A technicality ruling by the Fourth Circuit will see Roman Balanko and VictoriaBank keep $13.1 million in stolen Zeek Rewards victim funds.
The dispute over the funds began in 2016. In a nutshell the funds were laundered through Payza, who in turn laundered the funds through VictoriaBank, who in turn laundered the funds through Bank of New York Mellon, who in turn laundered the funds through Balanko’s company PaymentWorld.
PaymentWorld in turn laundered the funds through a Russian bank.
Three days after this transfer to Tusar Bank, PWHK routed the funds to an account for PaymentWorld Limited Russian Federation at Master Bank in Russia.
Master Bank closed soon thereafter, and those funds appear to be beyond recovery.
We’ve previously covered how PaymentWorld and VictoriaBank are in cahoots (and by proxy Balanko).
After being laundered through a Russian bank, the stolen $13.7 million is believed to be in Roman Balanko’s possession.
The Receiver has been fighting to get the funds returned for distribution to Zeek victims. Balanko and VictoriaBank have been fought tooth and nail against this.
The Receiver’s second appeal was filed after VictoriaBank prevailed on a motion to dismiss (details of the original granted appeal here).
On remand, the district court granted Victoriabank’s renewed motion to dismiss.
The district court determined that it had no power under the Federal Rules of Civil Procedure to order jurisdictional discovery as to Victoriabank, because Victoriabank was a non-party over which there was no preliminary finding of jurisdiction.
The district court ultimately concluded that the Receiver could not demonstrate personal jurisdiction even under the lower prima facie standard of proof and granted the motion to dismiss.
The Receiver argued the court had jurisdiction because
Victoriabank used its BNYM correspondent account in New York to place the proceeds of the scheme out of the Receiver’s reach.
The Fourth Circuit disagreed.
Even assuming that Victoriabank is subject to jurisdiction under New York’s longarm statute, the Receiver makes no effort to establish how that jurisdiction extends to North Carolina.
This failure is fatal to the Receiver’s argument.
The Western District of North Carolina cannot exercise jurisdiction pursuant to New York’s long-arm statute.
The Receiver’s second argument, that VictiroaiBank knowingly violated the 2012 Freeze Order, also fell flat.
The Receiver concedes that he never properly served Victoriabank in the instant contempt proceeding.
Accordingly, the Receiver’s freeze-order theory of jurisdiction fails.
The Fourth Circuit upheld the District Court’s granting of VictoriaBank’s motion to dismiss.
We appreciate that today’s ruling hamstrings the Receiver’s efforts to recompensate the ZeekRewards victims. But we cannot flout due process in the name of recompense.
For the foregoing reasons, the district court’s judgment is AFFIRMED.
And just like that, Roman Balanko gets to keep $13.7 million stolen from Zeek victims.
While the Zeek Receivership still managed to return upwards of 81% on valid victim claims, Balanko finessing victims out of $13.7 million is a bit of a blow.
Looking forward the VictoriaBank litigation was the last task the Receivership had to see through.
I expect a final distribution will be announced at some point, after which the Receivership will be dissolved.