Krista Freitag, the court-appointed Receiver for WCM777, filed her tenth Interim Report on August 19, 2016, detailing the second quarter's activities. The period saw the Receivership recover $6,535,447 from various asset sales and settlements, while also facing challenges with the disposition of flawed diamonds.
WCM777, operating as World Capital Market, was an alleged $65 million Ponzi scheme. The Securities and Exchange Commission (SEC) filed charges against its founder, Phil Ming Xu, and related entities in April 2014. The SEC alleged the scheme defrauded thousands of investors, predominantly within the Chinese-American community. The U.S. District Court for the Central District of California appointed Krista Freitag as Receiver for WCM777 to oversee asset recovery and distribution to victims.
The Receivership secured $6,535,447 in assets during the second quarter of 2016. This total included $50,000 from the James Dantona Governmental Impact settlement agreement. Another $1,000,002 came from the sale of FrequencyNetworks stock. The Receiver also generated $1,490,155 by selling an El Monte warehouse and $3,995,290 from the sale of the Glen Ivy golf course. These recoveries contribute to the overall restitution efforts for defrauded investors.
Efforts to monetize Phil Ming Xu's collection of flawed diamonds proved difficult. A Los Angeles gemologist, tasked with marketing and selling the stones, received special cutting wheels ordered from Israel. These wheels were not strong enough to complete the necessary polishing and cutting.
New tools would be needed. The estate would face an estimated $12,000 in additional costs to finish the work, comprising $10,000 for labor and $2,000 to buy stronger wheels from Belgium. The Receiver noted the current diamond market is soft, and the stones themselves lack quality. Proceeds from their eventual sale would likely not cover these additional finishing costs. An individual has made an offer to purchase the diamonds as they are, which the Receiver plans to accept, pending court approval.
Phil Ming Xu's sister, Sue Wang, and his mother, XiaoMei Deng, made a payment of $1,075,000. This payment, combined with an earlier $50,000, fulfilled the terms of their settlement agreement with the Receivership. The total from Xu's family members reached $1,125,000.
Processing claims from WCM777 victims continues to take longer than initially expected. The Receivership plans to seek an extension for this process by October 14, 2016.