Paul R. Burks, the operator of Zeek Rewards, was cooperating with the SEC prior to the filing of the Aug. 17 complaint that alleged Zeek was a $600 million Ponzi scheme and pyramid fraud, a new court filing suggests.
That “period of cooperation” resulted in the production of “hundreds of thousands of documents, including financial records, e-mails, and all manner of electronic files,” according to the filing by Noell P. Tin, an attorney for Burks.
The filing does not specify when the cooperation began or say whether others inside of Zeek knew that the SEC had access to Zeek records prior to the filing of the complaint and a freeze on the assets of Zeek’s parent company, Rex Venture Group LLC. But it may explain at least in part why Burks agreed to settle the case without admitting or denying the allegations and to cooperate with Kenneth D. Bell, the court appointed receiver: The SEC effectively already had been inside the company.
Separately, First Premier Bank of Sioux Falls, S.D., has advised Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina that it is holding more than $31.2 million in three separate Rex Venture accounts frozen under court order. The largest Rex account at the bank holds more than $30.9 million. A smaller account holds more than $284,000, and the smallest account holds only $90, according to a filing by the bank.
To date, court filings suggest that Rex Venture has an account at Charles Schwab that holds $10.3 million in cash and more than $4.94 million in securities. The company also has an account at North Carolina-based NewBridge Bank that holds more than $11.64 million.
Rex Venture also holds an account at Four Oaks Bank & Trust Co. Inc., another bank in North Carolina. The bank has asked the judge to give it until Sept. 3 to say how much it is holding because of the “complexity of the financial information that must be analyzed and the need to obtain relevant information from a third party.”
All in all, the SEC said on Aug. 17 that the Burks-controlled entities used 15 foreign and domestic financial institutions.
Burks’ personal assets were not frozen in the Aug. 17 SEC action, and the accused Ponzi schemer wants to keep it that way, according to court filings.
“There is no basis and no need to freeze Mr. Burks’ personal funds,” his attorney wrote in response to a motion by Bell that raised the possibility that “Recoverable Assets” were controlled by Burks and his family. “Mr. Burks has never expatriated the assets of Rex Ventures Group, LLC or his personal money. He has fully cooperated in the SEC investigation, which included examination of relevant financial records. He is 65 years old, married, a two time cancer survivor, and has lived in Lexington, North Carolina for 23 years. He has never been a defendant in any action, civil or criminal, until this matter. Mr. Burks is aware of the importance of this proceeding and will abide by any orders this Court imposes.”
One of the remaining mysteries of Zeek is how and when key executives found out about the SEC probe and whether they or other insiders feathered their own nests prior to the collapse.