UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION

Transcription

1 Case 1:14-cv RWS Document 70 Filed 07/30/15 Page 1 of 12 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION SECURITIES AND EXCHANGE COMMISSION, CIVIL ACTION FILE Plaintiff, NO. 1:14-CV-3030-RWS v. ZHUNRIZE, INC. and, JEFF PAN, Defendants. NOTICE OF FILING Michael Fuqua, as Receiver for the assets of Zhunrize, Inc. and Jeff Pan, and any entities owned by Pan who have received investor funds, including but not limited to D&A Capital Partners, by and through his undersigned counsel, hereby files the attached Second Status Report for the Second Quarter of This 30th day of July, /s/ Ann W. Ferebee Jennifer D. Odom Georgia Bar No jennifer.odom@bryancave.com Ann W. Ferebee Georgia Bar No ann.ferebee@bryancave.com

2 Case 1:14-cv RWS Document 70 Filed 07/30/15 Page 2 of 12 BRYAN CAVE LLP One Atlantic Center Fourteenth Floor 1201 West Peachtree Street Atlanta, Georgia Tel: ( Fax: ( Attorneys for the Receiver Danielle C. Parrington Georgia Bar No danielle.parrington@bryancave.com 2

3 Case 1:14-cv RWS Document 70 Filed 07/30/15 Page 3 of 12 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION SECURITIES AND EXCHANGE COMMISSION, CIVIL ACTION FILE Plaintiff, NO. 1:14-CV-3030-RWS v. ZHUNRIZE, INC. and, JEFF PAN, Defendants. RECEIVER S SECOND STATUS REPORT FOR THE SECOND QUARTER OF 2015 Michael Fuqua, as receiver for Zhunrize, Inc. and Jeff Pan, and any entities owned by Pan who have received investor funds, including but not limited to D&A Capital Partners (the Receiver, hereby files his Second Status Report for the Second Quarter of INTRODUCTION AND BACKGROUND 1. On September 22, 2014, the Securities and Exchange Commission ( SEC filed a Complaint for Injunctive and Other Relief in the United States District Court for the Northern District of Georgia against Jeff Pan ( Pan and Zhunrize, Inc. ( Zhunrize (collectively the Defendants, alleging that Zhunrize was an ongoing fraudulent multi-level marketing scheme operated by Pan.

4 Case 1:14-cv RWS Document 70 Filed 07/30/15 Page 4 of The SEC s Complaint alleged that the Defendants raised over $100 million from investors from 2012 through September Zhunrize purported to be a legitimate multi-level marketing business whereby investors purchased online stores to earn commissions by selling products at below retail prices as a result of Zhunrize s E-commerce Business Owner platform. Investors also earned commissions on the recruitment of new store owners and commissions on products sold through their stores. The SEC alleged that there were approximately 77,000 stores purchased during the period from 2012 through September Subsequent to the filing of the Complaint, the Court issued a Temporary Restraining Order Freezing Assets and for an Accounting, Order Prohibiting Destruction of Documents and Order Expediting Discovery ( TRO on September 22, The TRO was subsequently modified on October 9, 2014, to allow the Defendants to continue to operate the e-commerce platform for 30 days subject to a $2 million budget with spending constraints and with the understanding that Zhunrize would not solicit new investors nor collect hosting fees. 4. On December 18, 2014, the Defendants settled with the SEC, and Michael Fuqua was appointed Receiver by Court Order dated December 19,

5 Case 1:14-cv RWS Document 70 Filed 07/30/15 Page 5 of 12 SUMMARY OF RECEIVER S FIRST STATUS REPORT FOR QUARTER ENDING MARCH 31, As set forth more fully in the Receiver s First Status Report for the First Quarter of 2015 (Dkt. No. 60, during the initial reporting period of the Receivership ending March 31, 2015, and pursuant to the terms of his appointment, the Receiver employed the following professionals: (a As expressly authorized in the December 19, 2014 Order, the Receiver employed Bryan Cave LLP as his counsel; (b The Receiver employed GlassRatner Advisory and Capital Group LLC, a firm of certified public accountants and finance professionals with experience in both forensic accounting and receivership accounting, as accountants for the Receivership; (c With the Court s approval, the Receiver retained employees from Vodaware, the company that created Zhunrize s website, to assist in pulling electronic data for use in the claims analysis; (d With the Court s approval, the Receiver engaged BMC Group to assist with the claims process. BMC Group provides administration services for bankruptcy, mass tort settlements, and other matters involving a large number of claims. BMC Group has 3

6 Case 1:14-cv RWS Document 70 Filed 07/30/15 Page 6 of 12 set up the Zhunrize Receivership website and system for s between the Receiver and investors. In addition, the Receiver secured the books and records of the Receivership, recovered cash from frozen accounts, interviewed employees and contractors, and established the Receivership website. SUMMARY OF OPERATIONS FOR THE SECOND QUARTER ENDING JUNE 30, 2015 This Second Receiver s Report covers the period from April 1, 2015 through June 30, A. Developing the Claims Process. 6. Subsequent to securing the books and records of the Receivership, the Receiver, the Receiver s counsel and the Receiver s accountants (collectively, the Receiver s Team have been analyzing and reconciling data from the recovered books and records in order to develop an efficient claims process. Activities during this second period have included: (a Working with Vodaware, Zhunrize s service provider, to obtain victim investment data the Receiver s Team has secured reports from Vodaware that reflect store IDs, type of store purchased, and victim contact information; 4

7 Case 1:14-cv RWS Document 70 Filed 07/30/15 Page 7 of 12 (b Reconciling the number of victims in various system reports to financial data using the data recovered from the Zhunrize offices, bank statements, and other recovered sources, the Receiver s Team is attempting to identify those investors who received refunds from store purchases; (c Reconciling the number of victims to their investment data the Receiver s Team is using the recovered information to attempt to quantify the universe of active victims; (d Reconciling victim data to the books and records of the company financial information the Receiver s Team is using the recovered information to attempt to determine the active victims losses based on cash amounts paid for commissions and refunds; (e Reconciling the amount of cash that was deposited into bank accounts to victim investment data using the recovered financial information, the Receiver s Team is attempting to reconcile the number of stores sold, hosting fees paid, product sales, and other miscellaneous cash received to the information recovered from the various financial institutions; 5

8 Case 1:14-cv RWS Document 70 Filed 07/30/15 Page 8 of 12 (f Developing an efficient and effective claims process as its analysis has provided more findings, the Receiver s Team has been working to develop an efficient claims process that will utilize the company information to assist it in quickly allowing or rejecting potential claims based on company data and data collected on the claims form. During the period covered by this report, the Receiver s Team has not completed its analysis or finalized the claim form. However, it is expected that the form will be completed and posted online by August B. Settling Claims Against the Defendant Jeff Pan. 7. By Order dated May 26, 2015, the Court approved the Receiver s acceptance of a $2,500 payment from Pan in lieu of turning over possession and control of a 1996 Acura MDX (Dkt. No. 64, and Pan has now made the payment. 8. By Order dated June 25, 2015, the Court authorized the Receiver to abandon the claim to the residential real property belonging to Jeff Pan located in Suwanee, Georgia that was a part of the Receivership estate, as taking title to the property could have led to losses to the Receivership. (Dkt. No

9 Case 1:14-cv RWS Document 70 Filed 07/30/15 Page 9 of 12 C. Other Activities. 9. In the Second Quarter, the Receivership has recovered an additional $259, from accounts held at SunTrust, First Citizens Bank, and additional funds held by Wells Fargo. (See Exhibit B. 10. The Receiver paid $199, in Court-approved professional fees and other Receivership expenses in the Second Quarter. (See Dkt. No. 66. C. Receivership Assets Cash on Hand 11. The Receivership currently has $45,735, of cash on deposit in a Receivership account with Wells Fargo Bank. Schedule of Receipts and Deposits 12. See the attached exhibits: (a (b (c (d (e (f Exhibit A SFAR Exhibit B Detail of recovered funds Exhibit C Proceeds from asset liquidation Exhibit D Detail of expense payments Exhibit E Detail of plan development expenses Exhibit F Detail of ending balance of fund 7

10 Case 1:14-cv RWS Document 70 Filed 07/30/15 Page 10 of 12 Receivership Property 13. Without notice from the Receivership s landlord, Vodaware, the Receivership property in the Receivership s office space was disposed of by the building owner due to the pending sale of the building. The Receiver contacted the building owner s general counsel regarding notice given to Vodaware and was informed that multiple notices had been provided with the last one being on or about June 2, D. Vendor/Employee Claims and Receivership Claims 14. Through June 30, 2015, there has been no further identification of potential claims against the Receivership in excess of the approximately $525,000 of potential vendor and employee claims that were previously identified. 15. The Receiver and his team will continue to research and evaluate potential claims against third parties. CONCLUSION All information stated above is based on the knowledge of the Receiver at this point in time, and later developments and discoveries may cause the information reported herein to be outdated or incorrect. The Receiver will continue to provide the Court with updates on a quarterly basis, as provided in the December 19, 2014 Order. 8

11 Case 1:14-cv RWS Document 70 Filed 07/30/15 Page 11 of 12 Respectfully submitted this 30th day of July, /s/ Michael Fuqua Michael Fuqua, Receiver 9

12 Case 1:14-cv RWS Document 70 Filed 07/30/15 Page 12 of 12 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF GEORGIA ATLANTA DIVISION SECURITIES AND EXCHANGE COMMISSION, CIVIL ACTION FILE Plaintiff, NO. 1:14-CV-3030-RWS v. ZHUNRIZE, INC. and JEFF PAN, Defendants. CERTIFICATE OF SERVICE I hereby certify that I electronically filed the foregoing RECEIVER S SECOND STATUS REPORT FOR THE SECOND QUARTER OF 2015 with the Clerk of Court using the CM/ECF system which will automatically send notification of such filing to the attorneys of record. This 30th day of July, /s/ Ann W. Ferebee Ann W. Ferebee Georgia Bar No