Receiver’s Third Report

5 Dec

The Receiver has filed his third report to the Court summarizing the Receiver’s efforts to marshal and collect assets, administer the receivership estate and otherwise perform the duties mandated by the Court.

Receiver’s Third Report


4 Responses to “Receiver’s Third Report”

  1. Richard Smith December 9, 2013 at 3:49 pm #

    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.

    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.

  2. Richard Smith December 9, 2013 at 3:52 pm #

    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 ) 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).

  3. Richard Smith December 9, 2013 at 3:56 pm #

    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.

  4. Richard Smith December 9, 2013 at 4:00 pm #

    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

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