers.

    Despite the incontrovertible other professionals’ concrete numerical threshold testimonies supported by solid rationale & real experiences, if you take any clawback action for the amount that is below the threshold (especially for outside US case), you are deemed to violate your fiduciary obligation to protect the beneficiaries’ interest because you are deemed to maximize your profit at the expense of the customers’ final distribution by taking excessive risks.
    I will develop incontestable objection with all my force which allows the court to approve without fail.
    Best regards,
    Richard

    • mlmgfc April 1, 2014 at 3:12 pm #

      This comment by the Receiver responds to the comment submitted by “Richard Smith” on March 29, 2014 at 10:22 a.m., as well as to several other comments submitted by “Richard Smith” taking a hostile position toward any action by the Receiver to recover funds from those customers who received money back from Mason in excess of their principal deposit (“Net Winners”). “Richard Smith” calls for the Receiver “to completely rule out clawback [claims against Net Winners] in our case to preserve the funds already recovered.”

      Receivers are charged with maximizing the funds to pay back to victims. One of the assets of a receivership is the “net winnings” of those investors who received back more than they paid into a Ponzi scheme. Under the law, a receiver is entitled to collect from Net Winners the amount of their net winnings. In all cases, a receiver should evaluate the net winnings of each investor and, if appropriate, take legal action to collect the net winnings for the benefit of the receivership.

      In the most recent post, “Richard Smith” quotes a receiver in California explaining that receiver’s approach to actions against Net Winners: “I think the better approach is to predict the average cost of litigation and bring suits where we believe that – on average – we will recover more than the cost of suit.” “Richard Smith” also quotes a receiver in New York who looks at claims against Net Winners “on a case by case basis” and will not pursue claims against Net Winners “unless the dollar amount involved is material to the scheme and loss involved.”

      The Receiver generally agrees with these receivers in that the Receiver will not pursue claims against Net Winners unless the Receiver believes that a potential recovery is material to the loss involved in this case and exceeds the costs of pursuing the claim. The Receiver is currently coordinating with the CFTC on the development of a plan to deal with Net Winners.

      Notably, no one named “Richard Smith” was a customer of Mason’s. Rather, “Richard Smith” is an alias or pseudonym for another Mason customer who wishes to post material on this website with his/her identity remaining unknown to the Receiver and other customers.

      In the event “Richard Smith” is a Net Winner himself/herself, the Receiver challenges “Richard Smith” to turnover immediately all net winnings to the Receiver in order to save the Mason receivership the expenses of evaluating and collecting his/her net winnings and to “preserve the funds already recovered” for other Mason customers.

  25. Richard Smith April 2, 2014 at 9:27 am #

    I’m again disappointed with the receiver’s response as a professional receiver.

    I will explain “why” by addressing to specific comments the receiver made as below;

    1. “taking a hostile position toward any action by the Receiver to recover funds from those customers who received money back from Mason in excess of their principal deposit (“Net Winners”) “Richard Smith” calls for the Receiver “to completely rule out clawback [claims against Net Winners] in our case to preserve the funds already recovered.””
    – In the first place, what made the receiver consider my position as “Hostile”? I have good confidence that many of other members must reckon all my comments, opinion & suggestion as fairly constructive & objective based on the facts from the perspective of maximizing the final distribution to us which is the mandate of the receiver as well as our best interests.
    – My comment regarding the clawback is simply my natural conclusion as the receiver’s best action based on our case data available to us and information / specialists’ opinion backed up by their real experiences I have gathered & submitted to the receiver.
    – If the receiver were the real professional then he should have taken all my comments & information as valued input to use for their future right action rather than labeling my position as Negative Hostile, which made me feel again that his attitude is quite Defensive rather than Caring Your Customers.
    – One thing I have to admit is the fact that I went through a few bad experiences that receivers ate up most of the recovered funds through lengthy clawback litigations as I quoted several times here which might have made me take too cautious approach toward our receiver. In other words, my unconscious prejudice read between the lines may somehow get our receiver to feel Hostile, then I will pay more attention to my expression to avoid any misunderstandings from now on.
    2. “the Receiver will not pursue claims against Net Winners unless the Receiver believes that a potential recovery is material to the loss involved in this case and exceeds the costs of pursuing the claim. “
    – We are more than happy to confirm the point of “will not pursue claims exceeds the costs of pursuing the claim “, however I am not convinced myself of the point of “material to the loss involved in this case “, let me reiterate that our base amount is extremely small for the receiver to make costly litigation, in other words the involving fixed cost is disproportionally higher to the possible recovery that is even material to the loss involved in this case, therefore the return / cost calculation will be strictly evaluated for each single case in particular for your risk assessment regarding the insolvency & concealment of net winner’s asset when it comes to individual.
    – As kept saying, we would not support any of your clawback action unless the above return / cost calculation for each single case convinces us, which should include:
    – The subject amount
    – Projected time line to complete
    – The probability of winning in court judgement (foreign courts included if it’s international)
    – The confirmation of the defendant’s solvency, means identification of asset & location
    – All estimated cost & expense, the receiver’s & other possible professionals’ fee based
    on estimated number of hours during the whole process)
    – The estimated minimum Net Recovery
    – and various other elements listed by the Receiver in CA in my previous post
    Usually the court may not ask for such details in the case the pursuing money is significantly material that can absorb all fixed cost like the Zeek’s case of $300 million, but our assertion should be recognized by the court because I assume the stake in question will be too small to give green light without above specific risk assessment – this is what I always say we don’t have economy of scale to justify all related uncertainties.
    3. “Notably, no one named “Richard Smith” was a customer of Mason’s. Rather, “Richard Smith” is an alias or pseudonym for another Mason customer who wishes to post material on this website with his/her identity remaining unknown to the Receiver and other customers. In the event “Richard Smith” is a Net Winner himself/herself, the Receiver challenges “Richard Smith” to turnover immediately all net winnings to the Receiver in order to save the Mason receivership the expenses of evaluating and collecting his/her net winnings and to “preserve the funds already recovered” for other Mason customers. ”
    – Firstly, as I kept saying I am also a victim of this fraudulent scheme, and regarding my name, I already submitted my rationale to the receiver in the past, please see the correspondences I quoted at the bottom.
    – The receiver’s message here made me feel that the receiver is the one who is hostile to me rather than I and is trying to manipulate to discredit my information.
    – Actually, whether the information comes from net winner or net looser is absolutely irrelevant as long as the contents are valid, and the competent receiver should evaluate the opinion / information on its own and articulate his comment without any emotional bias or any immature tactics.
    – Having said, what disappointed me most is the fact that the receiver didn’t seem to take my information / opinions as Neutral & Fair but something that blamed the receiver’s possible clawback action blindly by assuming I am a net winner.
    – This cuts a sorry figure of the receiver’s narrow mind & incapacity as a professional.
    – I really hope our receiver is not the receiver who places higher priority of his own entitlement & interest (financial return from the fee) than his duty & customers’ benefit (final distribution) which we have observed in other cases.

    Anyhow, my interest is always achieving the maximization of the final distribution to us which the receiver admits the same, and what I’m trying to do is achieving it through the cooperation with everybody including the receiver by sharing all my knowledge to avoid any unnecessary dispute & conflict that will result in wasting time & money of all concerned.

    I may not be the only one who feels that the receiver always center his own interest.

    Each of us victim is vulnerable individual who we need protection from the receiver that has resources & expertise, thus I wish the receiver will place at least equal protection to us customers as the protection he places on himself. Unfortunately, we don’t feel that way at this moment in time.

    Hope everything goes well.

    Richard

    Correspondences with the receiver
    From: Michael Martinez
    Date: Mon, Feb 24, 2014
    To: Richard Smith Richard:

    I apologize for not publicizing your post as soon as you would have liked, but I was out of town on Friday.
    As you know, we are trying to finalize an accurate list of customer claims and distributions, as well as each customer’s contact information, if we do not have it. I am concerned because I do not see your name or email address associated with any account on any of Mason’s spreadsheets. Could you please email me your account number(s) and a current mailing address? Also, it would help if you could verify via email that our spreadsheet contains accurate information for each of your accounts. Thanks.

    MICHAEL L. MARTINEZ

    ———- Forwarded message ———-
    From: Richard Smith
    Date: Tue, Feb 25, 2014
    To: Michael Martinez
    Dear Michael,
    No problems, understood.

    My policy is posting Non-Biased Comments and seen them as Non-Biased by others in your site, in other words I don’t want anybody to have any single doubt on my personal connection with you as the receiver by allowing you to associate Richard Smith with my membership.
    Therefore, I would like to keep the position I can declare that the receiver doesn’t know my detail.
    I assure you that I’ll do all the necessary things for my account in your process.

    BTW, I just made a new post as below, please publicize it asap since I believe it very constructive, fair and the message for all the members’ benefit.

    Thank you.

    Best regards,

    Richard

    New Post: Deleted due to the duplication with the one already publicized.

  26. Richard Smith April 14, 2014 at 7:53 am #

    Everyone including the receiver,

    I just received another info about the threshold of international clawback from my friend’s friend (a bit complicated relationships) who was doing his own study after I talked JHM’s case to my friend.
    He sent me the below message from Mr. Brian Mahany, a fraud lawyer who must have good experiences in this arena.
    My friend said he doesn’t mind me disclosing the source, therefore I herein specified Mr. Mahany’s name and his website is http://www.mahanyertl.com/.

    His threshold is $1 million ($500,000 for some cases) for contingency fee lawyers.

    His comment of “Unless Hourly” clearly implies that the hourly rate lawyer who pursues the stake less than the said threshold shouldn’t claim “The receiver believes that a potential recovery exceeds the costs of pursuing the claim” (as our receiver’s clawback basis), because according to Mr. Mahany, the lawyer can’t have confidence to identify practical chance of netting a recovery for victims with the amount less than the threshold.

    This is another testimony, if our receiver does clawback against net-winners outside US with less than $500,000 stake, it is considered to violate the receiver’s fiduciary duty to maximize the funds to payback to victims as beneficiaries (, which the receiver declares) because the receiver is considered to take unreasonable risk to maximize his own profit at the expense of the victims’ benefit.

    Hope these will help.

    Richard

    The Message from Mr. Brian Mahany

    “There is no set threshold figure we use ti determine whether to take a case. Instead we look at dozens of factors. Depending on the situation, just one factor could be determinative.
    Some of the more important factors are:
    where the assets are believed to located
    where the defendants are located (some foreign jurisdictions defer more to US court determinations than others)
    the type of fraud (e.g. no jurisdictions likes child molesters, those who prey on the elderly, etc)
    age of the debt
    investigative report as to collectibility of the debt (we usually ask clients to pay $10,000 USD+/- for investigative services before we commit to take a case)
    existing relationships with local counsel
    political connections or other specific factors of the debtor
    fee arrangement (hourly versus contingent versus hybrid)
    and yes, the size of the debt
    All that being said, I can’t imagine taking a case with less than $1mm at stake unless hourly or unless in Canada or the Caribbean. Even then, our threshold would probably be $500,000 unless hourly fee.
    I hope this answers your questions.
    Brian”

  27. Richard Smith July 2, 2014 at 10:01 am #

    Everyone,

    As I said in the Receiver’s Fifth Report thread (https://masonreceivership.wordpress.com/2014/06/30/receivers-fifth-report/#comments ), I am introducing 2 interesting cases of the clawback attempts in Ponzi schemes.
    Both are very informative and give good insight about the danger / risk of clawback ativities our receiver has been doing, thus the information will help all the victims decide what actions they should take accordingly.
    The 2 cases are Zeek Reward and J.V. Huffman (actually I found this case in the Zeek’s below information), both are coincidentally happened in Charlotte NC, means our neighbors.

    Zeek Reward Case
    The source is: http://patrickpretty.com/2014/05/08/zeek-receiver-multilayered-investigation-into-rex-venture-group-and-its-insiders-advisors-and-financial-institutions-continues/comment-page-1/#comment-89934
    Quote of Gary’ Comment
    “I just read the receiver’s May 7 report.
    What worries me is the status of clawback.
    It says “Following the filing of the “net winner” clawback litigation, the Receiver Team communicated directly with numerous Affiliates (more than a hundred) regarding potential
    settlements.“
    Litigation was filed on March 3 ’14, and up until May 7 ’14 merely 100+ out of 9,000 are being negotiated for POTENTIAL settlement, that accounts only 1.1% for the 1st 2 months.
    Note that these are not the numbers already settled but just being discussed for potential settlement, then how long does it take to settle all 9,000? With this velocity, well over 200 months (17 years) is anticipated. It’s long enough for the receiver & other involved professionals to consume all the reserve funds & recovering assets.
    So far, the receiver’s clawback doesn’t seem to have been working as expected, not much different from the settlement progress at pre-litigation era.
    I found an interesting comment in ASDUpdate.com ,the link is http://asdupdates.com/wordpress/archives/5435# , the comment is about Zeek receiver’s May 1 announcement.
    According to Mr. Jordan Maglich (Ponzitracker) the Ponzi scheme’s average collection & distribution by receivers to victims is around 10%, then 40% distribution Bell plans to make is very good achievement, nevertheless Hall’s comment in ASDUpdate.com is very insightful and pointing out the receiver’s possible hidden agenda.
    As said in my previous posts, suing individuals internationally doesn’t seem to be rewarding.
    I can easily imagine many of them will neglect service of process delivered because unless the defendants are US citizens living outside US, the US court’s enforcement power is very low, each jurisdiction still detests threats of Exorbitant Jurisdiction.
    Another issue the receiver will face is if the defendants’ assets are in the same jurisdiction they live or in different jurisdictions.
    If the assets are not in the same jurisdiction, the receiver needs to identify its location and take another service process which will surely take years or decade as Hall said.
    I guess many international netwinners (especially big winners) must have reasonable financial literacy about offshore money management as well as good knowledge about on-line business.
    Therefore, many of them already transferred their money into different countries where HCCH is not working.
    Anyway, suggest you take a look at Hall’s comment I am copying here, I have no idea about Jul 23 hearing though all his points make sense:
    Comments made by Hall
    “I am not happy with this announcement.
    Bell said, “we have been reviewing approximately 175,000 timely filed claims. By Friday May 9 we will have issued about 160,000 letters of determination regarding those claims. Another 10,000 or so letters of determination will be sent before the end of May. There are a few thousand claims that will require additional time to review, because of conflicting information regarding the amounts claimed. Our goal is to distribute now an amount equal to 40% of each reconciled claim — I will also be reserving cash to distribute to holders of claims that have not yet been determined and allowed.”
    The reserve Bell sets mystified me.
    The total claim amount is supposed to be around $550 million, then 40% of that amount is $220 million. The current recovered asset is $334 million as of end 2013. So, $334 – $220 = $114 million will be reserved. Discounting $16 million allocation for Not Determined Claims (5,000 such claims accounts only 3% out of total 175,000 claims then $550 million x 3% = $16 million), $98 million seems to be reserved for future expenses.
    According to Bell, he pursues $312 million as clawback and he has confidence on recovering more than cost, then why does he need to reserve such huge amount of nearly $100 million (17% of the total claim), Bell should be able to manage future expense using the recovering assets without such huge reserve but with minimum reserve amount.
    Bell also comments “We have sued more than 9,000 of these “net winners” in the United States. We will soon sue net winners who live outside the United States. I remain hopeful that we will add tens of millions of dollars to the pool from which we will make final distributions to claimant victims. Unfortunately, these efforts will take quite a long time, maybe years.“
    I am pretty sure suing a lot of defendants internationally takes years, probably decade to complete or even indefinite because Bell may not be able to reach many defendants with little cooperation of foreign jurisdictions (I understand Bell tries to use HCCH – Hague Conference on Private International Law, yes the member countries recognize foreign judgement but when it comes to enforcement, it’s still extremely weak, don’t forget this convention is about just a civil matter not a criminal matter, once the defendants ignore the notice the case virtually becomes dismissed in many occasions because each country usually doesn’t have enough resources & time to pursue persistently to help other jurisdiction to deprive money from her own country), so from practical standpoint it will not work as people may expect .
    What I can read from these facts are;
    1) Bell anticipates enormous profits (fee) during the lengthy process of thousands of litigation which he describes years of efforts
    2) Bell doesn’t seem to have full confidence to recover the money that can cover all the costs including his own fee (now he says only“ adds tens of millions despite over $300 million target.
    That said, the worst but possible scenario (, which actually happened in many other Ponzi cases) is that Bell will eat up large parts of the reserved funds & even future collection, and the final distribution could be equivalent or even smaller than the amount Bell reserves currently after years of waiting.
    What are the bottom-line?
    – the only winner is the receiver who keeps earning based on hourly fee
    – the victims may have to wait years for the distribution they could get now (another 17%)
    Bell said “We continue to collect receivership assets from financial institutions“, which may bring about solid net recovery but I’m not sure from individual net winners, some may not have enough money to repay and some hide their money, a lot of uncertainties exist not at judgement level but at collection level, so recovery from individuals has huge risks therefore unpredictable.
    At first, I thought the receiver’s defendants class action was cost efficient approach, but after finding the receiver’s plan of the huge reserve fund together with his comment of “I will not be permitted to make final payments until all recoverable assets have been collected”, targeting enormous number of small profiteers would be Bell’s cunning tactics to delay the whole process at his best to maximize their hourly based fee.
    I heard that a hearing has been set for July 23 to hear a request by a group of participants (I guess these are net-winners) to end the receivership over the companies. The Securities and Exchange Commission requested a continuance. The request is scheduled to be heard in U.S. District Court in Charlotte.
    I’m not sure if ending the receivership is the most beneficial way for the victims though, I believe Bell should at least change their fee agreement from hourly based to contingency based, and pay out most of the reserve funds in the first distribution, which sounds only fair for the net-losers.
    Since Bell said “there will be an additional, final distribution at some point”, means he assures the positive net recovery, he doesn’t have any issue to get compensated based on contingency from the amounts he recovers in the future.
    I believe many victims will be happy to get additional distribution from the reserve fund NOW (possibly over 10% extra distribution) rather than waiting for years even the contingency fee costs more than hourly fee (which I personally feel less likely).
    Bear it in mind that there has been so many evidences that Ponzi receivers eat up the assets that could have returned to victims if they hadn’t done costly & lengthy clawback, such as Stanford case (Ralph Janvey), Legisi case (Robert D. Gordon), J.V. Huffman case (William Walt Pettit) and more & more.
    Now, Bell seems to disguises his efforts on maximizing own profit with the word “efforts on your behalf” same as the other unethical receivers.
    Hall”
    I listed a few concerns about the receiver’s clawback litigation in my previous posts http://patrickpretty.com/2013/12/12/urgent-bulletin-moving-lawsuits-against-zeek-insiders-winners-believed-imminent-paul-burks-dawn-wright-olivares-darryle-douglas-among-alleged-insiders-adsurfdaily-figures-todd-disner-and-j/comment-page-1/#comment-72615.
    I hope we will see good efficiency from the receiver’s defendants class action some day, which we have not been able to find from the receiver’s report.
    Gary”

    Yes, the contingency fee should be used when the receiver pursues any clawback.

    J.V. Huffman Case
    Source Article: http://www.hickoryrecord.com/news/article_8403fc90-48b3-11e3-b508-0019bb30f31a.html
    The Receiver Final Report – http://bloximages.newyork1.vip.townnews.com/hickoryrecord.com/content/tncms/assets/v3/editorial/4/3b/43b061dc-5084-11e3-a42f-001a4bcf6878/528a64de03dcd.pdf.pdf
    For five years, victims have waited quietly and with growing frustration while the legal firm appointed to the case worked to recover and liquidate Huffman assets.
    I understand the receiver started the 1st clawback litigation nearly 4 years ago and as the article says he was still waiting for the final settlement. The clawback recovery accounts around 15% out of the total recovered assets of $3.2 million.
    Interestingly, over 70% of the whole recovery comes from liquidation of tangible assets, which doesn’t seem to require a lot of fee given the nature of simple task, therefore quite a big portion of $0.8 million of the receiver’s fee may attribute to the clawback litigation.
    Consequently, the final distribution to the victims became $2.4 million ($3.2 million – $0.8 million fee) that is only 11% recovery ($2.4 million out of $22 million of total loss claim), and the receiver’s comment is;
    “the return of between 10 and 15 percent on invested dollars is on the high side of most distributions. He said between 5 and 7 percent is the norm.“
    My god, this is what the receiver finally says after the 5 years waiting.

    Does anyone want to go through the similar hardship like this?
    I definitely don’t, thus unless the receiver clearly shows the cost benefit analysis strictly limited to the case that satisfies the threshold amount explained in my previous comments, we should not be in the position to let the receiver enjoy eating our money.

    Richard

    • Jody July 3, 2014 at 10:03 pm #

      Thank you for all your research on this, Richard.

  28. Richard Smith July 8, 2014 at 2:25 am #

    Hi Jody,

    My pleasure.

    Richard

  29. mlmgfc July 9, 2014 at 1:17 pm #

    “Richard Smith” has experienced a technical issue in attempting to post the below comment, so the Receiver is posting the same on his behalf…

    *********

    Everyone,

    This is a new development of our neighbor Zeek, which again proves difficulties of clawback lawsuit – “Clawback Defendants File Counterclaims Against Receiver, Seek Treble Damages And Fees”, see the details here:
    http://www.ponzitracker.com/main/2014/7/2/clawback-defendants-file-counterclaims-against-receiver-seek.html

    The Zeek’s big net winners started court battle, a few key points are;
    – In their pleadings, the Defendants largely denied or claimed lack of knowledge surrounding the Receiver’s allegations concerning Zeek’s operation as a massive Ponzi scheme. In addition, each of the Defendants also chose to assert counterclaims against the Receiver – the first time in recent memory such a tactic has been attempted.
    – The main claims asserted by Defendants are: Breach of Contract, Tortious Interference, Money Had and Received, 42 U.S.C. 1983 (Deprivation of Constitutional Rights) or in the alternative common law 4th amendment claims, and North Carolina’s Unfair and Deceptive Trade Practices Act.
    – Breach of Contract Claims – The crux of the breach of contract claims is that each of the Defendants was owed compensation for their “work” for ZeekRewards parent entity Rex Venture Group (“RVG”), and that the Commission’s actions shutting down ZeekRewards prevented each Defendant from receiving the compensation owed to them. Each Defendant also alleges that the Commission “unnecessarily delayed its prosecution of claims” against RVG to their detriment. While the existence of a contract is alleged, there is little detail provided as to the substance of that contract or the terms of compensation.
    – Additional Claims Could Result In Additional Liability To Defendants – In addition to the breach of contract claims, Defendants also asserted additional claims that included a claim for violations of North Carolina’s Unfair and Deceptive Trade Practices Act (the “Act”), alleging that the Receiver and RVG’s conduct was illegal and immoral, offends public policy, and constituted unfair methods of competition, unfair trade practices, and deceptive trade practices.
    As a result, they are entitled to an award of treble damages and their attorney’s fees and costs, as provided in the Act.

    To me, which party will finally win is indifferent, importantly it reminds us of a few basic but critical facts as follows;
    – clawback litigation often faces such battles even at the stage of court judgement before moving into the collection stage where the real risk of enormous uncertainties exist as I have stressed many times
    – such court battle only delays the process of final distribution to the victims
    – such battle may eventually deplete the recovered assets – the above article says “the fact that funds that could potentially be returned to victims will instead be paid to the Receiver to defend these claims could certainly be a consideration.”, which confirms that all the risk comes from clawback litigation will be born by the victims and the receiver will not lose anything.

    The size of our case can’t afford to face any of such hindrance, thus it’s our receiver’s duty to move to the final distribution as quickly as possible without being bothered by any further clawback attempts.
    This is the best way to maximize the distribution to us victims by preserving the assets already recovered.

    Richard

    • mlmgfc July 10, 2014 at 10:18 am #

      “Richard Smith” has experienced a technical issue in attempting to post the below comment, so the Receiver is posting the same on his behalf…

      *********

      I just found the Interesting precedent that was just established – The Madoff Ruling Limiting Recovery Of Foreign Transfers, please see the article here: http://www.ponzitracker.com/main/2014/7/8/read-the-madoff-ruling-limiting-recovery-of-foreign-transfer.html

      The quotation of the article is;
      “On July 7, 2014, U.S. District Judge Jed S. Rakoff issued an order finding that bankruptcy laws could not be applied extraterritorially to recover subsequent transfers from “feeder funds” that invested in Bernard Madoff’s massive Ponzi scheme to foreign individuals and entities. The order cited the U.S. Supreme Court’s 2010 opinion in Morrison v. Nat’l Australian Bank Ltd., 130 S.Ct. 2869 (2010) for the presumption that, absent contrary intent, Congressional legislation is meant to apply only within the territorial jurisdiction of the United States. The decision, which is below, will have profound implications not only on the potential recovery for victims of Madoff’s scheme but also in the broader bankruptcy jurisprudence.
      While trustee Irving Picard has recovered nearly $10 billion to date to be eventually distributed to Madoff’s victims, he indicated that he had filed several dozen lawsuits to recover more than $7 billion in subsequent transfers. It remains unknown how much of that figure will be affected by the recent ruling, which it also likely to be appealed.”

      In short, it has become a leading case for the complicated Global Clawback Recovery, which I assume will be the additional reason for our receiver NOT to waste his time with anything related to foreign clawback any further.

      FYI.

      Richard

  30. Richard Smith August 20, 2014 at 11:27 am #

    Again, Gary made very insightful comments regarding Zeek receiver’s clawback lawsuits, visit: http://patrickpretty.com/2014/08/15/urgent-bulletin-moving-court-grants-approval-for-zeek-receiver-to-sue-international-winners/

    I genuinely like his approach of situation analysis & logic construction.
    The real numbers cast doubt on the effectivity of Zeek receiver’s clawback lawsuits, then efficiency of even over $300 million pursuit.
    Moreover, the interesting points are, the ponzi clawback is by no means a usual practice in outside US and many foreign courts even in the developed countries may reject US standard judgement when it comes to the ponzi clawback.

    The below is a full copy of Gary’s comment;

    “I have a growing incertitude about the effectiveness of this clawback lawsuit against individuals.

    According to the receiver’s periodical reports, as of June 30th ’14, the receiver made settlements & collected approximately $2.5 million, of which detail breakdown by period are as follows;
    – 1Q ’13, $36,000.00
    – 2Q ’13, $558,054.50
    – 3Q ’13, $843,342.84
    – 4Q ’13 $687,702.94
    – 1Q ’14, $183,740.46
    – 2Q ’14, $183,508.86

    Mr Bell filed lawsuits to US netwinners on Feb 28th ’14, so only part of the 1Q ’14 settlement was done after the filing though, even the whole settlements in the 1 & 2Q accounts only 0.1% out of over $300 million the receiver is said to pursue in this litigation.
    People may argue that it’s still early stage in the litigation, but what worries me is a trend of the settlements.
    Where can we see positive effect of litigation?
    In truth the surrender of netwinners decreased after the filing. So, it looks most of the netwinners are not bothered by being sued, which implies the receiver will face a lot of resistance when the suits go into enforcement stage.
    Having said, the collection may not be smooth but more costly & lengthy than Mr Bell originally expected, so I’m not sure the efficiency of class action is still valid.

    Now, Mr Bell is moving into the international clawback.
    Unlike US, Ponzi clawback lawsuits does not seem to be popular at all even in many advanced European countries that usually recognize US court judgements, because I can’t find indeed single news of its kind via Google search, I tried to find relevant articles specifically in UK, France, Germany, Spain & Italy etc though only ultra big cases such as Madoff http://www.law360.com/articles/528855/uk-court-rejects-madoff-feeder-fund-s-clawback-suit and Stanford targeting big financial institutions etc. comes out, then the rest goes to US cases, if I had googled in local language, I could have found some though (I searched only in English).

    Anyhow, surprisingly, the Supreme Court in Netherland where Hague Convention (HCCH) was concluded made very difficult judgements for Ponzi clawback – especially “unjust enrichment claim to net-winners” and burden of proof – see the article; http://www.internationallawoffice.com/newsletters/detail.aspx?g=ba7ff5aa-f829-4f21-97e9-9486c1110427&redir=1

    The receiver’s quarterly report explained that they have been in cooperation with multiple overseas law firms. I presume the contract with them must be hourly based rather than contingency based, therfore the foreign law firms may not refuse this business opportunity but rather show positive prospect even though they are sceptical about the results.

    I focused the difficulty of collection if the receiver pursues individuals in; http://patrickpretty.com/2013/12/12/urgent-bulletin-moving-lawsuits-against-zeek-insiders-winners-believed-imminent-paul-burks-dawn-wright-olivares-darryle-douglas-among-alleged-insiders-adsurfdaily-figures-todd-disner-and-j/comment-page-1/#comment-72615 and somehow blindly count on the recognition of foreign courts’ judgements, but now the judgements become question mark even in advanced nations.

    The receiver disbursed a bit over $14 million as of June 30 ’14, which is not big considering the total $850 million case because it accounts only 1.6% for 2 years but obviously the cost related with the clawback litigation will become significant among his future fee & expenses and so far only $2.5 million was recovered from the clawback and there are a lot of uncertainties down the road.

    Hope my concern expressed here http://patrickpretty.com/2014/05/08/zeek-receiver-multilayered-investigation-into-rex-venture-group-and-its-insiders-advisors-and-financial-institutions-continues/comment-page-1/#comment-89934 will not be realized.

    Gary”

  31. Jim Mudge August 22, 2014 at 8:28 am #

    I just received a package from the receiver containing a claims verification form. Is this the official form that needs to be returned or just a sample? There is no claim bar date on it.

  32. Judgement Time May 14, 2015 at 10:25 am #

    Mason’s sentencing hearing for the criminal charges is scheduled for May 20th 3pm in Courtroom 1 before Judge Frank Whitney in the U.S. District Court, 401 W. Trade Street, Charlotte, North Carolina. Frank G. Johns is the court clerk: 704-350-7400

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