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| Seal of US Department of Justice (Photo credit: Wikipedia) |
DOJ charged that Four Oaks Bank granted "Automatic Clearing House (ACH)" check processing access to Rex Venture Group, parent company of Zeek Rewards Ponzi, despite multiple warning signs such as no visible prinpals and unverifiable or suspicious address (one of which is a vacant lot).
According to DOJ, Four Oaks Bank, which has direct access to ACH, allowed a Texas company direct access for a price, without little if any oversight, since 2009. The direct access means any one with checking account number (which is on any check), can directly debit account with or without authorization. This Texas company then sold its services to many unscrupulous companies, such as possibly up to 22 payday loan lenders who continue to debit even though loan had been paid, and Zeek Rewards ponzi, to process checks through itself (and thus, through Four Oaks). Four Oaks apparently ignored a request from Arkansas Attorney General to look into payday loans made to Arkasas citizens paid through Four Oaks, since payday loans are illegal in Arkansas. According to DOJ, at least 60 million dollars worth of checks was processed through Four Oaks through a 5 month period for Zeek alone, and at least one bank official knew that Zeek was suspicious because apparently the owner "keeps changing company names so his reputation will not catch up with him." It was not known which "owner" was being referred, but it's likely to be Paul Burks.
Four Oaks claimed that the contract was written favoring the other party and it had no choice... until the DOJ order. The settlement stipulated that Four Oaks must break the contract in 30 days, help the Feds investigate any wrongdoings related to this, and to audit itself and report to DOJ every six months how it had performed proper background checks on any potential ACH customers and they do not have a history of unauthorized charges and so on... for the next ten years.
DOJ stated that it will go after more banks who neglect their duty to prevent fraud.
Referenced articles
http://www.patrickpretty.com/2014/01/09/urgent-bulletin-moving-justice-department-sues-four-oaks-bank-says-it-turned-blind-eye-to-red-flags-at-rex-venture-group-operator-of-zeek-rewards/
http://www.wral.com/government-accuses-four-oaks-bank-of-turning-blind-eye-to-illegal-activity/13285954/
http://myfox8.com/2014/01/10/settlement-reveals-new-details-in-zeekrewards-case/
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