Securities and Exchange Commission v. Rex Venture Group, LLC et al

Filing 365

ORDER re: #291 MOTION for an Order Directing NxSystems, Inc. to Turn Over Receivership Assets and/or Find It in Contempt of the Court's Agreed Order (Status Conference set for 6/24/2015 10:30 AM in Courtroom 2-2, 401 W Trade St, Charlotte, NC 28202 before Senior Judge Graham Mullen.) The Court finds it appropriate to freeze and safeguard assets until a final disposition can be made. Signed by Senior Judge Graham Mullen on 6/1/2015. (Pro se litigant served by US Mail.) (tmg)

IN THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
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SECURITIES AND EXCHANGE

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COMMISSION,

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Plaintiff,

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vs.

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REX VENTURE GROUP, LLC
d/b/a ZEEKREWARDS.COM, and
PAUL BURKS,

Civil Action
No. 3:12-CV-519

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Defendants.
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This matter is before the Court upon the Receiver’s Motion for an Order Directing
NxSystems, Inc. to Turn Over Receivership Assets and/or Find it in Contempt of the Court’s
Agreed Order. (Doc. No. 291). The Receiver seeks $9,069,446.52 in alleged Receivership
Assets that NxSystems, Inc. (“NxPay”) has failed to turn over to the Receiver. NxPay disputes
that these funds are Receivership Assets subject to the Agreed Order, and argues that a summary
proceeding under the Agreed Order is not the appropriate way to make this determination.
NxPay would have the Receiver file a separate action against NxPay such that NxPay would
have a full and fair opportunity to present their claims and defenses.
In cases involving equity receiverships, the district court has broad powers and wide
discretion in supervising the receivership, determining the appropriate procedures to be used in
its administration, and fashioning appropriate relief. S.E.C. v. Elliott, 953 F.2d 1560, 1566 (11th
Cir. 1992); S.E.C. v. Hardy, 803 F.2d 1034, 1037 (9th Cir. 1986). In determining appropriate
procedures, in the interest of judicial efficiency, it is often necessary for the district court to use

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summary proceedings. Elliott, 953 F.2d at 1566. Resolving issues through summary
proceedings “reduces the time necessary to settle disputes, decreases litigation costs, and
prevents further dissipation of receivership assets.” Id.
While the term “summary” indicates an abbreviated procedure, it does not mean that
there is no procedure or an absence of due process. Id. at 1567. The structure of such hearings is
left to the discretion of the district court as long as the parties have the opportunity to present
evidence as to disputed facts and to make arguments regarding those facts. Id.
The Court finds that NxPay’s due process rights can and will be fully protected in a
summary proceeding within the context of the contempt motion as requested by the Receiver.
The Motion necessarily involves the interpretation and application of the Agreed Order, and
requiring the Receiver to file a separate action would be costly and inefficient.
The parties are directed to appear for a status conference before the Court on June 24,
2015, at 10:30 a.m. in Courtroom 2-2 of the United States District Court in Charlotte. The
parties should be prepared to discuss the scheduling of the contempt hearing and whether any
discovery is necessary prior to the hearing.
Moreover, the Court finds it appropriate to freeze and safeguard these assets until a final
disposition can be made. Accordingly, NxPay is directed to pay the amount of $9,069,446.52 to
the Receiver within five days of the date of this Order to be held in a segregated account. The
Receiver shall consider these funds to be frozen funds not to be used or distributed in any
manner until a final resolution of this Motion or further Order of the Court.

Signed: June 1, 2015

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