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  • 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

    Zeek receiver Kenneth D. Bell at a Dec. 13, news conference in Lexington. N.C. Source: Screen shot from video at receivership website.
    Zeek receiver Kenneth D. Bell at a Dec. 13 news conference in Lexington, N.C. Source: Screen shot from video at receivership website.

    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.

  • EDITORIAL: Zeek Jungleland Exposed: A Brilliant Disguise No More

    zeekmemday

    “So tell me what I see when I look in your eyes. Is that you baby or just a brilliant disguise?” — Bruce Springsteen, Jersey Shore poet, lyricist, singer, musician, philanthropist and American icon. From “Brilliant Disguise” on the “Tunnel of Love” album, Columbia Records, 1987

    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.

    “[A]nd the poets down here don’t write nothing at all, they just stand back and let it all be.” — Bruce Springsteen. From “Jungleland” on the “Born to Run” album, Columbia Records, 1975

  • URGENT >> BULLETIN >> MOVING: Zeek Rewards Figures Dawn Wright-Olivares And Daniel Olivares Charged Criminally, Sued Civilly

    Dawn Wright-Olivares. Source: Cropped section of 2012 online promo for Zeek.
    Dawn Wright-Olivares. Source: Cropped section of 2012 online promo for Zeek.

    URGENT >> BULLETIN >> MOVING: (21st update 5:49 p.m.) Zeek Rewards figures Dawn Wright-Olivares and Daniel Olivares of Clarksville, Ark., have been charged criminally by federal prosecutors in the Western District of North Carolina and sued civilly by the SEC.

    Among the criminal allegations are tax-fraud conspiracy and investment-fraud conspiracy, according to a charging document. Wire fraud also is alleged. Zeek’s Zeekler arm is called a “sham internet based penny auction company” in the charging documents. Zeek’s Zeek Rewards arm is called a “purported advertising division.”

    Wright-Olivares has agreed to plead guilty to investment-fraud conspiracy and to tax-fraud conspiracy, federal prosecutors said this afternoon. Daniel Olivares has agreed to plead guilty to investment-fraud conspiracy.

    Daniel Olivares is the 31-year-old stepson of Wright-Olivares, 45. Zeek operated from Lexington, N.C., with Wright-Olivares at one time serving as its COO. The court docket in the criminal case notes a plea agreement.

    Information published by the government suggests Daniel Olivares had been in plea negotiations with prosecutors since at least July 29, 2013, before finalizing a deal yesterday. Wright-Olivares, meanwhile, appears to have finalized a deal on Nov. 22, 2013.

    The deals suggest that Wright-Olivares could be sentenced to a maximum of 10 years in federal prison and Olivares five years. Both deals contemplate cooperation from the defendants. Wright-Olivares, according to plea papers, is represented by Brian S. Cromwell and Sarah F. Hutchins. Olivares is represented by S. Frederick Winiker III. All three attorneys are specialists in white-collar defense.

    Zeek operated through Paul R. Burks and Rex Venture Group LLC. A “P.B.” is referenced in the Wright-Olivares/Olivares charging documents as an “Un-indicted co-conspirator.”

    Wright-Olivares allegedly received Zeek and Rex payouts through an entity known as Wandering Phoenix LLC, according to the charging documents.

    “Wright-Olivares was a marketing and operational mastermind behind the scheme and Olivares was the chief architect of the computer databases they used,” said Stephen Cohen, an associate director in the SEC’s Division of Enforcement.  “After they learned ZeekRewards was under investigation by law enforcement, they accepted substantial sums of money from the scheme while keeping investors in the dark about its imminent collapse.”

    Wright-Olivares has settled the civil action by agreeing to “pay at least $8,184,064.94,” the SEC said.

    Olivares settled by agreeing “to pay at least $3,272,934.58,” the SEC said.

    The settlement amounts, the SEC said, “represent the entirety of their ill-gotten gains plus prejudgment interest.”

    Meanwhile, the SEC said that the Zeek fraud “raised more than $850 million from approximately one million investors worldwide.”

    The dollar sum is about $250 million higher than the SEC’s original estimate in August 2012.

    From the SEC complaint (italics/bolding added):

    [Zeek operator Paul] Burks provided the daily dividend rate to Olivares, who then entered it into the ZeekRewards databases to establish each affiliate investor’s daily award (communicated to affiliates through the ZeekRewards website). Wright-Olivares and Olivares learned that the daily dividend rate was fabricated by Burks and not actually calculated based on “daily net profits” or any actual company earnings, as represented to investors. In fact, in several instances when Burks was unavailable, Wright-Olivares instructed Olivares to enter daily dividend rates to mimic the payout from a prior week, without any regard for the company’s actual earnings.

    Precisely when Wright-Olivares and Olivares allegedly learned that Burks had fabricated the daily payout rate is unclear. In a bizarre radio interview in June 2012, Wright-Olivares maintained that Burks “manages all that.”

    In the criminal charging document, prosecutors say that Zeek employed a so-called “80/20 VIP Bid Strategy” to keep adequate cash on hand to “make the daily Ponzi payments to victim-investors.” Under such 80/20 plans, investors are encouraged to keep 80 percent of their money in an enterprise and to withdraw no more than 20 percent in cash.

    Zeek’s 80/20 program, prosecutors said, caused liabilities to mushroom in August 2012 to approximately $2.8 billion. Zeek, however, had only about 11 percent of that sum on hand. The SEC said in an emergency enforcement action in August 2012 that Zeek was teetering on collapse because of ever-accumulating, unfunded liabilities.

    Meanwhile, according to the criminal charging documents, Rex, Zeek Rewards and Zeekler failed to file any corporate tax returns or any corporate tax payments to the IRS.

    And for the 2011 tax year, according to the charging documents, “P.B.,” Wright-Olivares and others reported to the IRS that Zeek investors had received more than $108 million from the scheme when Zeek had paid out only about $13 million.

    This caused Zeek victims to file “false tax returns with the IRS reporting phantom income that they never actually received,” according to the charging documents.

    Zeek used the “false tax notices to perpetuate the Ponzi scheme,” according to the charging document.

    “This case shows that the appearance of success can be a mask for a tangled financial web of lies” said Richard Weber, chief of IRS Criminal Investigation. “The underlying structure can fall apart at any time and leave many investors in financial ruin.”

    Added Paul Morrissey, assistant director of investigations for the U.S. Secret Service: “As today’s technology continues to evolve, cybercriminals use these advances and enhancements to perpetrate an expanding range of crimes. As we have seen with this case, even with the increasing complexity of online Ponzi schemes, it remains difficult for criminals to remain anonymous. The Secret Service continues to seek new and innovative ways to combat emerging cyber threats.”

    U.S. Attorney Anne M. Tompkins is supervising the criminal prosecution. The Zeek investigation is ongoing, her office said in a statement.

    As part of the criminal case, prosecutors are seeking the forfeiture of $850 million.

    NOTE: Our thanks to the ASD Updates Blog.

  • A PROFITABLE SUNRISE-LIKE SCHEME: American ‘Hard Money’ Ponzi Fugitive Who Fled To Brazil Arrested in Panama While Trying To Cross Border Into Costa Rica, Orange County (Calif.) District Attorney Says

    ponziblotterThomas Franklin Tarbutton, a purported “hard-money lender” who operated a $3 million Ponzi scheme in California and fled to Brazil, was detained by authorities Dec. 14 in Panama while trying to cross the border into Costa Rica, the office of Orange County (Calif.) District Attorney Tony Rackauckas said.

    Tarbutton, 54, of Newport Beach, was held in Panama on a 2011 U.S. warrant and has been returned to the United States, prosecutors said. He is listed as an inmate at the Central Men’s Jail in Orange County.

    Twenty-nine felony counts have been filed against him, prosecutors said.

    Bail was set at $2 million, and Tarbutton must “prove that the money is from a legal and legitimate source before posting bond,” prosecutors said.

    His company, Villa Capital Inc., operated as a “hard-money lender” with “private investors,” positioning itself as as an outlet for “borrowers looking for funds from non-bank lenders,” prosecutors said.

    PP Blog readers may recall the alleged Profitable Sunrise pyramid scheme was positioned in largely the same fashion. Profitable Sunrise may have gathered tens of millions of dollars using offshore conduits, the SEC said in April 2013.

    From a statement by Orange County prosecutors on the arrest of Villa Capital Inc.’s Tarbutton (italics added):

    Between 2004 and 2010, Tarbutton is accused of operating Villa Capital Inc. as a “hard money” lender by soliciting money from private investors for borrowers looking for funds from non-bank lenders. The defendant is accused of defrauding nine people in a Ponzi real estate fraud scheme. A “Ponzi” scheme is a fraudulent scheme that offers investors high, short-term returns on investments. Instead of using the money to generate actual income and legitimate profits, the money from the investors is kept for the benefit of the defendant or used to repay earlier investors.

    Tarbutton is accused of embezzling from his private investors by keeping the money they lent for borrowers and not funding the loans as promised. He is accused of providing his victims with fraudulent and forged real estate documents from the Orange County Clerk-Recorder Department showing that they were lien holders on property deeds. He is accused of supplying investors with false and forged mortgage payments and fraudulent documents of investment of the mortgage payments. The defendant is accused of supplying investors with small interest payments using funds from their initial investment to prevent them from discovering that the loans had not been repaid. He is accused of stopping all payments when the real estate market collapsed.

  • URGENT >> BULLETIN >> MOVING: Judge Approves Filing Of Lawsuits Against Alleged Zeek Insiders, Winners

    breakingnews72URGENT >> BULLETIN >> MOVING: (2nd update 3:21 p.m.) Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina has issued an order authorizing the court-appointed receiver to file lawsuits against alleged Zeek insiders and winners.

    Receiver Kenneth D. Bell asked for the order last week. He is expected to file the complaints soon.

    Mullen has scheduled an initial conference for the parties Jan. 27 at 2 p.m. in Courtroom 3 of the Charles R. Jonas Federal Building in Charlotte. He further ordered parties to preserve evidence, including “documents, data and tangible things.”

    Visit the ASD Updates Blog. Read the order.

  • MORE FROM MLM LA-LA LAND: (1) ‘Totally Wild Cover Story’ Puff Piece On TelexFree Promoter Doesn’t Reference TelexFree By Name And Doesn’t Mention Pyramid-Scheme Probe; (2) Cash-Gifting, A Bill-Counting Machine And ‘Economically Sovereign’ Individuals; (3) Jesus — (Again)

    From the Scott Miller puff piece in Home Business Advertiser.
    From the Scott Miller puff piece in Home Business Advertiser.

    UPDATED 11:23 A.M. ET (U.S.A.) The November/December issue of Home Business Advertiser carries a puff piece on TelexFree promoter Scott Miller. The one-page article, described by the publication as a “totally wild cover story,” does not reference TelexFree by name. Nor does the piece mention that TelexFree is the subject of a pyramid-scheme probe in Brazil and that a judge and prosecutor reportedly have been threatened with death.

    Rather, the piece provides a link to a page featuring a YouTube promo for TelexFree that, like the puff piece, doesn’t mention the Brazil probe and police investigations into the death threats. The 8:47 video solicits viewers to send TelexFree sums of up to $15,125 and claims prospects can earn money without selling anything.

    “We’re paid to advertise our company and products and build a team if you choose to sponsor. [Sponsoring] is not necessary,” according to the video.

    Like the puff piece, the video solicitation does not reference TelexFree by name.

    Lower sums such as $289 and $1,375 also are solicited in the video. Viewers are told that $15,125 will return at least $1,100 a week for a year. Meanwhile, according to the video, $289 will fetch at least $20 a week for a year, and $1,375 will bring in “never less than 100 bucks a week for a year.”

    From the Home Business Advertiser  puff piece (italics added):

    After a couple years of looking, Scott finally found an opportunity that allowed people to achieve success without having to sell anything or sponsor people. In fact, he now has over 14,472 positions in his group and 100% of those are now earning money every week! He even has one team member who is on track to make $200,000/year and hasn’t sponsored a single person . . . If you are interested in running a successful home business, but do not want to have to sell anything or sponsor any people . . . then this could be the perfect home business for you.

    A photo of the cover of Home Business Advertiser featuring Miller now appears on a Facebook pitch site for TelexFree styled “TelexFreeInUSA.” Info on the Facebook site suggests that Miller has gone from the 14,472 positions reported in the puff piece to “OVER 25,400 Positions Under Me! 100% Of Them Being Paid Weekly!”

    The puff piece on Miller appears on Page 30 and includes a link to a domain styled ThePaidWeeklyRevolution.com upon which the YouTube solicitation appears. Page 31 appears to consist of a companion ad from Miller that in part claims, “AS OF OCT. 10, 2013 14,472 HAVE JOINED ME 100% OF THEM ARE . . . BEING PAID EVERY WEEK!”

    Page 69 of Home Business Advertiser appears also to consist of an ad from Miller. This one appears to slam an unidentified MLM company:

    “100% COMMISSIONS?” it questions. “LMAO! ONLY 1% EVER MAKE A SALE! (READ THEIR INCOME DISCLOSURE) FORGET 100% COMMISSIONS.”

    The ad does not explain precisely why Miller apparently believes it imprudent it to join the unidentified “100% COMMISSIONS” program while he apparently believes it prudent to join TelexFree, an “opportunity” under investigation in Brazil and accused in Peru of gathering money unlawfully.

    News of the Miller puff piece in Home Business Advertiser was received late yesterday.

    Two days ago, the court-appointed receiver in the Zeek Rewards Ponzi scheme case auctioned off two plaques showcasing a Zeek puff piece that appeared in Network Marketing Business Journal in 2011. About a year after the NMBJ piece appeared, the SEC described Zeek as a $600 million Ponzi and pyramid scheme that had duped recruits into believing the money they’d been receiving came from an underlying, highly profitable business.

    Zeek constituted a “classic” Ponzi scheme in which cash from investors was simply “going to the earlier investor,” the SEC charged.

    TelexFree, which has a Zeek-like advertising component, may be operating in similar fashion. Whether the “program” is under investigation in the United States is unknown. Zeek had been under investigation in the United States for at least four months before the probe that led to its collapse was revealed in August 2012.

    Some Zeek members might have been confused by puff pieces that appeared in NMBJ in the summer of 2011 and the spring of 2012.

    The 2011 puff piece and accompanying plaques were auctioned Tuesday in Zeek’s home base of Lexington, N.C., as part of a bid to raise money for defrauded Zeek investors.

    On its website, Home Business Advertiser informs readers that it also can arrange advertising in NMBJ and other publications.

    One of the ads in the November/December issue of Home Business Advertiser is for something called “TooDamnEasy,” an apparent-cash gifting “program” in which a video pitchman tells viewers that they are looking at a stack of $100 bills totaling $60,000.

    The ad in Home Business Advertiser crows, “I don’t care what anybody says — when you can have a $60,000 yearly salary, delivered in cash, to your front door, in one day, by overnight courier … THAT’S SOME POWER THAT WILL BLOW YOUR MIND AND WILL TAKE THE AVERAGE PERSON SOME TIME TO GET USED TO!”

    As part of the pitch, the narrator inserts stacks of $100 bills in a Semacon cash-counting machine. He goes on to explain that he sometimes purchases cars for cash. The deck on the TooDamnEasy page reads, “Yearly Salaries Delivered Daily. In Cash. By Overnight Courier. 6 Days A Week.”

    “What I’m selling you is freedom,” the narrator intones.

    Two Connecticut women were sentenced to federal prison earlier this year for their roles in promoting a cash-gifting pyramid scheme and tax fraud.

    A LinkedIn profile for a user known as TooDAMNEASY.com reads in part, “To be ‘economically sovereign’ means that you’re a self-governing individual, who is financially self-sufficient and not indebted or controlled in any way, by an outside source such as credit cards, loans, interest, etc. This means that you exist as an individual who owns and controls his or her labor and income.”

    A column in Home Business Advertiser that appears to be unrelated to TelexFree and TooDamnEasy positions Jesus Christ as the person who inspired modern network marketers through his recruitment of 12 disciples.

    Images of Jesus Christ have appeared in promos for TelexFree and WCM777, an “opportunity” that became the subject of a securities investigation in Massachusetts and appears to have high-tailed it out of the United States. The state said the WCM “program” was targeted at the Brazilian community.

    Images of Jesus Christ also appeared in promos for Profitable Sunrise, which may have gathered tens of millions of dollars and funneled the cash offshore, according to an SEC fraud complaint filed in April 2013.

    This Semacon cash-counting machine appears as a stage prop in a cash-gifting video advertised in Home Business Advertiser.
    This Semacon cash-counting machine appears as a stage prop in a cash-gifting video advertised in Home Business Advertiser.

  • Public Citizen, Nonprofit Consumer Group, Sues KlearGear.com, Firm That Allegedly Fined Utah Couple $3,500 For Posting Negative Review Online

    recommendedreading1EDITOR’S NOTE: The case described below is apt to be followed closely by First Amendment advocates and companies trying to avoid PR calamities.

    Public Citizen has gone to federal court in Utah, alleging that Michigan-based KlearGear.com effectively fined a Utah couple $3,500 after the wife posted a negative review of KlearGear at RipoffReport.com after her husband never received a desk toy and a keychain he’d ordered as Christmas gifts in 2008.

    The items were valued at less than $20, including shipping, and never arrived from KlearGear, according to the complaint.

    KlearGear also is accused in the lawsuit of causing a debt collector to go after the couple and of lying to credit-reporting agencies when asserting the debt was valid.

    Named defendants were KlearGear of Grandville, Mich., and Fidelity Information Corp. of Los Angeles. The plaintiffs are John Palmer and Jennifer Kulas of Layton, Utah.

    “A company may not retaliate against a customer for a critical review by demanding money under a penalty clause in contractual fine print or by wrecking the customer’s credit,” said Scott Michelman, a Public Citizen attorney.

    From Public Citizen (italics added):

    In December 2008, John attempted to make a purchase on the KlearGear.com site, but the order was never delivered. His wife Jennifer then wrote a critical review on RipoffReport.com. In 2012, the company contacted John and demanded $3,500 pursuant to a non-disparagement clause contained in the website’s terms of use, which purported to prohibit “any action that negatively impacts KlearGear.com [or] its reputation.”

    However, the non-disparagement clause did not appear in the terms of sale when John did business with the company; it was added more than three years later. And even if it had been present at the time of John’s transaction, the clause would be unenforceable under basic principles of contract law and the First Amendment, Public Citizen explains in the suit.

    Among the issues in the case is whether a retailer such as KlearGear can enforce so-called “non-disparagement clauses” though contract language that asserts its customers owe it money if they complain online. Public Citizen has taken the view that KlearGear’s alleged behavior chills the First Amendment and is “unconscionable” and unenforceable as a matter of law.

    Whether other direct-sales companies such as the collapsed FastProfitsDaily scheme would monitor the KlearGear case is unclear. FastProfitsDaily once threatened recruits with a $500 fine if they filed a chargeback. Other MLM-like “programs” also have threatened recruits with fines for trying to leave the “programs.”

    Look for this phrase online: “ALL Purchases are FINAL and NO REFUNDS or CHARGEBACKS are allowed. Any attempts to acquire a refund or chargeback constitute theft and fraud, and are grounds for legal prosecution.”

    Some of the sites on which this phrase appears threaten $500 chargeback fines. Others threaten $100,000 fines for linking to content or portions thereof.

     

     

  • TOMORROW (DEC. 17) AT THE ZEEK AUCTION: Branded Ponzi History Up For Bid: Coffee Mugs, Water Bottles, Key Chains, Refrigerator Magnets — And Plaques Of Network Marketing Business Journal Puff Pieces

    zeeknmbjIt won’t be quite like buying Bonnie and Clyde’s fateful getaway car, but it still will represent a purchase of American crime or fraud history. In Lexington, N.C., tomorrow — on the second and final day of the court-approved Zeek Rewards auction — pieces of MLM Ponzi-scheme history will be put up for bid.

    And in Zeek’s case, it’s branded history: cases of water bottles with Zeekler.com branding, cases of coffee mugs with ZeekRewards branding, cases of key chains with Zeekler branding, cases of refrigerator magnets with Zeekler branding.

    The taglines on the Zeek coffee mugs read, “save money — make money.”

    Auctioneers also have put something called the “Zeek-Israel Jerusalem Trophy” up for bid.

    Also on the auction list are plaques of Zeek puff pieces that appeared in the July-August 2011 edition of Network Marketing Business Journal. Here’s the headline: “Record savings, record earnings with Zeekler’s entertainment shopping experience.”

    NMBJ is published by Keith Laggos, a touting defendant in a 2004 SEC case who later became a figure in both the Zeek Ponzi-scheme story and the AdSurfDaily Ponzi story.

    About a year after the July-August 2011 NMBJ article appeared, the SEC alleged that Zeek was a $600 million Ponzi and pyramid fraud. ASD was a $119 million Ponzi scheme exposed by the U.S. Secret Service in 2008.

    Plenty of gift cards, furniture, computer equipment and other items linked to Zeek also are up for bid tomorrow.

    In terms of the number of victims — somewhere on the order of 800,000 — Zeek is believed to be the largest Ponzi scheme in U.S. history.  Kenneth D. Bell is the court-appointed receiver.

    See PP Blog story from earlier today on Day 1 of the Zeek auction.

    The Day 2 auction begins at 9 a.m. ET tomorrow, Dec. 17, 2013.

     

  • Watch Bidding Action In The Zeek Auction LIVE!

    Zeek Rewards auction
    Item from the Zeek Rewards auction

    UPDATED 5:14 P.M. ET U.S.A. The court-approved auction in the Zeek Rewards Ponzi scheme case is being conducted today and tomorrow. Bidding already is under way — and you can observe it live.

    We just observed bidding for an autographed poster of Loretta Lynn start out at $100. Competitive bids flowed in, and the poster appears to have been sold for $170.

    To observe the live bidding today, go here. You’ll proceed to a page at IronHorseAuction.com in which the words “VIEW BIDS” appear on the left side near the top. Click on those words. You’ll then proceed to a page at ProxiBid.com. An “ENTER LIVE AUCTION” button will appear. Click on that, and you’ll be able to see live bids until today’s auction runs its course.

    Check here tomorrow (Dec. 17) and follow the procedure outlined above.

    Zeek is believed to have created more victims than any other Ponzi scheme in U.S. history. The auction is part of a court-appointed receiver’s efforts to gather money for victim’s of Zeek’s alleged $600 million fraud.

    Kenneth D. Bell is the receiver.

  • BULLETIN: Peru Issues Alerts On TelexFree, WCM777

    breakingnews72EDITOR’S NOTE ADDED AT 4:59 P.M. DEC. 14 AND UPDATED 8:39 A.M. ET (DEC. 16, U.S.A.): The URLs below now should be clickable. If not, they can be copied and pasted into the location bar of your browser. We apologize for the earlier formatting errors. Original story below . . .

    BULLETIN: The government of Peru has advised media outlets that the TelexFree and WCM777 MLM “programs” were raising money unlawfully in the country.

    Peruvian media are reporting the story in Spanish:

    Story URLs:

    http://www.andina.com.pe/Espanol/noticia-empresas-wcm777-y-telexfree-no-estan-autorizados-para-captar-dinero-del-publico-486768.aspx

    http://www.rpp.com.pe/2013-12-12-sbs-world-capital-market-777-y-telexfree-no-pueden-captar-depositos-noticia_654727.html

    Google translations to English:

    http://translate.google.com/translate?sl=auto&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.andina.com.pe%2FEspanol%2Fnoticia-empresas-wcm777-y-telexfree-no-estan-autorizados-para-captar-dinero-del-publico-486768.aspx%23.UqzFZ-JljIo

    http://translate.google.com/translate?sl=auto&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&u=http%3A%2F%2Fwww.rpp.com.pe%2F2013-12-12-sbs-world-capital-market-777-y-telexfree-no-pueden-captar-depositos-noticia_654727.html

    WCM777 exited the U.S. market under fire in November. Affiliates, however, still may be trying to cherry-pick U.S. money.

    TelexFree is under investigation in Brazil, amid allegations it is conducting a massive pyramid scheme. U.S. affiliates, however, have continued efforts to recruit Americans. Promotions for TelexFree also are appearing in other countries.

    News of the TelexFree and WCM777 alerts in Peru comes as the court-appointed receiver in the U.S.-based Zeek Rewards MLM scheme is preparing to sue potentially thousands of Zeek insiders and winners for the return of as much as $283 million. Zeek may have scores of former promoters in Brazil. How many of them are potential lawsuit targets is unclear.

    In August 2012, the U.S. Securities and Exchange Commission said Zeek was a $600 million Ponzi and pyramid scheme that potentially had scammed hundreds of thousands of people. An auction of Zeek-owned property will be conducted Monday and Tuesday in Lexington, N.C. The auction, coupled with the lawsuits, is a means of gathering as much money as possible for victims.

    In November, Jaime Delgado, a member of Peru’s Congress, raised concerns about WCM777. The “program” also is under investigation in Colombia.

     

  • DEVELOPING STORY: Ghastly Campaign On Facebook To Intimidate TelexFree Prosecutor In Brazil May Be Under Way

    ponzinews1Facts are sketchy, but there are disturbing reports in Brazilian media today that someone with a Facebook account used it to claim falsely that a prosecutor involved in the TelexFree pyramid-scheme probe had been murdered. The bogus report was supplemented by photos of a mutilated body purported to be that of the prosecutor.

    Investigators in Brazil are treating the matter as an effort to intimidate the prosecutor, according to media accounts in Portuguese.

    TelexFree has been under investigation in Brazil since at least June. There have been reports of death threats directed at a prosecutor and a judge.

    But apparent efforts to menace officers of the court are only one symptom of the disconnect that accompanies TelexFree, an MLM “program” that some U.S. affiliates say triples or quadruples money in a year.

    The PP Blog has observed recent instances in which apparent TelexFree members hoping to gain recruits spammed Comments threads below stories in Brazilian media that reported on the suicide deaths of two TelexFree members in the country.

    New TelexFree registrations are blocked in Brazil. Certain TelexFree assets have been frozen. Pitchfests, though, continue in other countries. Some promos have encouraged Brazilians to pose as residents of the United Kingdom to evade the limitations imposed in Brazil and sign up for the “program.”

    TerraMagazine possibly was the first outlet to report the disturbing news about the false reports about the murder of a prosecutor. There’s also a report on cbnfoz.com.br. (See Google Translation from Portuguese to English.)