Zeek, The ‘I’ Word And The Weight Of History . . .

UPDATED 6:36 P.M. EDT (U.S.A.) To hear some folks in HYIP Ponzi Land tell it, “opportunities” can avoid the long arm of the law by preemptively prohibiting affiliates from using certain words — “investment” and “security,” for two examples. Regardless, court records show that hucksters who played linguistic games to mask their fraud schemes confronted investigators who neatly exposed their wink-nod wordplay.

The following is from a transcript of a May 2007 U.S. Secret Service recording in which undercover agents posing as prospects were talking to Gregory McKnight of Legisi inside Legisi’s office in Michigan. McKnight and Legisi later were implicated in a $72 million Ponzi scheme that in part was promoted on the MoneyMakerGroup forum:

McKnight: ” . . . it is not an investment.”

Agent 1: “Okay.”

McKnight: “I hope you have any idea — if you have any inkling of an idea that it is an investment, then you should really . . .”

Agent 1: “I’m sorry.”

McKnight: “This is a loan to my corporation.”

Agent 1: “Okay.”

“Agent 2: “What’s the difference?”

McKnight: “The difference is — if I am selling investments and I am not registered with the SEC, I am going to prison.”

Agent 2: “Oh.”

Outcome: McKnight, adjudicated liable civilly in a case brought by the SEC and ordered to pay millions of dollars in restitution and penalties, is scheduled to be sentenced on a criminal charge of wire fraud on Sept. 11. The U.S. Secret Service brought the criminal case.

The following is from Paragraph 43 of the August 2008 complaint for forfeiture that targeted tens of millions of dollars in bank accounts tied to the AdSurfDaily Ponzi scheme, which gathered at least $110 million. ASD also was promoted on the Ponzi boards (italics added):

“The [undercover agent] asked her about investing with ASD. She immediately said, ‘Don’t call it investing, you know what I mean, we can get in trouble if we say that, we have to be careful.”

Outcome: A federal judge ordered the civil forfeiture of more than $80 million, including the forfeiture of more than $65.8 million in ASD President Andy Bowdoin’s personal bank accounts and more than $14 million in bank accounts linked to Golden Panda Ad Builder, another autosurf. The U.S. Secret Service brought the civil case.

The following is from the November 2010 criminal indictment against Bowdoin. The prosecution quoted from an email from Bowdoin in which the ASD patriarch himself laid out the wink-nod nature of the 1-percent-a-day ASD program and explained his bid to skirt securities laws by coming up with naming conventions to keep the government at bay (italics added):

“[L]et’s don’t (sic) use the words investment and returns. Instead, lets (sic) use ad sales and surfing commissions. The Attorney Generals in the U.S. don’t like for us to use these words in our program.”

Outcome: Bowdoin, currently jailed amid allegations he pushed other fraud schemes after the seizure and after his arrest and posting of bond, is scheduled to be sentenced on a criminal charge of wire fraud on Aug. 29. The criminal charge was brought after an investigation by the U.S. Secret Service.

And what about AdViewGlobal (AVG), the alleged 1-percent-a-day knockoff of ASD that prosecutors now say they’ve linked to Bowdoin? From the PP Blog’s April 27, 2009, report about the AVG forum warning members not to call AVG an investment program (italics added):

A Mod at an AdViewGlobal forum set up by Mods and members of AdSurfDaily has warned AVG members not to refer to their purchases as “investments.”

Rather, the Mod said, AVG members purchase “advertising” and are not “investing” or “investors.”

Posts that used the terminology of investments would be deleted, the Mod warned.

AVG members currently are stressing a so-called “80-20? strategy as a means of keeping the program viable for the long-term.

Analysts, however, point out that the “80-20? plans — taking out 20 percent in cash and letting 80 percent ride with the companies — are just another way to keep cash within ready reach of autosurf Ponzi schemes to sustain the deception.

There is not a single, documented case in the history of autosurf prosecutions in which the use of the word “advertising” to describe what the government views as an “investment” program involving the sale of unregistered securities has succeeded as a means of fending off a prosecution.

In other words, the government has made it plain that you can’t avoid prosecution by using other terminology to describe an investment program.

Regardless, many surf companies continue to insist that the use of the word “advertising” as a replacment for “investing” somehow insulates surfs from prosecution.

Outcome: Unknown. The AVG forum mysteriously disappeared, as did AVG itself. In April 2012, federal prosecutors announced in court filings that they’d linked Bowdoin to AVG.

Virtually all of the material quoted above has been a matter of record for at least three years. In the case of Legisi, it has been a matter of record for more than four years.

Wordplay, though, still is in play among “programs” that purport to pay members outsized percentages that correspond to annualized returns in the hundreds of percent per year. In the past 24 hours on the MoneyMakerGroup forum, for example, these posts (below) appeared in the context of the Zeek Rewards “program.” The first post used the word “investment.” Perhaps ignorant of history (or maybe not), the poster quickly followed up in the second post by saying the use of “investment” was a mistake and that what really was meant was that he or she had purchased “Bids.”

It was hard not to hear the echoes of ASD and AVG members doing largely the same thing summers ago, sometimes after being scolded by the purported forum masters.

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28 Responses to “Zeek, The ‘I’ Word And The Weight Of History . . .”

  1. Yep, they can’t use the word “investment” when posting on the financial forums, but then they talk about their “ROI” they receive from Zeek.

    What is truly sad is those who are winning the auctions can’t even receive what they won, and distributors have not been paid since early July.

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  2. Also do not forget that Zeek Rewards started out as a blatant HYIP (Ponzi + unregistered investment). Even if Zeek somehow has invented a new business model that is legal, do they get a pass on the first 1.5 years as a HYIP?

    If Zeek does get a pass, what would stop JBP, or any other HYIP/Ponzi, from o simply changing their business model NOW (1-2 years later after they’ve already built a large membership) and then when the regulators come knocking, they can say they changed their business model?

    Another angle that may be worth exploring is looking at the number of full time employees and employees who handle sales, marketing, customer support, developers on staff, etc. The successful MLM’s grew these portions of their operations as the business revenue grew. Take any MLM such as Monavie as an example. Even some of the questionable MLM’s (as far as test for internal consumption/pyramid goes) saw a proportional increase in staffing and operations relative to new revenue/affiliates.

    HYIP’s and Ponzi schemes, however, resist hiring more staff for many reasons: they are running a business model that losses money, and the more employees you hire the more potential witnesses to the fraud that exist.

    This may be worth charting if you have the raw data and you can show how Zeek Rewards is not growing their operations, and that is yet another warning indicator.

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  3. Yep, they can’t use the word “investment” when posting on the financial forums, but then they talk about their “ROI” they receive from Zeek.

    There was a video Oz posted that had a guy constantly tripping up saying “Investment”. Even if you ignore all of the slip ups, there are lots of related words that people use that are semantically linked to “investment”.

    What is truly sad is those who are winning the auctions can’t even receive what they won, and distributors have not been paid since early July.

    As some others have suggested, I don’t think this is the initial stages of Zeek collapse, yet. While there are reports of some members not getting paid, and some problems of receiving won items from the auction, the problems seem sporadic and the dollar amounts are relatively small. It is unlikely that Zeek is paying millions and would screw a few hundred members for amounts in the few hundred or less each.

    My assessment on this, which I’ve seen many others agree, is that Zeek’s poor business execution has the same symptoms as a typical HYIP having problems, but they aren’t at that point YET.

    It is worthy to note this distinction of poor execution vs. indicators of imminent collapse because as critics of the business model, we can be seen of “crying wolf” when we predict doom and it was just sloppy business operations that was the root cause.

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  4. Okay guys, looks like Zeek wants to play hardball.

    Just got word that my Hubpages.com hub about Zeek was taken down pending some sort of LEGAL complaint, who demanded that I release my real identity so the complainant can talk to me directly.

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  5. It would be surprising if Hubpages actually gave up your identity. That would open them up to more liability as they are already protected as a service provider via the DMCA. If Hubpages, or any content aggregation/platform, willingly gives up your personal information, it would open Hubpages up to liability when any investigative stalker asks for identifying information of all their users. Just imagine the high number of requests they would get. Or what Google would have to deal with for every gmail account. There have been many cases where the content providers defeated subpoenas attempting to gain identifiable user information. This is assuming Zeek is even going to file a subpoena; more likely they just sent a DCMA takeddown notice and/or a rude letter trying to strongarm Hubpages. A smaller site like an article director may captiulate, but would be very surprising if Hubpages does.

    On the legal side, here is an interesting article:

    Californians who get sued over something they’ve posted online are protected by a state anti-SLAPP law (Strategic Lawsuits Against Public Participation). While the law does not permit libel, it does protect people who speak out on matters of public interest, including protection of consumers, said Mark Goldowitz, an attorney who founded the California anti-SLAPP Project in Berkeley.

    The above is from 2009 and there has been even more movement in defense of first amendment rights related to blogging, reviews, and journalism: http://www.sfgate.com/news/article/Web-2-0-defamation-lawsuits-multiply-3251711.php

    Also, note that the content on your hub that Zeek would claim is copyrighted would all fall under fair use.

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  6. K. Chang: Okay guys, looks like Zeek wants to play hardball.

    Hmmnn,

    I can see the headlines now………………

    If it’s international exposure Zeek Rewards wants, they’re certainly going about it the right way.

    Damn, it’s tempting.

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  7. Hello K- Chang,

    Here’s hoping you are OK.

    If it proves to be Zeek, it easily could backfire.

    I’ve begun to notice that YouTube has removed some Zeek-related videos, citing a copyright claim by USHBB Inc.

    At the moment, one such removed video with the claim on the screen is here:

    http://all-marketing-videos.com/?p=26978

    I suggest you read the comments thread below the video.

    Please keep me posted as events unfold on your end.

    Patrick

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  8. Mitch McDeere: It would be surprising if Hubpages actually gave up your identity.

    That would depend on how ponzi-friendly Hubpages are. A quick search on google shows up several pages that are promoting zeekrewards. At least one is using the “i” word. These pages may be against Hubpages terms & conditions – it may be interesting to find out what action Hubpages takes against pages promoting obvious ponzi schemes.

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  9. Tony H: That would depend on how ponzi-friendly Hubpages are. A quick search on google shows up several pages that are promoting zeekrewards. At least one is using the “i” word.

    Thanks for this, Tony. I noticed a Zeek-related promo on Hubpages that used the exact, two-word word phrase a California scammer implicated in multiple Ponzi schemes used to describe her purported financial “specialty.”

    The Zeek promoter is not the same woman, but that word combo is positively nuclear.

    The other woman is most infamous for her role in the Black Diamond Ponzi scheme in NORTH CAROLINA, Zeek’s home state.

    Here is what ultimately happened to the bank the principal defendant in the Black Diamond caper used:

    http://patrickpretty.com/2011/04/27/urgent-bulletin-moving-keith-simmons-forex-ponzi-caper-leads-to-criminal-charges-and-deferred-prosecution-against-north-carolina-bank-communityone-bank-charged-with-not-maintaining-effective/

    Patrick

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  10. I think that’s great news Kchang. You might be the one who can really shine the legal spotlight on Zeek. They’d have to do an investigation on what you’re saying to substantiate their claims agains you.

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  11. To be clear, Hubpages is not giving up my ID. However they want me to give them contact info that will be forwarded to this “unknown” third party so they can contact me directly.

    In the meanwhile my hub is offline. I’ve forwarded the content to Eagle so the content shall stay up somewhere in the meanwhile.

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  12. Interesting.

    Have you asked or are they unwilling to provide you with this third party’s contact info?

    Or to provide a copy of whatever they received requesting it.

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  13. Got some answers, only raises more questions.

    FROM: Robert Craddock

    TO:

    I’m following up about the content you published on HubPages, regarding Zeek Rewards and companies connected with or believed to be connected with.

    If you would respond with a number so I can discuss this matter with you

    Sincerely

    Robert Craddock
    Rex Venture Group LLC

    Can find no info on Robert Craddock, or the email address he used, which is a gmail address, NOT any of the RVG domains.

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  14. Mystery somewhat revealed: Hubpages forwarded me the complaint:

    https://anonfiles.com/file/ff8995fb30a4a34d065c057dbaa8f02c

    They claim any mention of ZeekRewards, Zeekler, Shopping Daisy is “copyrighted” and any mention of them is a copyright violation.

    They claim I have mistakes in my hub but didn’t offer corrections.

    They claim that their own typo that resulted in 8.9% instead of 0.89% RPP, which I reported as an INVENTION and manually entered, (first appeared on BehindMLM) is libelous and tortuous.

    Absolutely hilarious, IMHO.

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  15. There is a “Robert Craddock” on LinkedLn who claims to be a “rep” for Zeek Rewards. He also claims to be a “rep” for another company (FHTM) which seems to have been hit with a class action suit a few years ago. It isn’t too hard to find his twitter account.

    If ZeekRewards etc is copyrighted, surely Hubpages will be removing the other pages that use the same terms? The ones that are promoting this obvious ponzi scheme?

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  16. As things stand, this this shaping up as one of those mind-boggling MLM stories.

    More later . . .

    Patrick

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  17. Except this Robert Craddock claims to consultant for Rex Venture Group.

    I can understand that I’m not listed in the RVG pages, but I’m a consultant for Zeek and I’m the person that contacted Hub Pages. As I stated, I would welcome the opportunity to discuss the impact your posting has generated. As you are aware of, the posting is quite large and will take some time to go over the entire site but, if needed, I will start now and let you know in detail all our concerns. I do not expect to have it completed by Monday as Kevin Grimes, RVG corporate attorney will also want to weigh in on this discussion if that is what it takes to keep your posting from being re-published on Hub Pages or anywhere else, as we believe and know this story contains false information and is disruptive to our affiliates.

    if you desire is to post a story about Zeek I’m willing to go over it with you or I can just make notes that are of concern on your posting, as I saved it in a PDF and get it back to you. This way everyone should be happy, but again that will take longer than just this weekend.

    Please let me know how you would like to proceed as of now, this was a friendly request and no future action was planned.

    Robert Craddock

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  18. Plot deepens.

    The email was sent from Herndon, Virginia, not North Carolina where Zeek is.

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  19. @K.Chang

    Hilarious, but you’ll have to take it serious, anyway.

    As far as I remember, the 125% guaranteed ROI was changed to 90 day ROI in August 2011, not in February 2012.

    In the long term perspective, you should have some defensive strategies implemented in your own work. I use lots of defensive strategies on the different websites I’m visiting. But people are often more interested in offensive strategies than defensive ones.

    As a short term solution, check the facts and link to sources. You don’t know whether the daily profit share is calculated or invented, so you shouldn’t claim it is invented either. You can ASK critical questions about it, but you can’t make a solid statement about it being invented.

    The copyright part is bullshit. Copyrights and trademarks aren’t meant as a solution to prevent all kinds of use. Quote something from Wikipedia about copyrights and trademarks, or something.

    Send the corrected article (plus facts about copyrights) to Robert Craddock, and ask if he disagrees in the corrected article. Send a copy of it to hubpages, to show them you’re handling the situation correctly. You’ll have to find the best procedure yourself. You can probably ask hubpages about the normal way to handle the situation.

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  20. @K. Chang

    The content on your hub is clearly protected by fair use.

    The “invented” piece on the 8.9% manual error is probably the strongest claim, i.e. when you said:

    Clearly, the daily profit share is NOT calculated, but rather, INVENTED and MANUALLY ENTERED. How else can they mistakenly typed in 8.9% instead 0.89%?

    Zeek could have an innocent explanation. For example, they use accounting software to calculate the daily profit (whatever that formula is) and then manually enter those results into another system and click “GO” to run the daily profit sharing. I thought this was also a slightly flimsy “proof” on Oz’s part to make the claim:

    1. We know the daily rate is entered manually
    2. Therefore, it must be invented or manufactured

    Without debating whether the formula itself is even legitimate or not, whatever the formula is, it is entirely possible for a human process step is used to enter it manually without it being “invented”.

    As for the overall complaint itself, my thoughts:

    – This not unlikely Zeek corporate or one of its lawyers. First of all, if it was in-house counsel or a lawyer, the first thing they would do is identify themselves as such, since the weight of the “attorney” title often is enough to force a blogger to capitulate. Secondly, the gmail account address as you mentioned is always suspect. If this was corporate it’d probably come from @zeeklers.com (yes, plural). Finally, if this is a legitimate attempt from Zeek to remove your hub, one would think they would have contacted the ISP’s for BehindMLM, PatrickPretty, and RealScam.com long before they contacted you. It is likely one of your readers who is a Zeek supporter “playing dirty”.

    – It is extremely noteworthy that the only libelous charge made is the “invention” of the profit share. Surely if this was Zeek corporate or their lawyers they would have pointed out MANY other areas of the Hub which directly addresses the Ponzi aspects, pyramid aspects, and unregistered security aspects. Is one to think that section is THE ONLY part they think is false? These other areas are much more damaging than the interpretation of a manual error in entering the daily profit share.

    – You could remove your analysis on that one section and simply say something like “this typo in the daily profit rate confirms that the process for calculating the rate and running the daily profit distribution requires a MANUAL STEP”. And then just leave it at that.

    – Zeek’s TradeMark claims could have some weight for the use of specific logos, not legally, but in terms of third party sites wanting to stay away from the legal morass of dealing with the issue. Your usage clearly falls under Fair Use as you are using the trademark NOMINATIVELY to refer to the product or company. You are NOT using it to sow confusion (such as being an affiliate and using Zeek logos to build credibility or pretend that the website is officially endorsed by Zeek).

    – Further, the three referenced TM serials do not refer to the term “Zeek” or “Zeekler” or “ZeekRewards”. They only refer to 3 specific logos. Nowhere on Zeek’s site or it’s terms and conditions does it use (TM) or (SM) for words such as “Zeek” or “ZeekRewards”. If they had TM’d just the words they could enforce takedown notices for some sites that use those words in the subdomain, such as “zeekrewards.blogger.com” or “zeekrewardssucks.wordpress.com”. In these cases, they can claim that the use of a TM word in the domain causes confusion, but using it in the rest of the URI string would not.

    Here are the 3 serials referenced in the complaint – they are ONLY logo TM applications:

    Serial #85585652 – filed 3/31/2012 – The main Z logo with “ZeekRewards – save money – make money” beneath it

    Serial #85673404 – filed 7/20/2012 – a specific logo with the Z & diamonds

    Serial #85585656 – filed 3/31/2012 – another logo

    Finally, from a completely Machiavellian perspective – what happens if someone creates a fake gmail account for “Robert Craddock” and then starts sending takedown notices to every site that has pro-Zeek content. Surely they are doing Zeek Compliance a favor as they have stated themselves and with the Zeek Squad that there is to be no independent marketing content of any kind.

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  21. When was Kevin Grimes the Zeek corporate attorney? It sounds like someone is trying to play games with you and doesn’t quite have hits facts straight. It probably the same person who was trying to OUT you as “Anthony Chang” out of… Virginia of all places.

    When have corporate attorneys ever approached a situation in this manner with some (unpaid?) consultant? The risks that the “consultant” does something dumb and causes more damage is too great if Zeek corporate or legal was truly concerned.

    I think this is one of kschang’s detractors who is just playing games.

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  22. Their logo appeared in only ONE place in the entire hub: as a part of a screenshot of their GetSatisfaction support forum, when it was still visible to the public. It is clearly fair use.

    The only part about that “invented”, It is also the conclusion on BehindMLM that it is invented. I offered to Hubpages to rewrite that section. Have not heard back from them.

    I surmised as much this is an affiliate impersonating someone from corporate. I will be making further e-mail exchange between me and Craddock public in 24 hours. I hope Hubpages republishes my hub soon, else I have to push EFF for a referral to one of their pro bono lawyers.

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  23. @K.Chang

    I agree with Rodney Kay, the complaint is probably false. So you should probably inform hubpages about THAT before anything else.
    * unable to verify the complainant, but a person with the same name lists himself as a former affiliate in ZeekRewards.
    * the complaint seems to have been made up from fantasy in some parts (the copyrights, etc.).

    But I still believe you will need defensive strategies on a long term basis. I can probably post a few comments about it on the amlmsceptic site.

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  24. FWIW, I forwarded the stuff to Troy Dooly, and he got back to me VERY quickly.

    RVG does have a Craddock… as an INDEPENDENT consultant.

    And Troy heard NOTHING about any sort of takedown action. Troy has forwarded the mail to COO and we’ll see where *that* goes.

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  25. @K. Chang,

    My spidey sense tells me that you should not give up any hint of your identity, even an email address that is traceable. You have to assume the worse of intentions, such as using a Scientologist like intimidation and threatening legal action regardless of the truth of the matter or whether you would/could/should win outright. A Ponzi has the weight of ill-gotten investor funds on their side to “lawyer up”.

    It is still strange, if legal intimidation is their intention, that they would contact you first. If I was Zeek, I’d probably start with the whistleblower insider who gave Oz information. Or threaten Oz himself considering how much traffic BehindMLM gets.

    In the end, the anonymity of the web is your best defense. Yes, Zeek could try to sue Hubpages and get more information about you, but you let Hubpages mount their normal legal defense. If Hubpages were to reveal your identity over something relatively minor as this (think about all of the more “severe” cases of libel, whistleblowing, and political scandal), Hubpages would open themselves up to constant requests for user identification. The entire fabric of the web, from Facebook to Google to WordPress and many others, depends on each of them constantly resisting request for end user identification by any third party. The cable providers have the same battles constantly. For civil cases like this, with no criminal element, I would expect Hubpages to fight any subpoena attempt (even if it gets that far).

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  26. Not to worry. I’ve checked and that e-mail address wasn’t traceable to me, as I’ve not used it for 2 years, and I’ve moved several times since.

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