URGENT >> BULLETIN >> MOVING: SEC Calls Zeek ‘$600 Million Online Pyramid And Ponzi Scheme’

URGENT >> BULLETIN >> MOVING: (UPDATED 6:25 P.M. EDT (U.S.A.) The SEC has filed an emergency action in federal court in Charlotte, N.C., that alleges Zeek Rewards is a $600 million Ponzi and pyramid scheme.

“The obligations to investors drastically exceed the company’s cash on hand, which is why we need to step in quickly, salvage whatever funds remain and ensure an orderly and fair payout to investors,” said Stephen Cohen, an associate director in the SEC’s Division of Enforcement. “ZeekRewards misused the power of the Internet and lured investors by making them believe they were getting an opportunity to cash in on the next big thing. In reality, their cash was just going to the earlier investor.”

In its emergency filing, the SEC described Zeek as a classic Ponzi scheme. The agency charged that “approximately 98% of ZeekRewards’ total revenues, and correspondingly the purported share of ‘net profits’ paid to current investors, are comprised of funds received from new investors.”

Records show that the AdSurfDaily Ponzi scheme which, like Zeek, suggested that investors would receive a return on the order of 1 percent a day, also received only about 2 percent of its revenue from sources other than members. Zeek had members in common with ASD.

Zeek, the SEC alleged, “is teetering on collapse.”

Zeek CEO Paul R. Burks has been charged with selling unregistered securities as investment contracts, the SEC said. Burks presided over Rex Venture Group LLC, Zeek’s purported parent company. Rex Venture also has been charged. The SEC said it was aided in the probe by the Quebec Autorite des Marches Financiers and the Ontario Securities Commission.

Burks’ program holds “approximately $225 million in investor funds in approximately 15 foreign and domestic financial institutions, and those funds are at risk of imminent dissipation and depletion,” the SEC charged, noting that the Ponzi potentially could affect more than 1 million people globally.

A federal judge has ordered an emergency asset freeze and a receiver will the appointed, the SEC said.

“Through the ZeekRewards program, Defendants offer affiliates several ways to earn money, two of which involve the offer and sale of securities in the form of investment contracts: the ““Retail Profit Pool” and the “Matrix,” the SEC charged.

And, the agency said, the “compounding” effect has created a condition under which 3 billion Zeek “Profit Points” are outstanding.

“Based on the ZeekRewards current outstanding Profit Point balance, the company would be obligated to pay out approximately $45 million per day if all Qualified Affiliates elected to receive their daily award in cash,” the agency charged.

Amid Zeek claims that it paid out 50 percent of its daily net and that its business model was “proprietary,” investigators discovered that Zeek delivered an unusually consistent return of about 1.5 percent a day.

“In fact, the dividend bears no relation to the company’s net profits,” the SEC charged. “Instead, Burks unilaterally and arbitrarily determines the daily dividend rate so that it averages approximately 1.5% per day, giving investors the false impression that the business is profitable.

Similar allegations were made in 2008 against ASD operator Andy Bowdoin.

Zeek’s fabled Zeekler “bids” were described by the SEC as smoke-and-mirrors. From the complaint (italics added):

Despite encouraging affiliates to purchase and give away VIP Bids to promote and drive traffic to the Zeekler penny auction website, Defendants fail to disclose that almost none of the VIP Bids given away by Qualified investors are actually used on the Zeekler penny auction website. Of approximately 10 billion VIP Bids purchased by or awarded to investors, less than one-quarter of one percent have been actually used in auctions on the Zeekler penny auction website. Thus, the VIP Bids do little or nothing to actually promote the retail business.

Zeek operator Burks, meanwhile, “has withdrawn approximately $11 million while operating Rex Venture and ZeekRewards, of which approximately $4 million remains in his possession, custody or control.

Burks “distributed approximately $1 million of the funds garnered from ZeekRewards to family members,” the SEC said.

Amid high drama and confusing website reports from Zeek yesterday, including the virtual abandonment of its office in Lexington, N.C., and petition drives by Zeek affiliates to demand the return of Zeek, it turns out that “Burks has agreed to settle the SEC’s charges against him without admitting or denying the allegations, and agreed to cooperate with a court-appointed receiver,” the SEC said.

The U.S. Secret Service also is investigating Zeek, as is the office of North Carolina Attorney General Roy Cooper.

Read the SEC complaint.

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40 Responses to “URGENT >> BULLETIN >> MOVING: SEC Calls Zeek ‘$600 Million Online Pyramid And Ponzi Scheme’”

  1. Tango Down! Tango Down!

    How is Troy gong to spin this?

    http://www.sec.gov/news/press/2012/2012-160.htm

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  2. What is truly funny is that MMG took down their Zeek thread. Before it was closed, now it is gone. As if that is going to change anything.

    It was said that Troy did his latest video before the announcement of the SEC/Secret Service take-down. I’m not sure he didn’t know of it, but it will be interesting to see if he does another one soon.

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  3. WOW!!!

    33. As a result of the compounding effect, Qualified Affiliates now have nearly 3 billion Profit Points outstanding. Based on the ZeekRewards current outstanding Profit Point balance, the company would be obligated to pay out approximately $45 million per day if all Qualified Affiliates elected to receive their daily award in cash.

    http://www.sec.gov/litigation/complaints/2012/comp-pr2012-160.pdf

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  4. You know what is truly interesting is Troy claming he didn’t believe that Zeek was a Ponzi, I guess he didn’t learn what a Ponzi was from his promoting ASD. You would think he would have learned from that experience.

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  5. On Troy’s Aces Radio show he did come closer to the light:

    http://blogtalk.vo.llnwd.net/o23/show/3/513/show_3513859.mp3

    I’m not sure Troy ever promoted ASD. He’s gone through a few platform changes so most of his old videos are unavailable but his written work on the topic wasn’t in support of it.

    I’ll admit to having an agenda with him. The MLM world needs leaders who do the opposite of what he did with ZR. They need someone to look past they hype and to look at the numbers. Granted, the role he played here makes him an ironic choice for the “anti-scam MLM guy” but given that the other choices include Len Clements, I’ll take my chances.

    I’m not going to push him this weekend, but the man needs a talk’n to. Zeek Rewards exposed a systemic error in the MLM comunity, a small band of small time serial scammers were able to con the MLM dream team. They’ve got to start to wonder about how this happened and what to do about it. If we play this right, they ~might~ listen to some constructive suggestions.

    And why yes, my family does hail from La Mancha. Why do you ask?

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  6. Troy claimed he was against ASD all along many times before.

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  7. Troy refused to DO THE MATH.

    The math showed it was an obvious Ponzi.

    Also, as some of you have pointed out, what other business on the planet can pay > 1% daily compounded ROI?

    To claim he was duped or confused is just total rubbish. If the rest of us laymen can see it, surely Troy the expert in MLM compensation plans and insider with knowledge that we did not, should have.

    What was his NDA with Paul Burks? If he wants to get any small sense of respect back, he’d share the full insider scoop.

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  8. He claimed he didn’t sign an NDA, merely ‘respected’ one, I think.

    Does it still apply? :)

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  9. I thought in his video on Zeek where he quoted from the Bible he said he originally had a hand shake but then later SIGNED an NDA?

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  10. Jimmy: Also, as some of you have pointed out, what other business on the planet can pay > 1% daily compounded ROI?

    Troy appeared to have let himself get hung up on the fact that Zeek claimed there was no guaranteed rate and that it would fluctuate depending on profits.

    He didn’t allow for the fact that in ponzi scams, a certain minimum ROI is expected by the investors even though many ponzis these days claim that no specific rate of return is guaranteed.

    He appears to have let himself be fooled by all of the “compliance” hogwash that Zeek was spewing.

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  11. K. Chang: He claimed he didn’t sign an NDA, merely ‘respected’ one, I think.
    Does it still apply? :)

    Oz covered it, and it was in his video and a few replies on his blog.

    Troy signed an NDA with Paul Burks:

    http://behindmlm.com/companies/zeek-rewards/nc-ags-office-deny-saying-zeek-rewards-is-legal/

    Troy: There are items I can’t share publicly due to the NDA I agreed to sign with Paul Burks. Although, not every CEO and Founder asks for one Paul did based on his own life experiences.

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  12. Jimmy:

    GREAT Find! This is the missing piece that would have been valuable to the Stepfordian ASDelusionals. Many of them claimed that ASD was solvent and had more than enough money to pay out, etc.

    And, the argument will be put forward by the Zeekfordians, and this paragraph 33 will shed light on the sheer lunacy of the model – if they are smart enough to understand and open minded enough to listen.

    Two “ifs” that are a long shot for that audience, no doubt.

    ARWR

    Jimmy: WOW!!!
    http://www.sec.gov/litigation/complaints/2012/comp-pr2012-160.pdf

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  13. Had a troll on my hub who still insist that the Zeek haters can go to hell. :D

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  14. K. Chang: Had a troll on my hub who still insist that the Zeek haters can go to hell. :D

    Oh, I’m gonna go to hell, but not for anything to do with Zeek being just another cheap ponzi

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  15. From the “more things change . . .” department:

    A MLM-Stepfordian who calls himself “Briant” has sent five separate spams to four separate Zeek threads today.

    He’d like the folks to join something called “Ultimate Power Profits.” A quick look at the MoneyMakerGroup Ponzi forum shows it’s an emerging scheme over there — and that former members of Zeek’s Ponzi-forum team are pushing it.

    Zeek’s former head cheerleader at MoneyMakerGroup — “mmgcjm” — also is the head cheerleader for Ultimate Power Profits.

    Patrick

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  16. Someone is spamming all of Troy’s Youtube videos with that same program. Might be the same person. Vultures.

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  17. K. Chang: Troy claimed he was against ASD all along many times before.

    Initially back in 07 I am sure he was a supporter of ASD, but sometime in April or May of 08 he changed his tune. I am still checking to see if I can find out for sure.

    But he did give glowing praises to another Ponzi MBPToday. It is closed as it is under investigation by the SEC as being a classic Ponzi.

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  18. From
    http://business.gather.com/viewArticle.action?articleId=281474981559517

    A security officer, Kerry Graves, stationed outside of the Burks home in Lexington on Friday, said that Burks had multiple threats issued. Graves also said that Burks is advised by his attorneys not to release any statements. The media rep for the company, Clifton Jolley, said that the SEC charges (which are civil) will be settled without admitting guilt. However, this could simply be a way to try to avoid criminal charges. If investors receive enough of their money to satisfy them, law enforcement agencies may not pursue the criminal side of the investigation.

    However, Burks may also have criminal charges filed against him in the near future. Special Agent Glen Kessler said on Friday that the Secret Service were investigating Burks and the companies Zeek Rewards and Zeekler. However, Kessler refused to comment on the status of the investigation, as per the Secret Service’s policy. The Attorney General of North Carolina may also be filing charges, as they requested records from the parent company, Rex Venture Group, on Friday.

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  19. Kerry Graves, head of GravesInvestigation.com, must be short on work to do work as a common security guard. I think he’s supposed to talk at a Sandusky related investigation panel today.

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  20. @KChang…probably the same zeek guy who was giving you death threats!

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  21. admin: Zeek’s former head cheerleader at MoneyMakerGroup — “mmgcjm” — also is the head cheerleader for Ultimate Power Profits.

    I was so disappointed to see that MMG’s Zeek Rewards thread “pulled a Dranishack” (i.e. disappeared), not only for my first amendment sentiments but also for the opinion that mmgcjm shared that if anyone didn’t think that Lynn wasn’t behind ZR being shut down they were fooling themselves.

    Hey, maybe if I could get UPP shut down he’d say such a flattering thing about me. LOL

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  22. GlimDropper:
    I was so disappointed to see that MMG’s Zeek Rewards thread “pulled a Dranishack” (i.e. disappeared), not only for my first amendment sentiments but also for the opinion that mmgcjm shared that if anyone didn’t think that Lynn wasn’t behind ZR being shut down they were fooling themselves.Hey, maybe if I could get UPP shut down he’d say such a flattering thing about me. LOL

    GD: You’re too kind. He also credited the “crew at RS” too. I can’t take all the credit. LOL!

    Seriously the people who did the yeomen’s job were KSChang and his “Analyzing Zeek blog” and oz at “behindMLM” that deserve the major credit in exposing this Ponzi and its demise. Bravo gentlemen.

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  23. Absolutely !

    Kudos to both Kasey and Oz

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  25. K. Chang: Wow, someone’s conducting a confession on reddit:http://www.reddit.com/r/IAmA/comments/yhagt/iama_dishonest_person_part_of_a_600_million/

    Interesting. So he knows he’s scamming people with zeek, allegedly sort of feels bad for people in his downline but tries to steer them to another scam in ‘bids that give’. What a scumbag.

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  26. He is a scumbag, but assuming what he says is true, it is a goldmine of insider info that we wouldn’t get otherwise.

    Also note that Reddit has a long tradition of “experts” or “insiders” or even whistle-blowers posting a confessional entry and answering questions. For the most part, Reddit posts like this have a pretty good history of being honest, especially the ones where the author answers the questions and has dialog.

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  27. Main post was removed, but s/he confirmed that Troy Dooly was PAID for the good reviews via one of the “replies”.

    Not that it means anything in court of law…

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  28. The scum bag lawyers are already coming out of the wood work:

    http://zeekrewardsscam.co/

    Reminds me of the Robert G and Larry F scam.

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  29. Did Dooley reveal that he was receiving money from the business in question, when he published his reviews?

    If not… the Federal Trade Commission made some rules changes in 2009 to outlaw such non-disclosure of relationships.

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  30. ProfHenryHiggins: Did Dooley reveal that he was receiving money from the business in question, when he published his reviews?If not… the Federal Trade Commission made some rules changes in 2009 to outlaw such non-disclosure of relationships.

    He was a little… evasive in his answers. He redirected one direct question: where you paid by RVG? His reply: “As a rep?”

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  31. Oz, kchang, m_norway, jimmy, e, al, realscam crew, et al…

    The author of one of the Forbes articles, Jordan Maglich, is looking to talk to “Zeek critics” to do a story on the backstory. He has followed some of the drama from the last few months and can be reached at ponzitracker@gmail.com.

    You can search for “Jordan Maglich Zeek” in Google to see his Forbes and Ponzitracker.com stories.

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  32. K. Chang: Main post was removed, but s/he confirmed that Troy Dooly was PAID for the good reviews via one of the “replies”.
    Not that it means anything in court of law…

    well, sure it does and it further tarnishes an already shit ‘expert’ rep. Who is to say he won’t have charges of aiding and abetting?

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  33. THIS IS SUCH BS MY FAMILY HAS LOST OVER $$30000!!!!!!! DID THE “GOVERNMENT” REALLY TAKE IT?? OR DID SOMEONE ELSE? SHOULDN’T THEY BE OBLIGATED TO GIVE IT BACK TO THE PEOPLE IT CAME FROM?? OR IS THE GOVERNMENT TAKING ALL THIS MONEY?? THE SAME THING HAPPENED WITH ASD!! WHERE DID ALL OF THIS MONEY GO?!?!?!

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  34. Whip: Who is to say he won’t have charges of aiding and abetting?

    Web definitions

    In the criminal law, a conspiracy is an agreement between two or more persons to break the law at some time in the future, and, in some cases, with at least one overt act in furtherance of that agreement. …

    en.wikipedia.org/wiki/Conspiracy_(law)

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  35. Mitch McDeere: Oz, kchang, m_norway, jimmy, e, al, realscam crew, et al…The author of one of the Forbes articles, Jordan Maglich, is looking to talk to “Zeek critics” to do a story on the backstory.

    He already contacted me, and Lynndel already knows and forwarded me the request.

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  36. Poor Jane. Wake up! You were stealing from other people if you got paid anything from Zeek. Do you understand how a Ponzi works? Please do some research and comment again. The “Evil Government” is not the villain here. The villains are the Andy Bowdoin types that prey on ignorant people. Of course, some know exactly what they are doing when they play these illegal and immoral games. Once you do a bit of research, you’ll know as well.

    Much luck to you on your journey to enlightenment on Ponzis and scams.

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  37. Confession on reddit is a hoax, IMHO. The image was Photoshop(tm)’ed to embellish the VIP points.

    Analysis of the confession indicates most of which are from public sources.

    http://amlmskeptic.blogspot.com/2012/08/update-reddit-confession-is-probably.html

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