Zeek Receiver In Process Of Sending Large Batch Of Claim-Determination Notices; ‘Program’ Operated ‘Like World’s Biggest Chain Letter,’ Likely Created Losers On Unprecedented Scale And Resulted In Ill-Gotten Gains In All 94 Federal Districts, Receiver Says

The court-appointed receiver in the Zeek Rewards Ponzi-scheme case has announced he is in the process of sending a batch of more than 80,000 Notices of Claims Determination. This is the first batch of such notices, which the receiver began to issue yesterday. The first batch is expected to take through Dec. 31 to be fully sent.

Zeekers not included in the first group of 80,000 should remain calm.

“Not receiving a Claim Determination notice at this time does not mean that your Claim is not valid,” receiver Kenneth D. Bell said in an update posted on the receivership website and dated Dec. 27. “Certain Claims will take additional time to evaluate and may require us to make further contact with you before we issue a Claim Determination. We are and will be working hard to reconcile all Claims and send all Claims Determination as soon as we are able to do so.”

More than 175,000 claims were filed in the Zeek case, Bell said in Dec. 13 letter.

The sending of the first batch of notices, though good news, does not mean that a distribution from the receivership estate is imminent. What it means is that individuals who receive a notice can log into the Claim Determination Portal to review the determination and follow the instructions provided to either accept or object to the determination. (Read the Dec. 27 update at the receivership website.)

“We’ll be able to get, I think, more than 50 cents on the dollar back to people,” Bell said at Dec. 13 news conference.

One or more distributions may come from the receivership. The first is contemplated for the first quarter of 2014, though more reconciliation work needs to be done before it is scheduled, Bell said.

Top Ponzi Winners’ Alleged Hauls

On the clawback front, Bell said on Dec. 13 that Zeek’s Top 10 net winners each received at least $900,000 from the Ponzi scheme.

The biggest net winner received on the order of $1.8 million, Bell said.

Clawback lawsuits are contemplated against roughly 9,000 net winners in the United States alone, Bell said.

“They’re in all 94 U.S. District Courts, they’re in every state in the country,” Bell said. He noted that the U.S. winners have combined clawback exposure on the order of $200 million.

Another 6,000 or so net winners are not U.S. residents and may have exposure of “several tens of millions of dollars,” Bell said.

“We are trying to figure out who we can sue and where,” Bell said of Zeek’s international winners.

Zeek operated through Rex Venture Group LLC of Lexington, N.C.

‘Like The World’s Biggest Chain Letter’

“This Ponzi scheme is just fascinating to me in a lot of ways,” Bell said of Zeek. “It only lasted for about 20 months, from January 2011 [to] mid-August of 2012. During that time, it brought in something north of $800 million from about 900,000 people from 100 countries around the world. I mean, it’s like the world’s biggest chain letter, if you will.”

The AdSurfDaily Ponzi scheme exposed by the U.S. Secret Service in 2008 brought in about $120 million and ensnared about 100,000 participants, also in less than two years of operation. Zeek, which launched after ASD was exposed and had promoters in common with ASD, appears to have brought in more than seven times the dollar volume of ASD while roping in about nine times the number of participants.

More than $850 million was directed at Zeek, the SEC said last week.

Zeek and ASD both operated MLM “programs” and had strikingly similar business models. Although ASD posed logistical challenges to the U.S. courts and victims seeking restitution, Zeek’s enterprise appears to have established an unprecedented challenge.

Bell has called Zeek “one of the largest — if not the largest — Ponzi and pyramid schemes in history.”

On Dec. 20, federal prosecutors charged former Zeek COO Dawn Wright-Olivares and former Zeek programmer Daniel Olivares criminally, marking the first criminal prosecutions in the case. The SEC sued Wright-Olivares and Olivares civilly on the same day. The former Zeek pair settled with the SEC, agreeing to pay more than $11.4 million.

On the criminal side of things, Wright-Olivares agreed to plead guilty to investment-fraud conspiracy and tax-fraud conspiracy. Olivares agreed to plead guilty to investment-fraud conspiracy.

The SEC sued Zeek operator Paul R. Burks in 2012.

Various Zeek probes are ongoing, investigators said last week.

Bell said that most individuals who filed Zeek claims “did an excellent job.” He added, however, that some individuals filed “fraudulent claims” and that some “net winners” appear to have filed claims that state losses.

“We want to make sure we’re not paying claims to people who ought to be paying the money back to the receivership,” Bell said.