NxPay's $9 Million Stonewall
A payment processor is sitting on nearly $9 million in stolen money from one of the largest Ponzi schemes ever prosecuted, and it's refusing to hand it back.
NxPay served as the digital wallet for Zeek Rewards, an $850 million pyramid scheme the SEC shut down in August 2012. When the feds froze assets that day, NxPay held $31.9 million connected to the fraud: $21.2 million in Zeek's main e-wallet account and $10.7 million in frozen affiliate funds.
NxPay returned the $21.2 million without complaint. But for more than a decade now, the company has refused to release the remaining $9 million.
The Zeek Receivership, tasked with recovering stolen money, has grown tired of waiting. It's now asking the court to force NxPay's hand and possibly hold the company in contempt.
Here's what happened. When the asset freeze came down, NxPay locked all accounts linked to Zeek Rewards and moved the money into a master Settlement Account. The company then used a "netting" accounting method to separate actual Zeek funds from money affiliates had deposited. Basically, people who lost money in the scheme got refunds up to what they'd invested. Everyone else's remaining balances went into the Zeek pot, since they'd profited from the fraud.
The math seemed straightforward on paper. In January 2014, NxPay employee Gabriela Phillips handed the Receiver a document showing $16.1 million flowing into the Settlement Account and $6.7 million flowing back out to affiliates. That left $9.395 million—supposedly all Zeek money.
Except NxPay's numbers were wrong.
Forensic accountants dug into the Settlement Account and found NxPay made calculation errors. The company improperly transferred $1.351 million back to affiliates that should have stayed frozen. That accounting mistake explains the gap between what NxPay said was left ($9.395 million) and what actually belonged to the Receivership ($10.738 million).
So NxPay knows where the money is. It knows how much should be released. And it's refusing to do it anyway.
The Receivership has no patience left. The company's obstruction has cost fraud victims years of delayed recovery. Every month NxPay delays is another month people who lost everything in Zeek Rewards wait for their portion of restitution.
The court filing makes NxPay's position indefensible. The forensic accounting is clear. The Settlement Account documents are on record. There's no legitimate reason for the payment processor to keep holding nearly $9 million in stolen proceeds.
NxPay built its business on moving money between parties. In this case, it should simply move it to the people it actually belongs to: the victims waiting to recover from a massive fraud their payment processor helped facilitate.
🤖 Quick Answer
What is the NxPay controversy regarding Zeek Rewards funds?NxPay, a payment processor, holds approximately $9 million in frozen assets from the Zeek Rewards Ponzi scheme, which the SEC shut down in 2012. Despite returning $21.2 million, NxPay has refused to release the remaining $9 million in affiliate funds for over a decade, prompting the Zeek Receivership to seek court intervention for asset recovery.
Why did the SEC freeze NxPay's accounts in 2012?
The SEC froze NxPay's accounts because the company served as the digital wallet for Zeek Rewards, an $850 million pyramid scheme. At the time of shutdown, NxPay held $31.9 million connected to the fraud, including both main account funds and affiliate deposits linked to the illegal operation.
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