Free Receivers Financial Report - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 01-cv-645-JLK SECURITIES AND EXCHANGE COMMISSION Plaintiff, v. KENNETH ROY WEARE a/k/a ROY WEAVER, J&K GLOBAL MARKETING CORPORATION, and AAA-AUCTION.COM, INC., Defendants.

RECEIVER'S EIGHTH QUARTERLY REPORT FOR THE QUARTER ENDED SEPTEMBER 30, 2007

Patten, MacPhee & Associates, Inc., the Court-appointed Receiver, submits its quarterly report for the calendar quarter ended September 30, 2007, outlining the current status and progress of its efforts to establish and administer the claims process for investors, as set forth in the Court's Order Appointing Receiver dated October 26, 2005. This quarterly report summarizes activities undertaken by the Receiver from July 1, 2007 through September 30, 2007. The Receiver reports the following: Background 1. On December 6, 2006, the Court entered its order granting the Receiver's Unopposed

Motion to Establish Procedures and Deadline for Filing Claims, to Approve Manner of Notice to Potential Claimants, and to Establish Claims Review Procedures ("Motion to Establish Procedures"),

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which outlined in detail the process to be followed by the Receiver in administering claims submitted by investors in J&K Global Marketing Corporation ("J&K Global") and AAA-Auction.com, Inc. ("AAA-Auction.com"). 2. As described more fully in the Receiver's Seventh Quarterly Report for the Quarter

Ended June 30, 2007 ("Seventh Quarterly Report"), through June 30, 2007, the Receiver had reviewed and considered a total of 1,866 claims, totaling $4,981,072, after eliminating a substantial number of duplicate claims and/or consolidating certain claims for administrative convenience. Attached at Exhibit A is a schedule summarizing the number of timely- and late-filed claims considered by the Receiver through June 30, 2007, as well as the dollar amounts claimed and allowed/disallowed by the Receiver with respect to those claims. Exhibit A further divides all claims considered by the Receiver through June 30, 2007 into 3 categories: (1) those allowed by the Receiver in their entirety; (2) those disallowed in their entirety; and, (3) those partially allowed and partially disallowed. 3. As reflected in Exhibit A, 1,466 claims, or 78.6% of all claims considered by the

Receiver through June 30, 2007, were allowed in their entirety. The total dollar amount allowed for all claims allowed in their entirety through that date was $1,760,855. It should be noted that the amount allowed for this category of claims exceeded the amount claimed, $1,488,352, because the Receiver received and considered as many as 263 claims with no specified amount. In many cases, the claimant had expressly stated that he/she no longer had any documentation evidencing his/her investment from seven or eight years ago, and therefore, had no choice but to rely on the records obtained by the SEC. -2-

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4.

Through June 30, 2007, the Receiver had also considered and disallowed in their

entirety a total of 99 claims, or 5.3% of all claims considered through that date. Claims disallowed in their entirety consisted primarily of investors who actually made money on their investments in J&K Global and claimants seeking amounts lost in other investment scams. The total dollar amount claimed for claims disallowed in their entirety was $358,786. 5. In addition, through June 30, 2007, the Receiver had partially allowed/disallowed

another 301 claims seeking a total of $3,133,934. The Receiver allowed only $374,250 with respect to those claims, thereby disallowing $2,759,685. While that amount may seem substantial at first blush, it should be noted that 9 claims, alone, accounted for $1,919,125, or approximately 70% of that difference. The remainder of the total amount partially disallowed by the Receiver consisted of (1) claimed investments that the Receiver could not verify from documents supplied by the claimant or from records obtained by the SEC, and (2) adjustments made by the Receiver for amounts actually received by the claimants from J&K Global or AAA-Auction.com. 6. Just prior to the calendar quarter covered by this report, the Receiver had sent a Final

Determination Notice to the 149 claimants who had sought reconsideration of the Receiver's prior disallowance of all or part of their claims. As a result of these "de novo reviews" by the Receiver, the amount allowed by the Receiver was increased with respect to 101 claims, or roughly 2/3 of the claims for which reconsideration had been requested. The Receiver did not change the amount allowed with respect to the remaining 48 claims. 7. In accordance with the Motion to Establish Procedures, claimants who objected to

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a Motion for Review on or before July 19, 2007. To facilitate that process, the Receiver prepared and included with each Final Determination Notice a form Motion for Review By Court. A copy of that form motion was also attached to the Receiver's Seventh Quarterly Report at Exhibit A. 8. As of the date of the Seventh Quarterly Report, July 11, 2007, the Receiver had not

been served with a copy of any Motion For Review By Court. However, by July 19, 2007, four Motions for Review By Court had been filed. On July 26, 2007, the Receiver filed with the Court its response to each of those motions. As discussed more fully below, the Receiver and three of the four claimants filing a Motion For Review By Court before July 19, 2007 have since reached a mutually satisfactory resolution of their claims. Only the Motion For Review By Court filed by James Raissis of Australia remains for the Court's consideration at the hearing scheduled for the afternoon of October 15, 2007. 9. In addition, on September 24, 2007, Robert Lee Pillow, III filed with the Court his

Motion For Review By Court (the "Pillow Motion"). The Receiver filed its response to the Pillow Motion on October 4, 2007. For reasons discussed more fully below and in the Receiver's Response to Motion For Review By Court Filed By Robert Lee Pillow, III, the Receiver has asked the Court to deny the Pillow Motion.

Receiver's Progress During the Most-Recent Calendar Quarter (Payment of Allowed Claims) 10. On July 27, 2007, the Receiver filed with the Court Receiver's Combined Status

Report and Motion for Order Authorizing and Directing Payment of Allowed Claims and to Set Hearing Date on Claimants' Motions for Review by Court ("July 27 Status Report and Motion").

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Among other things, the July 27 Status Report and Motion asked the Court to approve the payment of 1,743 allowed claims, totaling $2,124,980. Attached at Exhibit B is a schedule summarizing the number of timely- and late-filed claims considered by the Receiver as of July 27, 2007, as well as the total dollar amounts claimed and allowed/disallowed by the Receiver with respect to those claims. Exhibit B also divides all claims considered by the Receiver into 3 categories: (1) those allowed by the Receiver in their entirety; (2) those disallowed in their entirety; and, (3) those partially allowed and partially disallowed. 11. As reflected in Exhibit B and discussed more fully in the July 27 Status Report and

Motion, as of that date, the Receiver had considered and allowed in their entirety a total of 1,441 claims, or 78.3% of all claims considered. The total dollar amount of all claims allowed in their entirety was $1,757,855. At the same time, the Receiver had considered and disallowed in their entirety a total of 99 claims, or 5.4% of all claims considered. The total amount disallowed for claims falling into that category was $359,161. The remaining 302 claims were partially

allowed/disallowed by the Receiver. A total of $367,125 was allowed with respect to those claims. 12. The total number of allowed claims, and the total dollar amount allowed with respect

to those claims, requested by the Receiver to be paid in the July 27 Status Report and Motion were slightly different from those reported in the Receiver's Seventh Quarterly Report due to claims considered by the Receiver after June 30, 2007 and the identification of additional duplicate claims after that date.

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13.

On July 31, 2007, the Court entered its Order Authorizing and Directing Payment of

Allowed Claims and Setting a Hearing Date on Claimants' Motions for Review ("July 31 Order"), granting the relief requested by the Receiver in its July 27 Status Report and Motion. 14. Prior to filing the July 27 Status Report and Motion, the Receiver had spoken at

length with the Clerk of the Court's Financial Supervisor, who assured the Receiver that her office had the resources and capabilities needed to prepare, issue and mail the checks requested by the Receiver. The July 27 Status Report and Motion, therefore, recommended payment under the direction of the Clerk of the Court's Financial Supervisor, as the most cost-efficient method of payment for the receivership estate. 15. Upon receipt of the July 31 Order, the Receiver prepared for the Clerk of the Court's

Financial Supervisor Microsoft Excel® spreadsheets containing all of the data needed to prepare and issue the checks for approved distributions to claimants. On August 7, 2007, three spreadsheets were e-mailed to the Clerk of the Court's Financial Supervisor: (1) a list of 1,011 checks, totaling $1,098,205, to be made payable to J&K Global investors residing in the United States; (2) a list of 713 checks, totaling $637,575, to be made payable to J&K Global investors residing in 29 foreign countries; and, (3) a list of 22 checks, totaling $389,200, to be made payable to AAA-Auction.com investors, all of whom reside in the United States. It should be noted that the total number of checks issued (1,746) was three more than the total number of claims approved by the Court (1,743) because one claim submitted in the names of four brothers and sisters in Finland subsequently was divided into four separate checks to facilitate the payment process.

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16.

While assisting the Clerk of the Court's Financial Supervisor with the preparation,

issuance and mailing of distribution checks to claimants, the Receiver identified additional duplicate claims. As a result, the Receiver withheld delivery of 11 checks totaling $6,750, in accordance with the Court's July 31 Order. The Receiver also directed the Clerk of the Court's Financial Supervisor to reduce the amount of one distribution check by $750, due to the discovery of a duplicate claim. The Clerk of the Court's Financial Supervisor, therefore, issued 1,735 checks totaling $2,117,480. 17. In accordance with the procedures set forth in the Motion to Establish Procedures,

unrelated investors were permitted to consolidate one or more claims if the investor(s) whose claim was (were) being consolidated submitted to the Receiver a signed Consent to Consolidation Form. At the time of the July 27 Status Report and Motion, seven claimants had consolidated their claim with that of one or more additional investors, but had not submitted the requisite Consent to Consolidation Form(s) to the Receiver. The July 27 Status Report and Motion, therefore, asked the Court to grant to the Receiver the authority to withhold delivery of any claimant's check until receipt of the requisite Consent to Consolidation Form(s). The July 31 Order granted that authority to the Receiver. 18. Initially, the Receiver directed the Clerk of the Court's Financial Supervisor to

withhold delivery of six claimants' checks as a result of their failure to submit the requisite Consent to Consolidation Form(s) to the Receiver. In the weeks since then, four of those six claimants have submitted the requisite documentation and received their distribution checks. Two, however, have still not submitted the requisite documentation, despite repeated requests from the Receiver's staff to do so. Therefore, at the hearing scheduled for October 15, 2007, the Receiver expects to ask the

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Court to authorize reduced payments to those two claimants, if the requisite documentation has not been submitted by that time. 19. It is the Receiver's understanding that the checks made payable to AAA-Auction.com

investors were mailed by the Clerk of the Court on August 9, 2007, and that the mailing of payments to J&K Global investors began on or about Thursday, August 16, 2007, and was completed by Monday, August 20, 2007. 20. As of the date of this report, eight claimants have reported to the Receiver that they

have not yet received their distribution check in the mail. Those eight checks total $13,700. Four of the payees reside in the United States, two in Australia, one in the United Kingdom, and one in Malaysia. Currently, the Receiver is working with the Clerk of the Court's Financial Supervisor to investigate whether those checks have been negotiated and, if not, to provide for their re-issuance. 21. As noted above, at the time of filing the July 27 Status Report and Motion, the

Receiver had not fully completed its review and consideration of several claims. The July 31 Order, therefore, expressly permitted the Receiver to supplement its motion at any time prior to October 15, 2007, in order to seek the Court's order to direct payment of any claim considered or reconsidered by the Receiver after July 27, 2007. 22. On September 7, 2007, the Receiver filed with the Court its Unopposed Motion for

Order Authorizing and Directing Payment of Allowed Claims ("September 7 Motion"), asking the Court to approve the payment of 14 additional allowed claims, totaling $23,625. The Court entered its order that same day authorizing and directing the payment of those additional claims. It is the

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Receiver's understanding that the distribution checks related to those claims were mailed by the Clerk of the Court's Financial Supervisor on or about September 13, 2007. 23. At the time of filing its September 7 Motion, the Receiver had partially disallowed

three other claims and each of those claimants still had the right to seek reconsideration and/or Court review of his/her claim in accordance with the Motion to Establish Procedures. On October 2, 2007, the Receiver filed with the Court its Unopposed Motion for Order Authorizing and Directing Payment of Additional Allowed Claims ("October 2 Motion"), asking the Court to approve payment of those three additional claims, totaling $1,125. The Court entered its order granting that motion on October 3, 2007. 24. In summary, in ruling on the Receiver's July 27 Status Report and Motion, September

7 Motion and October 2 Motion, the Court has authorized and directed the payment of 1,760 allowed claims, totaling $2,149,730. In addition, as discussed more fully below, on September 5, 2007, the Court authorized and directed the payment of $750 each, or a total of $1,500, to Karyn Daniels and Gary Pedler in connection with the dismissal of their Motions for Review by Court. Thus, as of the date of this report, the Court has authorized and directed the payment of 1,762 allowed claims, totaling $2,151,230. 25. As discussed above, eleven checks totaling $6,750 were withheld by the Receiver and

the amount of one check was reduced $750 by the Receiver after its discovery of an additional duplicate claim. In addition, one claim was divided subsequently into four separate checks to facilitate the payment process. Consequently, as of the date of this report, the Clerk of the Court's

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Financial Supervisor has already issued, or will have issued by October 15, 2007, a total of 1,754 distribution checks, totaling $2,143,730. 26. The Receiver would be remiss to not inform the Court of its sincere appreciation for

the cooperation and assistance it has received from the Clerk of the Court's Financial Supervisor and her staff. It is the Receiver's understanding that the number of checks issued in this matter may be the most ever issued directly by her office. In any event, the job performed by her office has been highly professional in all respects.

Receiver's Progress During the Most-Recent Calendar Quarter (Status of Disputed Claims) 27. As noted above, as of July 19, 2007, four Motions for Review By Court had been

filed with the Clerk of the Court. On July 26, 2007, the Receiver filed with the Court its response to each of those motions. A brief summary of the nature and status of each claim is set forth below: a. James Raissis ("Raissis") Claim I. As reported in the July 27 Status Report and Motion, Raissis, who resides in

Australia, claims $100,000.00. According to Raissis, that amount was invested through an intermediary in Canada, James Vint with J. Ventures, Ltd. Documents provided to the Receiver also make reference to a specific bank account at The Hong Kong Shanghai Banking Corp., Ltd. In Hong Kong. Yet, none of these documents makes any reference to J&K Global or AAA-Auction.com. At the same time, records obtained by the SEC indicate that the investment made by Raissis was at most

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$375.00. Therefore, the Receiver has strongly opposed Raissis' Motion For Review By Court. ii. In accordance with the Court's July 31 Order, the Receiver sent a Notice of Hearing to James Raissis on August 21, 2007, informing him of the hearing set by the Court for October 15, 2007, at 2:00 p.m. A Certificate of Service Regarding Notice of Hearing was filed with the Court on August 23, 2007. iii. On August 23, 2007, the Receiver also sent an e-mail to Raissis, attaching a copy of the Certificate of Service Regarding Notice of Hearing. In that email, the Receiver also asked Raissis to provide copies of all documents or other information supporting his motion. iv. Similarly, on September 7, 2007, the Receiver sent a letter to Raissis, reminding him of the October 15 hearing and enclosing copies of all documents previously sent to the Receiver in support of Raissis' claim. In addition, the Receiver asked Raissis to provide copies of any additional documents or other information related to his claim no later than Monday, October 1, 2007. v. As of the date of this report, Raissis has not responded to the Receiver's email and letter requests. Of more interest, however, on September 25, 2007, the Receiver received an e-mail from James Vint, stating that he had lost money with investments in Rishon Bank and/or Hulaman Trust. Mr. Vint also wanted to know whether these investments were in any way related to

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this matter. On October 1, 2007, the Receiver responded to Mr. Vint's email, asking him to contact the Receiver to discuss these issues further. Although Mr. Vint did attempt to call the Receiver on one occasion and left a message with no return telephone number, as of the date of this report, the Receiver has not spoken with Mr. Vint. vi. In response to Mr. Vint's e-mail and telephone message, the Receiver contacted Leslie Hughes at the SEC to ask whether Rishon Bank and/or Hulaman Trust were in any way related to this receivership matter. Ms. Hughes indicated that she was not aware of any such relationship. At the same time, the Receiver has not discovered any reference to Rishon Bank or the Hulaman Trust in the database records obtained by the SEC. Bank records provided to the Receiver do indicate that J&K Global received checks from Rishon Bank totaling $8,434.26 and may have sent a check to Rishon Bank for $1,529.25; however, none of these records makes any reference to Mr. Vint or Raissis. vii. Records obtained by the SEC and provided to the Receiver evidence an investment by Raissis of, at most, $375.00. Therefore, the Receiver

anticipates asking the Court to allow and approve payment of Raissis' claim in the amount of $375.00 at the hearing set for October 15, 2007.

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b.

Karyn Daniels ("Daniels") Claim: I. As reported in the July 27 Status Report and Motion, the Receiver allowed Daniels' claim in the amount of $750.00 and Daniels filed her Motion For Review By Court. The Receiver then filed its Response to Motion For Review By Court Filed by Claimant Karyn Daniels on July 26, 2007. ii. On August 2, 2007, the Receiver sent an e-mail to Daniels, requesting additional documents or other evidence supporting her claim and asking Daniels to call the Receiver to discuss her claim further. Later that afternoon, Daniels responded by e-mail to the Receiver, stating that she had no additional documents and asking the Receiver to "simply cancel my request for a Review." iii. On September 4, 2007, the Receiver filed with the Court a Stipulated Motion for Dismissal With Prejudice of Motion for Review by Court Filed by Claimant Karyn Daniels and Unopposed Motion for Payment of Allowed Claim, asking the Court to dismiss Daniels' Motion for Review by Court and to authorize the payment of $750.00 to Daniels. The Court entered its order, granting the relief requested, on September 5, 2007.

c.

Gary Pedler ("Pedler") Claim: I. Pedler, also a resident of Australia, claimed $1,000.00, even though it appears that he kept no records of his investment. Records obtained by the SEC indicated that Pedler had invested no more than $750.00 in J&K Global. The

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Receiver, therefore, allowed Pedler's claim in the amount of $750.00 and Pedler then filed his Motion for Review by Court. In turn, the Receiver filed its response on July 26, 2007. ii. On August 7, 2007, Pedler sent an e-mail to the Receiver, indicating that he had no additional documentation supporting his claim, accepting the allowed amount of $750.00, and asking the Receiver and the Court to process his payment of $750.00 "expediently." A subsequent e-mail from Pedler on August 14, 2007 reaffirmed that position. iii. On August 29, 2007, the Receiver filed with the Court a Stipulated Motion for Dismissal With Prejudice of Motion for Review by Court Filed by Claimant Gary Pedler and Unopposed Motion for Payment of Allowed Claim, asking the Court to dismiss Pedler's Motion for Review by Court and to authorize the payment of $750.00 to Pedler. The Court entered its order, granting the relief requested, on September 5, 2007. d. Frank L. Miller ("Miller") Claim: I. As reported in the July 27 Status Report and Motion, Miller submitted a claim for $1,200.00, which the Receiver partially allowed in the amount of $750.00. Miller then filed his Motion for Review by Court on or about July 18, 2007. ii. On July 23, 2007, the Receiver contacted Miller by telephone. As a result of information provided to the Receiver during that telephone conversation, the

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Receiver and Miller agreed that his claim should be allowed in the amount of $1,125.00. The July 27 Status Report and Motion, therefore, requested payment of Miller's claim in the amount of $1,125.00. That request was granted by the Court's July 31 Order, and Miller subsequently received a check in that amount. iii. On September 7, 2007, the Receiver filed with the Court a Stipulated Motion for Dismissal With Prejudice of Motion for Review by Court Filed by Claimant Frank L. Miller, which was granted by the Court's order on September 7, 2007. 28. Based on all of the above, only the Raissis Claim remains for the Court's

consideration at the hearing scheduled for the afternoon of October 15, 2007. 29. The Court's December 6, 2006 order established midnight March 12, 2007 ("Claims

Bar Date"), as the deadline for the Receiver to have received timely-filed claims from investors in J&K Global and AAA-Auction.com. Nevertheless, as indicated above, the Receiver continued to receive, review and consider claims submitted after the Claims Bar Date, while still recognizing their "subordinate" position, based on the Receiver's expectation that the total amount of claims allowed, including late-filed claims, would not exceed the amount of funds held in the registry of the Court. 30. While the Receiver's consideration of such late-filed claims did not significantly

delay or otherwise have any negative effect on the receivership estate or other claimants, the Receiver also has recognized the need to bring finality to the claims administration process. Therefore, the July 27 Status Report and Motion requested that the Court expressly grant to the

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Receiver the absolute discretion to determine the date after which no new or supplemental claim would be considered. The July 31 Order granted that discretion to the Receiver and the Receiver subsequently determined that it would not consider, or reconsider, any new or supplemental claim after August 10, 2007. 31. After distribution checks were mailed to and received by claimants, the Receiver was

contacted by a number of individuals, asking that they still be allowed to submit a claim at this late date. As discussed more fully below, these individuals have provided to the Receiver a number of reasons as to why their late claims should still be considered. 32. In any event, one of the individuals who contacted the Receiver after August 10, 2007

is Robert Lee Pillow, III ("Pillow"), who appears to have contacted the Receiver for the first time on or about September 21, 2007. That same day, Pillow apparently prepared a Motion For Review By Court, which was filed with the Court on September 24, 2007. 33. On October 4, 2007, the Receiver filed with the Court its Response to Motion for

Review by Court filed by Robert Lee Pillow, III ("Response"). As set forth more fully in the Response, Pillow and/or his wife were sent e-mail notification of this receivership matter on at least six occasions, and at least three of those e-mails were opened. In addition, notice of this receivership was mailed to their current postal address on or about June 9, 2006. 34. Despite these efforts by the Receiver to contact them, neither Pillow nor his wife

registered at the Receiver's website. Nevertheless, a Proof of Claim Form was e-mailed to Katrina Pillow at [email protected] on January 31, February 6 and February 15, 2007. Records

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maintained by the Receiver also indicate that the February 15, 2007 e-mail was opened on February 17, 2007 at 9:51 p.m. 35. As of the date of this response, Pillow has not submitted a Proof of Claim Form to

the Receiver. In accordance with Paragraphs 50-53 of the Motion to Establish Procedures, approved by the Court's December 6, 2006 order, a claimant may seek Court review of the disallowance of all or part of his/her claim after (1) a Proof of Claim Form has been submitted to the Receiver; (2) a Determination Notice disallowing all or part of his/her claim has been sent by the Receiver to the claimant; (3) the claimant requests reconsideration of his/her claim; and, (4) the Receiver, after reconsidering the claim, issues a Final Determination Notice continuing to disallow all or part of the claim. Pillow filed his Motion For Review By Court without complying with these procedural requirements. 36. As set forth in the Response, it is the Receiver's position that Pillow should not obtain

rights greater than those similarly situated, who have followed the procedures approved by the Court. Therefore, the Receiver has asked the Court to deny Pillow's Motion For Review By Court, and to treat his "claim" in the same manner as all others similarly situated.. 37. In summary, the Receiver anticipates that the Court will consider only the Motion For

Review By Court filed by Raissis at the hearing set for the afternoon of October 15, 2007. The Receiver has already reached a mutually satisfactory resolution with Daniels, Pedler and Miller regarding their claims. And, for reasons discussed above, Pillow's Motion For Review By Court should be denied.

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38.

With respect to the upcoming hearing on Raissis' Claim, the Receiver's legal counsel

will be prepared to provide an offer of proof and/or present testimony to the Court showing the complete absence of any documentation or other information evidencing an investment of more than $375 by Raissis in J&K Global. Also, it should be noted that in his July 6, 2007 cover letter to the Court, Raissis stated that he would not be able to appear before the Court. Moreover, as noted above, Raissis has not responded to either the Receiver's recent e-mail or written correspondence seeking evidence of his claim. Therefore, as of the date of this report, it appears unlikely that Raissis will appear and present evidence to the Court at the October 15 hearing.

Status of Claims Process at September 30, 2007 39. As described in detail above, at September 30, 2007, the Court had approved the

payment of 1,759 (1,743 + 14 + 2) allowed claims, totaling $2,148,605 ($2,124,980 + $23,625 + $1,500). Three days later, on October 3, 2007, the Court approved the payment of 3 additional claims totaling $1,125. Therefore, as of the date of this report, the Court has approved the payment of 1,762 claims, totaling $2,151,230. Except as otherwise discussed in Paragraph 40 below, the Clerk of the Court's Financial Supervisor has now prepared, issued and mailed all of those checks to J&K Global and AAA-Auction.com investors residing in the United States and 29 foreign countries. 40. Nevertheless, for reasons discussed more fully above, the Receiver withheld the

delivery of eleven checks, totaling $6,750, and reduced one check by $750 after discovering that such payments would have resulted in the payment of duplicate claims. In addition, as discussed in Paragraphs 17 and 18 above, the Receiver has withheld delivery of two checks awaiting Consent to -18-

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Consolidation Form(s) from the claimants. And, as noted above, one claim approved by the Court was divided into four checks to facilitate the payment process. Thus, as of the date of this report, the Clerk of the Court's Financial Supervisor has prepared, issued and mailed 1,752 checks, totaling $2,141,105. At the same time, 2 checks totaling $2,625 are being held by the Clerk of the Court's Financial Supervisor, awaiting further direction from the Receiver and/or the Court. 41. As discussed in Paragraphs 29-31 above, the Receiver determined that August 10,

2007 would be the date after which the Receiver would no longer consider any new or supplemental claim. Since that date, however, the Receiver has been contacted by approximately 50 individuals, asking that they still be allowed to submit a claim. In some instances, these "claimants" allege that they had no prior notice of this receivership matter. Others readily admit to being aware of this matter, but claim that they were not told, or did not understand, that they were required to submit a Proof of Claim Form to the Receiver. Still others readily acknowledge that they understood the procedures but did not submit a Proof of Claim Form, for whatever reason, and now want to do so. It is the Receiver's understanding that, in virtually all cases, the receipt of a distribution check by a friend, co-worker or family member in late August or early September triggered the communication to the Receiver. 42. Given (1) the number of post-August 10 "claims" received by the Receiver; (2) the

length of time that passed between the date on which these individuals invested and when a receiver was appointed in this matter; (3) the quality of the data upon which the Receiver had to rely in notifying potential claimants and validating claims; (4) the nature of these investments and the manner in which investors invested on behalf of others; and, (5) the dollar amount of funds still

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remaining in the registry of the Court after payment of all allowed claims (discussed below), the Receiver believes that the equities here may weigh in favor of considering these "claims," notwithstanding the Receiver's previous determination of August 10, 2007 as the last date for the consideration of claims. 43. The Receiver anticipates presenting to the Court at the October 15 hearing its decision

regarding these "claims" and the dollar amount to be allowed by the Receiver. Because these "claims" were presented to the Receiver after August 10 and outside the claim procedures established by the Court's previous orders, the Receiver will request that they be allowed outside the established claim procedures and in the amount determined by the Receiver, and also that there be no further consideration or review of these claims by the Receiver or the Court. 44. During the period covered by this quarterly report, the Receiver was contacted on a

number of occasions by the Federal Public Defender's Office, regarding the status and progress of this receivership matter. It is the Receiver's understanding that, in connection with the criminal action brought against him, Defendant Weare was ordered to pay $1,199,355 in criminal restitution to 645 specifically-identified investors in J&K Global and/or AAA-Auction.com. Thus, as an initial matter, the Federal Public Defender's Office has wanted to know the amount, if any, paid to each of those 645 investors in this receivership matter. It is also the Receiver's understanding that Judge Nottingham entered an order staying the collection of criminal restitution from Defendant Weare, pending a determination as to the amount of funds to be paid to investors through this receivership matter. The Receiver has also discussed these issues with a representative of the U.S. Attorney's Office and Leslie Hughes, counsel for the SEC.

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45.

It is the Receiver's understanding that, as of October 10, 2007, there was

$1,537,680.35 of principal and $23,762.58 of interest, or a total of $1,561,442.93, being held in the registry of the Court under this case name and number, after the payment of all allowed claims, discussed above. 46. Within the next few days, the Receiver intends to file with the Court its Eighth

Application for Fees and Expenses, seeking the Court's approval for the payment of approximately $46,000 for professional fees and out-of-pocket expenses incurred during the period July 1, 2007 through September 30, 2007. Except for the Receiver's and the Tax Administrator's fees to perform their remaining duties with respect to this receivership matter, the Receiver is not aware of any material amounts remaining to be paid from the receivership estate. Therefore, the Receiver fully expects Defendant Weare's criminal attorneys to request, at some future date, that the funds remaining in the registry of the Court be used to satisfy Defendant Weare's obligations to pay criminal restitution. It should be noted that, currently, there are sufficient funds in the registry of the Court to pay Defendant Weare's entire criminal restitution obligation and still have monies remaining. 47. During the course of this receivership, the Receiver also heard from a number of

claimants voicing their view that "interest" should be paid on their claims. In addition, one European investor suggested that foreign investors should receive an additional amount due to the substantial decline in the U.S. dollar during the six and one-half years since the SEC first brought this civil action. It is the Receiver's opinion that additional payments of "interest" on allowed claims

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should not be made here because such payments would, in all likelihood, increase the costs, duration and income tax reporting obligations of this receivership estate. 48. At the hearing on October 15, the Receiver will also be prepared to address the final

administrative matters related to this receivership, so that the Receiver may be discharged from its duties upon completion of those matters. WHEREFORE, the Receiver respectfully submits this quarterly report this 11th day of October, 2007.

s/ Leslie A. Patten Leslie A. Patten, President Patten, MacPhee & Associates, Inc. 1775 Sherman Street, Suite 2900 Denver, Colorado 80203 Telephone: (303) 296-2900 Fax: (303) 296-4475 E-mail: [email protected]

DATED this 11th day of October, 2007.

s/ Michael D. Burns Michael D. Burns, #11631 1775 Sherman Street, Suite 2900 Denver, Colorado 80203 Telephone: (303) 296-2900 FAX: (303) 296-4475 E-mail: [email protected] Attorney for Receiver

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CERTIFICATE OF SERVICE I hereby certify that on October 11, 2007, I electronically filed the foregoing RECEIVER'S EIGHTH QUARTERLY REPORT FOR THE QUARTER ENDED SEPTEMBER 30, 2007 with the Clerk of the Court using the CM/ECF system, which will send notification of such filing to the following e-mail addresses:

Leslie J. Hughes [email protected] Christine J. Jobin [email protected] Thomas J. Krysa [email protected],[email protected] and I certify that I have caused to be mailed a copy of the foregoing to the following non-CM/ECF participants via U.S. mail, postage prepaid: James Raissis Raissis Solicitors Suite 502, 3 Waverly Street Bondi Junction, NSW 2022 AUSTRALIA Robert Lee Pillow, III 19139 Babrof Drive Eagle River, AK 99577-8677

s/ Michael D. Burns Michael D. Burns, #11631 Attorney for Receiver 1775 Sherman Street, Suite 2900 Denver, Colorado 80203 Telephone: (303) 296-2900 FAX: (303) 296-4475 E-mail: [email protected]