EDITORIAL: Stepfords At The Gate: Zeek Trots Out ‘Social Security’ Argument In Preemptive Pyramid Scheme Denial; MLM ‘Program’ Married To Penny-Auction Site Makes Its Bizarre Case With Exclamation Points

Zeekler, an arm of a U.S. company, frequently promotes auctions for sums of U.S. cash. Winning bidders can collect the sums via offshore payment processors linked to fraud scheme after fraud scheme. Zeek is adding to the incongruity by preemptively denying it is a "pyramid scheme" while planting the seed that the U.S. government is operating a pyramid scheme through the Social Security program.

UPDATED 11:12 A.M. EDT (U.S.A.) After the U.S. Secret Service seized tens of millions of dollars in the AdSurfDaily Ponzi case in 2008, some of ASD’s Stepfordian members advanced the bizarre theory that ASD should have been left untouched because Social Security — a U.S. government program — is a Ponzi scheme. The argument, which assumes Social Security is a Ponzi scheme, is disingenuous to its core. Even if it could be proven that Social Security is a Ponzi, it does not change the simple fact that private businesses are not permitted to operate Ponzi schemes.

With the Social Security argument providing disingenuous cover for ASD and scams across the web, some of ASD’s most reliable “defenders” instantly turned their attentions to other autosurfs, HYIPs, cyclers and cash-gifting schemes. They might as well have said, “If the government gets to run a Ponzi scheme, so do we.”

The Social Security argument is a deflection that gets trotted out in scam after scam. It is used so often in scams that feature an MLM or MLM-like component that it has become a cliché, a veritable signature of a scam. Some of the most robotic MLM Stepfordians can’t resist the urge to go heavy on the exclamation points when they’re “defending” the most recent “program” in their stable of scams. Many of the “defenses” are nothing more than antigovernment screeds.

Even ASD President Andy Bowdoin — who after preemptive denials now admits he was operating a massive Ponzi scheme and knew all along that ASD was “an illegal money making business” — could not summon the discipline required to put an end to his scamming ways and days after his arrest. The government now says it has tied Bowdoin to AdViewGlobal (AVG), an autosurf that launched after the Secret Service raid, and to “OneX,” an alleged “fraudulent scheme” and pyramid.”

After the ASD raid, Bowdoin embarked on a PR strategy that positioned the government as evil. The government, according to Bowdoin, was guilty of “wrong doing,” creating a “nightmare of injustices,” bringing “un-true charges” and the “suppression of all ASD members.”

Like the Social Security argument, it was just a way to change the subject.

It has become somewhat fashionable within the HYIP sphere for “program” operators to preemptively deny they are running Ponzi schemes. The up-front denials were an element in the ASD case. They are incongruous by their very nature because they typically occur even as the “program” plants the seed that it not only pays commissions on two or more levels, but also provides outsize returns of 1 percent or more per day — percentages that would make Bernard Madoff blush.

“Zeek Rewards” is an MLM “program” that is planting an ASD-like seed that money directed to the enterprise will produce a large return.

Given the lessons provided by the ASD case on both the legal and PR fronts, it is just plain bizarre that Zeek is preemptively denying it is a “pyramid scheme” — all while going heavy on the exclamation points and raising the issue of Social Security.

On its Zeekler.com penny-auction site, the “opportunity” is saying this (italics/bolding added):

Our parent company Rex Venture Group has been in business 13 years and has historically paid its representatives in the field every commission check earned since its’ [sic] inception. “Is this a Pyramid Scheme?” Of course not!! “Pyramids” or “Money Games” are illegal and ask its’ [sic] participants to wrap money in tin foil and FedEx it to “someone else” with no exchange for product or service!

For good measure, the site is saying this (italics/bolding added):

The pyramidal structure is actually the “model” structure of every corporation and even the U.S. Social Security system. Why then are pyramids illegal? Because there is no “exchange” of product or service for the money spent and the only ones who “collect” money are the people at the top of the pyramid. When there are no longer enough people coming and sending money “up” to move people thru the pyramid – the pyramid collapses. An example of a legal – yet collapsing pyramidal structure/system is what is happening to social security. The baby boomers are all coming of age to collect (at the top of the pyramid)- with not enough people paying in from the bottom!! The structure will then collapse. Every CEO is at the top of his/her company’s pyramidal structure. That’s why he/she makes so much more than a mailroom worker. At penny auction site Zeekler every person has the same opportunity to achieve the same income or out-earn the person who referred them into the program.

Whether Rex Venture Group historically has paid commissions is immaterial to the issue of whether the company is conducting a pyramid scheme through its Zeek arms. Like successful Ponzis, successful pyramid schemes pay. The payments are what keep new money flowing to the schemes. Web-based Ponzis/pyramids can be exceptionally dangerous because affiliates use the payments they receive as a disingenuous form of social proof that no scam is under way.

Zeek’s “tin foil” reference is an apparent allusion to obvious cash-gifting scams. But lawyered-up Zeek has to know that the pyramid issue is much more complicated that that, which is why the gifting allusion impresses us as a red herring.  Ponzi/pyramid schemes come in many forms and often involve the issuance and sale of securities. Fraud purveyors may avoid the use of the language of investments, but a security described as something else is still a security.

And that’s one of the potential issues with Zeek: Is the company selling unregistered securities as investment contracts and trying to disclaim its way out of an encounter with regulators?

Zeek does not address this issue in its preemptive denial that it is operating a pyramid scheme and simultaneous argument that Social Security is a pyramid scheme. But it does touch on the securities issue at the bottom of the home page of ZeekRewards, the MLM arm of the Zeek “program” (italics added):

IMPORTANT: The following paragraph MUST BE READ ALOUD whenever the ZeekRewards compensation plan is presented verbally or by telephone, or included in it’s entirety when communicating in writing:

“If you make a purchase from ZeekRewards you are purchasing a Premium eCommerce subscription or you are purchasing bids to give away as samples. You are NOT purchasing stock or any other form of “investment” or equity. You MUST actually use the bids that you purchase or give them away as samples to help grow your business. Affiliates who present our products to others in a misleading manner or in a way that leads the buyer to believe he or she is making an investment or purchasing equities will be terminated and all commissions and awards will be forfeited. Buyers MUST read the entire How It Works and Get Paid pages on the ZeekRewards website and the Legal Disclaimers.”

At a minimum, this much can be said about Zeek: It has a tin ear for PR.

Zeek is preemptively denying it is a pyramid scheme even as its affiliates maintain a presence on well-known fraud forums such as TalkGold and MoneyMakerGroup, a circumstance that strongly suggests scammers are directing money to Zeek that they “earned” in other scams. The Social Security argument also is a loser because it is embraced by a sea of online scammers as a rationale for licensing themselves to commit crimes on a global scale.

ASD preemptively denied it was a Ponzi scheme. Its Stepfordian affiliates advanced the Social Security deflection even as they were racing to their next scams and positioning them as a way ASD members could make up their losses.

Almost all of the scams used the same offshore processors Zeek is using.

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12 Responses to “EDITORIAL: Stepfords At The Gate: Zeek Trots Out ‘Social Security’ Argument In Preemptive Pyramid Scheme Denial; MLM ‘Program’ Married To Penny-Auction Site Makes Its Bizarre Case With Exclamation Points”

  1. According to this posting http://zeekrewardsnews.com/2012/02/goodbye-5cc-hello-prc/

    Zeekrewards says that they are illegal.

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  2. I still think that Zeek’s legal problems are going to be related to gambling. When you’reflat out auctioning off cash, and the amount of cash “won”in irrelevant to the price “paid”, that’s a problem. The “prize” is funded not by the winning bid, but by the losing bids. How is that not just a high tech version of playing the numbers in Meyer Lansky era New York?

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  3. Gregg: I still think that Zeek’s legal problems are going to be related to gambling. When you’reflat out auctioning off cash, and the amount of cash “won”in irrelevant to the price “paid”, that’s a problem. The “prize” is funded not by the winning bid, but by the losing bids. How is that not just a high tech version of playing the numbers in Meyer Lansky era New York?

    I do think this could be an issue. But I wouldn’t rule out securities being an issue, too. What Zeek is doing is reminiscent of what ASD was doing.

    I’ve seen an ad from a Zeek affiliate who is a well-known figure in the ASD story. The ad talks about Zeek “compounding.”

    The headline is “I earn 1% + a day on my $ and you can too!!”

    Here’s my question: “Why WOULDN’T the government look at Zeek as an investment program when the ad uses copy such as that?”

    Patrick

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  4. If it’s just the numpties at talkgold & MMG funding these obvious ponzi schemes, that’s one thing. This is something else:
    http://www.scambook.com/report/view/116530/Rex-Venture-Group-LLC-False-Advertising-for-170.74-on-05-21-2012

    This reminds me of that scam artist who committed suicide last year to avoid facing prosecution for the same exact thing…placing tiny ads in newspapers all over the country…where he conned the government of millions of dollars and showed others how to do the same thing. I almost got rooked by him…and now I’m being rooked by this company.

    This person could be roping in anyone daft/greedy/desperate enough. I wonder what wording this person’s adverts have.

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  5. Tony H: If it’s just the numpties at talkgold & MMG funding these obvious ponzi schemes, that’s one thing. This is something else:
    http://www.scambook.com/report/view/116530/Rex-Venture-Group-LLC-False-Advertising-for-170.74-on-05-21-2012
    This person could be roping in anyone daft/greedy/desperate enough. I wonder what wording this person’s adverts have.

    I looked a little down the rabbit hole last night on this. There is some excellent coverage of it at behind MLM http://behindmlm.com/category/companies/zeek-rewards/

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  6. Been discussing ZeekRewards for a while on Behindmlm.com myself.

    The problem with ZeekRewards is it looks like a Ponzi scheme, not a pyramid scheme, though it has SOME of those elements as well.

    Basically, the way the system works, the members are essentially paying themselves THROUGH ZeekRewards. Follow the money trail:

    ZR affiliates buys bids (thus generate majority of profit)
    Bids are “given away” to new members
    ZR then rewards every bid given away with VIP Profit points
    The affiliates then gets a share of “daily profit” based on amount of VIP Profit points they have (which expires after 90 days)
    The daily profit can be cashed, or use for MORE purchase of bids (go back to step 1) or in any proportion the affiliate desires (most do 80/20, 80% repurchase, 20% cash out)

    So in effect, the affiliates are paying themselves, as they are buying the bids which generates the profits they are “sharing”. As long as ZR can recruit more members or get the members to buy more bids to give away, it will continue to generate record “profits” to be shared. Thus, it is a potential Ponzi scheme.

    Denying they are a pyramid scheme, which it may be factually accurate, is irrelevant. It’d be a murderer stating “I stabbed no one” when the suspect weapon is a gun.

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  7. Incidentally, this is a variant of the “Tu Quoque” fallacy, I termed “so is everything else” defense

    http://amlmskeptic.blogspot.com/2012/05/so-is-everything-else-variant-of-tu.html

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  8. I wouldn’t mind betting, just like AdSurf Daily, NONE of it is true.

    It’s a characteristic of ponzi schemes that there’s always a backstory to mask the reality.

    Substitute “adpacks” for “bids”, “surfing” for “give away” and spin the spin and there’s little or no difference.

    Which is why, if and when prosecution comes, the charges are not “running a ponzi” but fraud, wirefraud, money laundering and conspiracy.

    IM(very)HO, there’s very little point debating whether or not this particular fraud is HYIP/ponzi/half ponzi, MLM or advertising.

    ANYTHING offering an ongoing interest rate in the region of 1% or 2% is a fraud.

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  9. It’s also very interesting they managed to reduce payout by implementing this “90-day expiration of points”. This effectively cut their payout by 3/4 or 4/5. Instead of actual payout of 1.4% it’s closer to 0.4% as everybody want to keep their VIP point count up. It’s a very cleverly worded / circumspect version of “required reinvestment”.

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  10. It seems to be yet another instance of a fraudulent scheme trying to make its compensation plan (or earnings scheme or whatever they want to call it) so complicated that people get lost in figuring it out, and thus distracting them from the fact that it is nothing but more of the same old same old.

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