That something can become an embarrassment to an entire nation — while somehow not becoming one to an entire industry — is the most important takeaway from the monumentally bizarre tale of Zeek Rewards.
Involuntarily forced by the SEC last year to abandon Zeek’s criminally gushing spigot, some of Zeek’s greatest purported “leaders” simply took their winnings and hitched their wagons to other MLM HYIP scams-in-progress. Those actions finally are catching up to them. The court-appointed receiver in the Zeek Ponzi- and pyramid case is expected to start suing them within hours for being the beneficiaries of tens of millions of dollars in fraudulent transfers.
Some Zeek insiders and winners may have criminal exposure. Two were charged criminally last week, marking the first instance in the long-running Zeek probe in which the prospect of jail time has been used publicly as a deterrent.
And this brings us to today, Christmas Day 2013.
There is no holiday joy or bogus claims of patriotism today in the criminal and prefelony wings of Zeekland. A ticking clock now has fully replaced the outrageously tacky Zeek penny-auction flag, an insult to free-market commerce masked as a call to liberty. That Zeek wrapped itself in Old Glory while ripping off tens and tens of thousands of Americans and other peoples of the world made its $850 million fraud a crime for the ages. Active civil and criminal investigations continue on at least five fronts. Zeek’s jungleland has been exposed, its brilliant disguise is in tatters.
Mysteries remain. When the SEC went to federal court last week to charge former Zeek COO Dawn Wright-Olivares with securities fraud and selling unregistered securities and her stepson (Daniel Olivares) with securities fraud, the agency left dangling the answer to a most-intriguing question: When did Dawn and Daniel find out Zeek’s dividend that averaged about 1.5 percent daily “bore no relation to the company’s net profits” and that Zeek operator Paul R. Burks allegedly had “unilaterally and arbitrarily” determined the payout?
In its Wright-Olivares/Olivares civil complaint filed Dec. 20, five days before Christmas, the SEC says the pair found out while they were working for Zeek that Burks allegedly was concocting figures to scam the Zeek masses — but the agency doesn’t say precisely when the Olivareses learned.
The SEC’s “unilaterally and arbitrarily” line about Burks strikes us as a polite way of saying he made up the numbers out of thin air. One would think that any COO worth the title would have questioned from Day One the numbers Burks supplied. Such unusually consistent and utterly preposterous daily gains were obvious markers of fraud, to say the least. And preposterous numbers manufactured from thin air to dupe the MLM masses were a major part of the AdSurfDaily Ponzi prosecution in 2008. If ever there was an MLM cautionary tale, it was the ASD story.
If Wright-Olivares somehow didn’t know about the ASD case and the striking similarities between ASD and Zeek, she ranks among the most clueless American business executives of all time. If she did know about Zeek’s similarities to ASD and turned a blind eye, she is one of the MLM world’s most predatory hucksters.
Although Daniel Olivares, a programmer, conceivably could have argued that his inherent geekiness kept him focused on code rather than the math behind the scheme, such a superficially plausible argument ultimately would have failed. As an MLM executive with a COO title, his stepmother had no argument, not even a superficially plausible one.
The bitter reality for Dawn and Daniel is that there’s no good answer to the “what did they know and when did they know it” question, likely a contributing factor to their decisions to settle with the SEC and to plead guilty to criminal charges filed by federal prosecutors in the Western District of North Carolina. If they discovered early on that Burks was fabricating profitability numbers in the same fashion that jailed ASD Ponzi-schemer Andy Bowdoin had manufactured them in 2008 and earlier, it means that they sat back and watched as Zeek created victims by the tens and tens of thousands in a combined Ponzi- and pyramid scheme and tax fraud.
If they found out later — say, within the final weeks of Zeek’s operation before its August 2012 collapse — it means that they still planned to benefit from the fraud despite the pain Zeek was about to inflict on a community of hundreds of thousands of people. In the settled SEC case filed against Dawn and Daniel last week, the agency alleged that they were “[a]ware that the ZeekRewards was under investigation by several law enforcement agencies and that the business was in serious trouble in 2012.”
Indeed, the agency alleged that “Wright-Olivares, Olivares and others accepted, substantial sums of money from the scheme (or had prior loans forgiven) before it was shut down without advising investors.” The SEC further alleged that once the Olivareses learned Burks was pulling numbers out of a hat, they did the same thing in his absence.
Had the SEC not acted on Aug. 17, 2012, to stop the Zeek Ponzi monster in its tracks, it likely would mean that Zeek would have hosted a wallet-pilfering “Red Carpet” event as planned on Aug. 22. Had Dawn, for example, been in that room on Aug. 22, it very much appears that she’d have been there with full knowledge that she intended to steal from attendees she greeted with a smile. She might have done the same thing at earlier Red Carpet events. The earliest was held on April 18, 2012. Others followed.
Of course, the alleged fabrication of the daily dividend rate makes for interesting conversation, but it was hardly the only concern about Zeek. It is inconceivable that Dawn and Daniel did not understand even before they allegedly learned that Burks had fabricated numbers that Zeek was a Ponzi scheme. The SEC covers these elements thoroughly in its complaint last week. Outtakes (bolding added):
- Both Defendants also learned, and Wright-Olivares and other RVG [personnel] failed to disclose, that without new investor deposits (in the form of VIP Bid purchases and subscription fees), revenues would dwindle substantially as only approximately 2% of daily revenues came from actual retail sales, and the scheme would likely collapse.
- Wright-Olivares knew, and Olivares learned in the course of working for RVG, that daily award payments from the Retail Profit Pool – which were credited to investor accounts, supposedly making such sums available for cash withdrawal – were unsustainable absent a constant influx of new investor money.
- Based on the average 1.5% daily dividend on 3 billion Profit Points outstanding by the time ZeekRewards was shut down in August 2012, ZeekRewards would owe nearly $45 million per day in profit share awards to investors (ZeekRewards Qualified Affiliates) if all investors requested cash rewards instead of points. Both Wright-Olivares and Olivares knew that the company’s actual daily revenues — which averaged approximately $5 million per day (based almost entirely on new affiliate subscriptions and VIP bid purchases) at the time ZeekRewards was shut down – could not support such daily cash payouts, but neither did anything to warn investors.
- In order to discourage investors from withdrawing too much cash from the scheme, Wright-Olivares and other RVG personnel encouraged affiliates to reinvest at least 80% of their daily awards into a point compounder, and to withdraw no more than 20% in cash. By convincing affiliates that they could compound their earnings by reinvesting daily awards, RVG slowed the outflows of cash and sustained the ZeekRewards fraud for longer.
- Wright-Olivares and other RVG personnel failed to disclose to investors that the company would quickly become insolvent if more Qualified Affiliates elected to take daily awards in cash from the Retail Profit Pool rather than converting their awards into ever-increasing accumulated Profit Points.
- Wright-Olivares and other RVG personnel also failed to inform investors of the substantial risk that the Matrix was prone to collapse if the promoters were unable to recruit ever-increasing numbers of paid affiliates into the Matrix pyramid, because, as both Wright-Olivares and Olivares knew, without new investors there would be no source of revenue to pay existing investors.
- In order to conceal from investors and regulators the true nature of the ZeekRewards scheme, Wright-Olivares and others directed several superficial or nominal changes to certain ZeekRewards features, which Olivares implemented. This included removing any references on the website to the terms “investment” and “ROI”; substituting a daily award percentage that in the aggregate approximated 125% every 90 days rather than “guaranteeing” a 125% return; and requiring investors to give away VIP bids to foster the illusion of contributing efforts to the enterprise.
There’s plenty more . . .
As the PP Blog reported in an editorial on June 10, 2012, two months before the collapse of Zeek, Wright-Olivares had been a guest on ACES Radio Live two days earlier, on Friday, June 8, 2012. During the broadcast, she contended to co-hosts Jim Gillhouse and Troy Dooly that “Paul manages all that,” meaning that Burks uniquely managed Zeek’s daily dividend rate and purported revenue-sharing calculations.
If she was telling the truth, it means that she found out only after the broadcast that Burks allegedly had fabricated the numbers. But if she knew prior to uttering those words, it means that she lied to Gillhouse and Dooly and their entire audience of MLMers.
Credit is due Gillhouse for not knuckling under to the Zeek PR machine. He used the radio show to try to get to the truth about Zeek’s murky math and revenue-sharing calculations. Dooly later settled SEC allegations that he failed to disclose that he was part of Zeek’s PR machine when he was delivering Zeek-related puffery on the radio and on his Blog.
It seems clear that the SEC used the radio program to explore the issue of when Wright-Olivares found out that Burks allegedly was manufacturing numbers. At a minimum, the “Paul manages all that” answer gave the agency a starting point at which it could begin the process of pinning down the former Zeek COO. If she goes to prison, her various comments on ACES Radio Live could be part of the reason. There simply was no more wiggle room left for Zeek by that fateful Friday in June 2012, and court filings suggest the SEC probe had begun at least two months earlier, on April 17, 2012, one day prior to Zeek’s first Red Carpet Event.
One or more Zeek insiders could have been spilling the beans to investigators even before the radio program aired.
The danger Zeek posed to investors and the U.S. financial system was untenable, which likely is precisely why the U.S. Secret Service became involved in the Zeek probe after earlier spearheading the ASD probe. It is simply beyond the pale that former ASD investors also became involved in Zeek. Both “programs” polluted banks and financial vendors with tainted proceeds from scams whose rotten cores were fundamentally the same.
The ASD enterprise raked in about $120 million, according to court filings. Zeek gathered at least $850 million, the SEC says. When the proceeds from the two scams are combined, the receipts allegedly total at least $970 million — nearly $1 billion. The combined victims’ count numbers in the hundreds of thousands. Wealth fundamentally was stolen from a vast number of people and placed in the hands of a virtually preordained few.
Perhaps most remarkable of all is that some of the people who involuntarily left Zeek because of the SEC action didn’t miss a beat: They almost immediately starting pushing other “revenue sharing” MLM scams, likely using tainted money from Zeek to buy into those “programs.”
For X number of people in Zeek’s inner circle or in the “net winner’s” club, the “what did they know and when did they know it” question was answered in 2008, when they were promoting AdSurfDaily.
Dawn Wright-Olivares and Daniel Olivares should not take the Zeek criminal fall alone. They had plenty of helpers. ASD’s Andy Bowdoin is sitting in prison at the age of 79 with some of his helpers who went on to help Zeek still on the outside.
If Wright-Olivares, Olivares and Burks go to jail, some of the ASDers who later promoted Zeek deserve to join them there. It was not stupidity; it was willful blindness and incredibly brazen and ongoing criminality ported from one fraud scheme to another. # # #
NOTE TO ‘OZ’: You deserve high praise for your exceptional work on Zeek. Regardless, I have read many comments on your Blog from people who’d prefer that you shill, rather than educate and illuminate. For close to 40 years, I have found inspiration in the line from Bruce Springsteen highlighted below. Here’s hoping it will inspire you if you ever find yourself wondering if you’ve made a difference.
On this Christmas Day, I wish you my best and congratulate you on your 1,000th post at BehindMLM.com. For good measure, I wish you the best piano sounds of Roy Bittan, the best violin sounds of Soozie Tyrell, the best guitar sounds of Nils Lofgren, Garry Tallent and Steven Van Zandt, the best drum beats of Max Weinberg, the best saxophone tones from the late and immortal Clarence Clemons, the combined talents of the gifted but lesser-known players in the E Street Band — and the best Jersey Shore poetry of Bruce Springsteen.
May you always be a giant Exxon sign that gives your fair city light. And may you always remain a writer who doesn’t just stand back and let it all be. Happy Holidays to you, Oz, and to all of my readers.