FOR ZEEKERS: Court-Appointed Receiver Asks Federal Judge To Approve Claims Process, Bar Date — And More

“In examining these facts, the Receiver has determined that because the VIP Points aspect of the multilevel marketing program did nothing more than redistribute funds among Affiliates in Ponzi-scheme fashion, points generated and/or accumulated by Affiliates will not be an includable part of an Affiliate’s claim for purposes of receiving a distribution from the Receivership Estate. Including any of these points as part of any claim of an Affiliate would merely effectuate a continued redistribution of funds from later-investing Affiliates to earlier-investing Affiliates. In other words, these Retail Profit Points were an instrument for the perpetration of the Scheme and will, therefore, not be honored as claims by the Receiver. Instead, the Receiver will solely recognize the actual cash paid to ZeekRewards by or for the benefit of an Affiliate, not Retail Profit Points accumulated by such Affiliates that were ‘earned’ through the perpetration of the Scheme.” — Kenneth D. Bell, court-appointed receiver in the Zeek Rewards Ponzi scheme case, March 29, 2012

In a Good Friday filing, the court-appointed receiver in the Zeek Rewards Ponzi-scheme case has asked a federal judge to approve the claims process and a procedure by which claimants will be notified.

Receiver Kenneth D. Bell also asked Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina to set a deadline for claims to be filed (the “bar date”).

The claims process is largely designed to be handled over the Internet because there may be more than 800,000 claimants, nearly all of whom had an existing electronic relationship with Zeek, Bell advised Mullen.

It is likely to be a bittersweet day for many Zeek affiliates. Some may be be happy because the approval motion means the receivership is advancing the ball down the field, meaning a key milestone has been met in the process of putting money back in victims’ hands. But it also may be a day that brings Zeek’s alleged fraud into fuller focus, causing winces among affiliates who trusted the “program” and their purported upline leaders.

Here is the wince — and it’s one that occurs in Ponzi scheme after Ponzi scheme carried out on the Internet:

Bell advised Mullen that claimants should not be compensated for Zeek’s so-called “Retail Profit Points” (RPP), saying the points “aspect of the multilevel marketing program did nothing more than redistribute funds among Affiliates in Ponzi-scheme fashion.”

And, Bell advised Mullen, “these Retail Profit Points were an instrument for the perpetration of the Scheme and will, therefore, not be honored as claims by the Receiver. Instead, the Receiver will solely recognize the actual cash paid to ZeekRewards by or for the benefit of an Affiliate, not Retail Profit Points accumulated by such Affiliates that were ‘earned’ through the perpetration of the Scheme.”

The process calls for affiliates to provide documentation of their claims. There will be a reconciliation process by which the cash outlay to Zeek will be balanced against the money affiliates may have received from Zeek, Bell advised Mullen.

Visit the receiver’s “Case Documents” page to read the motion to approve the claims process and other filings. (The approval motion is titled, “Receiver’s Motion for Order Seeking Approval of (1) Claims Process, (2) Setting of Bar Date, and (3) Certain Notice Procedures.”

Bell also published a “Letter from the Receiver” today. Read it here. (It is dated 3-29-13.)

In August 2012, the SEC described Zeek as a $600 million Ponzi- and pyramid scheme that had duped people into believing they were earning an average of 1.5 percent a day on their money legitimately.

It may be an especially introspective Easter weekend for some Zeek affiliates, given they also were involved with Profitable Sunrise, now the subject of Investor Alerts or cease-and-desist orders in at least 34 U.S. states or provinces in Canada. The United Kingdom and New Zealand also have issued warnings on Profitable Sunrise, whose website has gone missing.