Zeek Operator Paul R. Burks Was Cooperating With SEC Prior To Date Of Ponzi Complaint, New Filing Suggests

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.

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12 Responses to “Zeek Operator Paul R. Burks Was Cooperating With SEC Prior To Date Of Ponzi Complaint, New Filing Suggests”

  1. 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.

    Could that result in Insider Trading charges?

    Or would the Insider Trading charges be moot because the receiver would just clawback those gains?

    The timeline, when it is known, will probably correlate with Darryl Doulgas’ “leave of absense” and Dawn’s public disappearance into the CMO role, where ironically, she didn’t do one bit of public marketing.

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  2. There is no insider trading issue, insider trading usually only applies to transactions in the stock of a publicly held company, which RVG was not. There are legitimate issues of fraud if insiders were doing things due to knowledge they did not disclose, but the fact is they’ve got bigger problems right now,

    In the consent judgement, Paul Burks did not admit or deny guilt in regards to non criminal charges brought by the SEC, but he DID admit the facts alleged by accepting the judgement, and the terms do not allow him to later deny those findings of fact. If you look closely at the SEC complaint (which contain the factual findings Paul has admitted to) there are a lot of things in there that can be used against him. Paul is going to have a real tough fight if he faces criminal charges because he’s already admitted to acts that are essentially felonies. Go back and read that SEC complaint again, and as you read realize that Paul has admitted everything in them to be true. Then be real glad you aren’t the one who admitted all that.

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  3. Hmmmm. Seems there were indeed plenty of US banks that could serve their needs. That’s when the SEC hubbub was in full swing….when they started shuffling money.

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  4. It’s also interesting in the final judgement against Burks and RVG that he’s NOT allowed to argue the same issues that he plead no contest to, should additional charges be brought against him. :D

    And this is just the SEC. Wait until everybody else joins in.

    Didn’t state of Florida also filed charges against Andy Bowdoin, in addition to the Federal charges filed by US Attorney? What happened to those charges?

    Does that mean NCDOJ can file their own charges against RVG/Burks for breaking NC law?

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  5. K. Chang: It’s also interesting in the final judgement against Burks and RVG that he’s NOT allowed to argue the same issues that he plead no contest to, should additional charges be brought against him. :DAnd this is just the SEC. Wait until everybody else joins in.
    Didn’t state of Florida also filed charges against Andy Bowdoin, in addition to the Federal charges filed by US Attorney? What happened to those charges?
    Does that mean NCDOJ can file their own charges against RVG/Burks for breaking NC law?

    Florida investigated but I don’t think they actually filed charges, Patrick would know better. Yes, NC can charge him under state law in addition to any federal charges, but in a lot of cases I think the states are generally satisfied if they go to federal prison, especially when they don’t have to pay the cost of locking them up. Some notable exceptions are high profile cases where some political prosecutor wants to point out he was tough on crime. I believe Oklahoma City bomber Terry Nichols was charged in Oklahoma after he didn’t get the death penalty in the Federal case, if he wasn’t tried I do know some prosecutor at least talked about it.
    Burks problem I think will be The Secret Service, they’re more appropriate if you consider it a money crime that affected the money system, if you consider it straight up interstate fraud or wire fraud, the more likely choice is the FBI, but I haven’t heard much about them and we know that the SS was on site the day they were shut down.
    I’m very encouraged that they went after the off shore anonymous payment processors, I’ve long felt they were the big enablers of internet fraud, and maybe the pimps won’t be so sure in the future that once they get the money in STP or AlertPay that they’re home free.

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  6. Gregg: Florida investigated but I don’t think they actually filed charges,

    Florida sued Bowdoin in 2008. It dismissed the case “without prejudice” in 2010, saying it had compiled a victims’ list and forwarded it to the Feds.

    Patrick

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  7. I don’t give a shit about this article. I want my f in money back

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  8. sbrick: I don’t give a shit about this article. I want my f in money back

    So leave the receiver to do his job (return your money), and yell at any one who’s trying to delay / stop that.

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  9. sbrick: I don’t give a shit about this article. I want my f in money back

    Sue your upline for ripping you off.

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  10. Some background on Burks, also an [old] photo:

    Former Zeek CEO has ties to politics, Louisiana
    http://www.goupstate.com/article/20120831/ARTICLES/120839942

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