URGENT >> BULLETIN >> MOVING: SEC Charges Alleged Zeek Promoter Trudy Gilmond

URGENT >> BULLETIN >> MOVING: (5th Update 9:15 p.m. ET U.S.A.) The SEC has gone to federal court in the Western District of North Carolina and charged Zeek Rewards’ figure Trudy Gilmond with securities fraud, selling unregistered securities and failure to register as a broker-dealer.

Among the allegations: Gilmond knew Zeek was under investigation in 2012 and cashed out without telling investors the “program’s” days likely were numbered. She also is accused of joining with Zeek’s principals in playing word games to sanitize the fraud.

Gilmond, 45, of Vermont, is the first individual Zeek promoter charged in an alleged Ponzi- and pyramid scheme said to have gathered more than $850 million. She previously had been sued by court-appointed receiver Kenneth D. Bell as an alleged “winner” in the scheme.

The Zeek receivership estate was awarded a judgment of more than $2.1 million against Gilmond, who previously promoted the collapsed Regenesis 2X2 scheme investigated by the U.S. Secret Service in 2009.

In its complaint, the SEC said Gilmond is a “self-described network marketer who has participated in numerous MLM programs, operating under the trade name ‘Team Fired Up’ to attract followers and new recruits to join her ‘downline’  in those MLM programs (several of which ultimately collapsed in a fashion similar to ZeekRewards).”

Zeek’s former COO Dawn Wright-Olivares, an SEC civil defendant who also has been charged criminally, recruited Gilmond, the SEC charged.

Bell has raised the issue of MLMers or direct marketers moving from one fraud scheme to another. Gilmond now joins MLM promoter Matthew John Gagnon as a roving huckster pursued by both a receiver and the SEC. Gagnon also was pursued by criminal authorities.

It perhaps never has been more dangerous for hucksters to move from scheme to scheme to scheme. Serial promoters Faith Sloan and Sann Rodrigues were charged by the SEC in the TelexFree Ponzi- and pyramid case and also are being pursued by class-action attorneys. Rodrigues, who once claimed God invented MLM and “binary,” also has been hit with criminal charges of immigration fraud.

The SEC later tied Rodrigues to Daniel Fernandes Rojo Filho, an alleged fraudster from DFRF Enterprises who previously was tied to the infamous EMG/Finanzas Forex Ponzi scheme.

With respect to Gilmond, the SEC described her as “one of the most successful and prolific promoters of ZeekRewards. From at least September 2011 until ZeekRewards was shut down in August 2012, Gilmond worked closely with the company founders and served as a senior ‘field liaison’ to promote the scheme, persuading scores of unsophisticated retail investors to buy ZeekRewards securities upon the promise of profit sharing. Gilmond reaped more than $1.7 million in transaction-based commissions and bogus profit-sharing for her recruiting efforts.”

Some of the specific allegations against Gilmond in the SEC complaint (italics added/editing performed):

Based on Gilmond’s efforts and the misstatements on the website, many of Gilmond’s team members ultimately purchased the ZeekRewards securities, earning Gilmond substantial commissions.

As a field liaison, Gilmond had access to portions of ZeekRewards’ internal electronic investor database so that she could make adjustments to individual accounts to address her affiliates’ concerns or complaints. Among other things, Gilmond had the ability to adjust the number of “points” earned and could assign downline recruits to certain affiliates, both of which impacted the measure of profit sharing or commissions paid to those affiliates. In addition, Gilmond developed close ties with Wright-Olivares and other ZeekRewards insiders, which gave her unique access and insight not available to a typical investor.

Having worked closely with the company founders and insiders to promote the scheme in her role as a senior field liaison, and given her prior experience with similar MLM programs that ultimately collapsed, Gilmond knew or should have known that the ZeekRewards scheme’s outsize returns (averaging 1.5% per day) were too good to be true and could not be sustained.

Gilmond also helped conceal from investors and regulators the true nature of the ZeekRewards scheme. To that end, Wright-Olivares and others directed, and Gilmond helped implement, several superficial or nominal changes to certain ZeekRewards features. 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.

Aware that ZeekRewards was under investigation by several law enforcement agencies and that the business was in serious trouble in 2012, Gilmond and others withdrew substantial sums of money from the scheme before it was shut down, without advising investors that the scheme was likely to collapse.

Read the SEC statement and complaint against Gilmond.

NOTE: Our thanks to the ASD Updates Blog.