Receiver Files Motion for Court Approval of Citibank Settlement in Profit Connect Crypto Fraud Case
On Monday, October 14, 2024, the court-appointed receiver of Profit Connect Wealth Services, Inc., and its subsidiaries and affiliates filed a motion in the United States District Court for the District of Nevada, seeking judicial approval for a settlement agreement with Citibank, N.A. The receiver, Geoff Winkler, represents a case that began when the Securities and Exchange Commission (SEC) initiated legal action against Profit Connect and its principals, Joy I. Kovar and Brent Carson Kovar, on July 8, 2021.
The motion requests the court to approve a settlement in which Citibank would pay $65,000 to resolve claims related to payments made by Profit Connect. The receiver claims that Citibank received $125,786.61 in payments for credit cards issued to individuals and not to Profit Connect itself, for which the company had no contractual liability. This claim is framed under the assertion that Profit Connect did not receive adequate value for these payments and was insolvent at the time they were made.
In the initial phase of the legal proceedings, the court granted a temporary restraining order that allowed for the freezing of the defendants’ assets. Following a stipulation by the defendants, the court later appointed a permanent receiver over Profit Connect, tasking Winkler with controlling and accounting for the company’s assets.
Profit Connect had purported to be a cryptocurrency mining operation, claiming to offer investors returns of 15-30% through “seat time” on its high-performance supercomputers. However, investigations revealed that, from May 2018 to July 2021, the company mined only $352.93 in cryptocurrency, despite claims of generating between $500 million and $1 billion. During this period, approximately 880 investors deposited nearly $24.7 million into Profit Connect’s accounts, of which a small fraction was returned to investors, while the majority was used for various expenses, including commissions to agents and the personal costs of the Kovar defendants.
As part of the settlement negotiations, the receiver and Citibank engaged in discussions regarding the potential defenses that Citibank might assert, including that some of the payments were related to business expenses. After several rounds of negotiation, both parties agreed on a settlement amount of $65,000, which would be paid within thirty days of the agreement’s execution, contingent upon court approval.
The motion filed by Winkler emphasizes that the settlement aligns with his business judgment and serves the best interests of the receivership estate. The receiver argues that this settlement presents a fair resolution that balances the risks of litigation against the potential recovery of funds for the investors affected by Profit Connect’s operations.
Alongside the motion, a declaration from Winkler details the investigations conducted into the financial activities of Profit Connect. The declaration confirms that, based on forensic accounting, the receiver determined the extent of the payments made to Citibank and the lack of value received in return. Winkler asserts that the settlement represents a reasonable outcome given the circumstances.
The court’s approval of this settlement is necessary for the receiver to finalize the agreement and secure the funds for distribution to investors. The motion includes a proposed order for the court to consider, which would formally grant approval for the settlement agreement.
Please contact BlockTribune for access to a copy of this filing.
