DEVELOPING STORY: Zeek Winners Begin To Receive Subpoenas

Alleged Ponzi scheme Zeek Rewards wrapped itself in the American flag and symbols such as the American penny coin to attract business. The purported “opportunity”  has created problems for hundreds of thousands of members in the United States and other countries.

The PP Blog has received a report that some members of Zeek have received subpoenas issued by the court-appointed receiver in the Zeek Rewards Ponzi scheme case. The SEC alleged in August that Zeek was a $600 million Ponzi and pyramid scheme operated by Paul R. Burks and Rex Venture Group LLC.

Receiver Kenneth B. Bell said earlier this week that a first round of about 1,200 subpoenas would be issued to “affiliates who profited most from ZeekRewards.”

Early details are sketchy about precisely what information the subpoenas demand. Bell wrote on the receivership website that recipients “are required to fully respond to the subpoena.

“If you do not have possession, custody or control of any of the documents requested simply say so in responding to the subpoena. However, you are required to make a full reasonable effort to locate all documents requested, including electronic documents and email,” Bell wrote.

The issuance of the subpoenas demonstrates that online HYIPs dressed up as multilevel-marketing “programs” can — at a minimum — create civil exposure for participants. Profits received from such schemes are viewed as ill-gotten gains subject to clawback.

In an Oct. 8 court filing, Bell advised Senior U.S. District Judge Graham C. Mullen that he planned to pursue Zeek winners and others through common-law and and clawback claims “under applicable fraudulent transfer statutes.”

In addition to Zeek winners, potential clawback targets include Zeek officers, employees and professionals who benefited from the scheme, according to Bell’s Oct. 8 filing. As many as 100,000 people potentially received ill-gotten gains from Zeek, while about 800,000 Zeek members experienced losses.

Zeek wrapped itself in the American flag while pitching its offer globally, claiming among other things that winners of its Zeekler auctions for sums of U.S. cash would be paid through offshore payment processors. North Carolina-based Zeek has never explained the striking incongruity of auctioning U.S. cash and offering to deliver it via payment processors linked to fraud scheme after fraud scheme promoted on Ponzi scheme forums such as TalkGold and MoneyMakerGroup.

Auctions for cash mysteriously went missing from Zeek in June. On Aug. 4, 13 days before the SEC filed an emergency action to halt the alleged Zeek Ponzi scheme, the company publicly complained about “North Carolina Credit Unions” that were warning customers about Zeek.

On June 5, the company bizarrely planted the seed that, if Zeek instructed members to change their preference in dispensing toilet paper, they should do it to demonstrate how coachable they are. Just days earlier — on May 28, Memorial Day — the company claimed it was closing two U.S. bank accounts and urged members to cash commission checks by June 1 or they would bounce.

Zeek’s auction arm was known as Zeekler and was married to Zeek Rewards, the MLM side of the business. The SEC said in August that Zeek commingled funds and that Burks “unilaterally and arbitrarily” determined Zeek’s daily dividend rate so that it averaged “approximately 1.5% per day, giving investors the false impression that the business is profitable.”

In 2008 and 2009, the U.S. Secret Service made similar allegations against AdSurfDaily and operator Andy Bowdoin. Bowdoin, 77, was charged criminally in December 2010. He pleaded guilty to a Ponzi-related charge of wire fraud in May 2012. Bowdoin was sentenced in August 2012 to 78 months in federal prison.

ASD operated as an “autosurf” HYIP that planted the seed that members would receive a return of 1 percent a day.

Precisely how many Zeek members live outside the United States and benefited from the scheme is unclear. In July, the PP Blog reported that a Zeek-related article carried on Google News claimed that Zeek had 100,000 members in Brazil alone.

An issue that potentially could emerge in the coming weeks is whether the receiver will be successful in seeking clawbacks from non-U.S. members of Zeek who received more from the scheme than they put in. How many Zeek members fit the profile is not yet known.

HYIPs that operate across borders on the Internet introduce the specter of international red tape and also potentially bring language barriers into play. In the days after the SEC brought the Zeek case, some purported international members of Zeek effectively thumbed their noses at the United States and Zeek victims, crowing on Ponzi-scheme forums that they’d keep their Zeek money no matter what.

 

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26 Responses to “DEVELOPING STORY: Zeek Winners Begin To Receive Subpoenas”

  1. Well, Robert Craddock and his gang of 12, as I call them, has responded to Kenneth Bells update on the receiver website.

    This is the group that claimed it has “proof” and “evidence” to show that Zeek was not operating illegally as claimed by the SEC. They were going to file a lawsuit to prove it. So they asked Zeek members to contribute to their legal costs so they could hire attorneys for them to make this filing. And thousands of Zeeksters did so despite being warned that unless they paid their money to an attorney, they were not represented.

    Now here we are over 8 weeks later and not one lawsuit has been filed on behalf of the gang of 12 against the SEC. Kind of makes you wonder what they are waiting on doesn’t it. If not, it should.

    I am not going to post this latest update in full, but only one section that I want to address about the subpoena being sent to the “winners” of Zeek and it is this comment:

    “First, for everyone who has received a civil request from Kenneth Bell do not panic. Kenneth Bell is fishing for information and is using, in my opinion, scare tactics to shake you good people up in turning over money you have earned from your efforts in building the penny auction known as Zeekler.com for Rex Venture Group.”

    First, this is a federal subpoena in a civil case, not just a civil request. Second, Kenneth Bell is not fishing for information. He has the information already or he would not be sending you a subpoena. And lastly you did not earn anything from Zeek. The money you received, or thought you were earning, was stolen.

    If you did receive the subpoena from Kenneth Bell, I would consult my own lawyer and not rely on anything that Robert Craddock has to say. Robert Craddock is only looking out for himself and not you or anyone else in Zeek. My fear is that if you do rely on Robert Craddock’s advice, you could end up in a lot worse situation than you are already in. Your choice.

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  2. Incentive to invest in these schemes would be greatly reduced if the receiver sought to claw back principle as well as “profit” to make equitable restitution to both winners and losers.

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  3. It is too late at night to be typing responses. Yes, I know the word is “principal.”

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  4. Sounds ok, provided it goes to where it is supposed to be going and not into the pockets of the so called ‘receivers’ as 90% usually does. Maybe there is a way to ensure this happens.

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  5. John: not into the pockets of the so called ‘receivers’ as 90% usually does.

    male bovine excreta

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  6. Hi John:

    Just curious if you could point to information related a receivership process in the ponzi arena that caused 90% of funds to be allocated to the receiver.

    That surely wouldn’t be fair (to have a receiver retain 90%) but I rather suspect it’s not the truth, but, rather, more diversionary tactics by the big ponzi schemers to confuse and frustrate.

    ARWR

    John: Sounds ok, provided it goes to where it is supposed to be going and not into the pockets of the so called ‘receivers’ as 90% usually does. Maybe there is a way to ensure this happens.

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  7. Personal experience from the past from me and many others I know.
    There seems to be some naivete here.

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  8. I would like to add that this is not ALWAYS the case and can vary.

    I did have a few of times when the full amount was refunded, after
    having forgotten about it all together for a few years.

    On the other hand, just a few weeks ago I did get 10% of something from 10 years ago, completely out of the blue.

    About 8 months after ASD closed I mysteriously got my $200 paid back into my STP account, and to this day I don’t know where it was from. It wasn’t anything to do with the receiver.

    My point is, that it can vary, depending on how much is in the pot and how much is collected, and what their expenses are. Time will tell.

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  9. John: My point is, that it can vary, depending on how much is in the pot and how much is collected, and what their expenses are.

    So, John,

    With Mr Bell being a court appointed receiver, are you suggesting the court is in on the conspiracy as well as Mr Bell ??

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  10. Just because you only got 10% back by no means implies that the receiver got the other 90%. The money was in fact stolen and the people who stole it (both the operator of the scam and the “winners” who didn’t have to pay it back) kept a pretty big part of it.
    The receiver in most asset recoveries get something around 5-6% as their fee, and there are expenses involved, with total cost of recovery being about 10% of the assets recovered.

    And the sad fact is, while 10% is not very good, it’s not untypical. The only recovery case I was ever seriously surprised by was ASD, where an effort not terribly unlike Fun Club’s current scheme led to many people who were entitled to refunds not applying for them. Since much of the recovered funds went unclaimed, the ones who did ignore the conspiracy theory crowd and filed got 100% of their money back (and there were still millions left, unclaimed although many millions were not recovered)

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  11. I’m not suggesting any conspiracies. I’m only going by what I’ve seen so far.

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  12. John,

    I actually have a different question. Why do you continue to put money into obvious scams? Not one of them has ever been legal. One likely answer is that you yourself are a serial scammer, although there may be other answers. It would seem to me that you yourself are trying to profit from the schemes you have been a part of, hoping to receive ill-gotten gains from other victims. From my perspective, I would like to see receivers never compensate serial participants. Take away the safety nets…..

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  13. I’m no scammer, I pays my money and makes my choice like everyone else.
    I guess anything classed as ‘legal’ never seems to make anyone any money anyway. And often it’s only later we find out. Anyway, I’m off to the tropics for a few months to enjoy the hot weather. Have a good winter!

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  14. Gregg Evans: Just because you only got 10% back by no means implies that the receiver got the other 90%.

    Thanks for making this point, Gregg.

    Over on the Ponzi boards, of course, the Zeek receiver is being demonized. It just never stops.

    OneX pitchman T. Lemont Silver — who also was a Zeek pitchmen — was only too happy to tell listeners to a conference-call featuring Craddock that he (Silver) had been scammed in a previous Ponzi scheme.

    While planting seeds of doubt against receivers in TWO Ponzi sceme cases, Silver seemed to be completely oblivious to the obvious reality that somehow he’d become involved in THREE Ponzi schemes: Zeek, the unnamed scheme for which he was blaming the receiver for a slow disbursement and OneX, which federal prosecutors described in April as an ASD-like money-circulation scheme.

    This situation is truly incredible. Here’s hoping the Feds are contemplating a RICO complaint that would incorporate the serial scammers.

    Patrick

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  15. John: I’m not suggesting any conspiracies. I’m only going by what I’ve seen so far.

    Your first post proves otherwise:

    John: Sounds ok, provided it goes to where it is supposed to be going and not into the pockets of the so called ‘receivers’ as 90% usually does. Maybe there is a way to ensure this happens.

    You were asked for documentation to prove this claim. Since you admit you somehow have the unfortunate luck of frequenting enterprises that would require this type of action (odd for not being a ‘scammer’), surely you have something solid to back up your claim – not just what you allegedly received back.

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  16. Multiple unethical debate tactics committed by John there…

    Anecdotal evidence — *he* only got 10% back
    Flip the burden of proof — I don’t have to prove my side, burden’s on you to disprove me!

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  17. John: I guess anything classed as ‘legal’ never seems to make anyone any money anyway.

    Goodness me. There are no legal investments that give the kind of return that the Zeeks, ASDs, JBPs and other HYIPs of the world promised BECAUSE the monies paid out are invariably those paid in by later investors. In other words they are not legitimate investments, they are ponzis which borrow from Peter to pay Paul and do not generate any income. Even Maddoff never promised such high rates of return, which is why his ponzi took so long to be discovered (in fact he confessed himself). The only way to make legal money without working is with real high risk investments, i.e. those registered investments where you can win or lose your shirt and which are recommended for those who are informed and who have strong nerves

    There is another way to make money – and that is very boring – it’s called hard work. You can either do this with a job, or take the risk and start your own business with borrowed or saved capital. Many successful entrepreneurs have tried it; Bill Gates, Steve Jobs, Mark Zuckerberg, Warrren Buffet, Richard Branson, Henry Ford and a whole host of others.

    Your argument that you have joined scam after scam (which looks be the case if you have several previous experiences of receiving varying percentages back from the receiver through various previous money games) because nothing else pays doesn’t wash. If you have made money in any of them, it is because other members have lost money. This is not gambling. Gambling is what it says it is, and does not masquerade under the mask of business or investment.

    And, as you well know, the percentage paid to victims of scams by the receiver depends on the amount of money that they recover and if the crooks have run off with or spent 90% then you’ll only get 10% back because there is not more to pay with. The percentage depends on how much money they catch the crooks with, not the receivers overheads.

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  18. Indeed. When a receiver seizes a Masarati. the scammer may have paid $100,000 for, he has to insure it, store it and sell it, and in the end only gets say, $60,000 net. And that’s the good assets, there is hardly any market for used lap dances and who knows what other stuff criminals waste money on. I’ve even heard that, wait for it, sometimes the scammers will try to hide money overseas, bury cash in safe deposit boxes and otherwise try to avoid giving it back. I guess in theory they could even ask their victims to pitch in for lawyers to try to find some legal loophole to keep it. Admittedly a low chance of success on that, but the risk is offset when the losers pay the legal fees.

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  19. Lynn:

    Robert Craddock and his 12 henchmen are the unscrupulous lawyer aka Larry and Robert Guenther of the ASD Business Association. The only purpose of what they are doing is to get their money back along with their friends money. Just like before.

    A lawsuit of any kind will never be filed and just like before they will slither away and nobody will get anything who donated to the fund.

    The only way to stop these scumbags is for the Government to take a stand and start prosecuting them to the full extent of the law (which they will never do).

    Am I bitter…Yes!

    Because a lot of good people like you continue to in many cases waste your time, money and effort to bring the top promoters to justice and nothing is ever done. Until the major supporters are prosecuted this will continue to go on and on.

    Are the Secret Service,SEC and the FBI so blind that they can not see or understand that these Ponzi’s would not and could not sustain themselves if it was not for the major promoters like Terrilynn Hoy, Robert Guenther, Robert Craddock and friends and the list goes on and on.

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  20. My experience (I brought an involuntary bankruptcy against a collapsing Ponzi scheme) was that my clients recovered 50% of their losses. Just like our friends on the Ponzi boards the net winners are up in arms at the thought of paying back money.

    There was one lawyer who thought the Ponzi litigation looked interesting. I asked her who she wanted to represent. She said “the investors.” It took some time to explain that there were winners and losers.

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  21. Dl, at least she saw it like it was, an investment….

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  22. Hardly an investment. Offered to pay 125% a year. Shady business plan (selling frequent flyer coupons) proprietor had previous conviction of embezzlement from the post office.

    There were a lot of naive people involved in that case. The lawyer was only one of them. The investors included Judges, FBI Agents, most of the Bureau of land Management people, police officers. The chief shrills for the scheme were prosecuting attorneys. Confusion between winners and losers permeated the community. Can’t believe how many times the winners got together to figure out to stiff the trustee. They took the matter all the way to the 9th Circuit before paying up.

    Personally, I think that getting 50% of my widow and retired client’s money was a wonderful result.

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  23. Any idea on how to help the receiver get names of the so called ‘Winners”?

    I know of a guy who is gloating online how he was one of the winners and is scoffing at the attempts to clawback any of his winnings. I know his name, e-mail and address.

    Thanks

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  24. Ace baker: Any idea on how to help the receiver get names of the so called ‘Winners”?

    From the receiver’s Nov. 14 motion to delay the filing of the liquidation plan until Dec. 17:

    “The Receivership Team has secured and preserved approximately 10.4 terabytes of electronic data from dozens of computers and servers. In addition, more than 115 boxes of hard copy documents were collected. We have issued more than 1,200 subpoenas and voluntary document requests to third parties for documents. There are significant document productions expected.”

    Patrick

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  25. Oops. Sorry, Ace. I misread your question. In any event, the receiver appears to have plenty of info to keep himself busy and also has published a way to contact him:

    http://zeekrewardsreceivership.com/Contact%20Us.html

    Patrick

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  26. Thanks for that info.

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