Summary of Todd Disner’s alleged Zeek winnings. Source: Exhibit by court-appointed receiver.
Zeek Rewards “winner” Todd Disner owes the receivership estate $2,079,757.88, according to a motion asking the court clerk to enter a default judgment.
Receiver Kenneth D. Bell filed for the judgment July 9 in federal court for the Western District of North Carolina, seeking not only Disner’s alleged Zeek haul of $1,800,037.06, but also interest of $279,720.82.
Zeek’s records show that Disner paid $11,810.49 into the “program,” beginning with an initial outlay of $480 on March 4, 2011, shortly after Zeek started business.
From that initial outlay and others, $1,811,847.55 flowed back to him, the receiver advised Senior U.S. District Judge Graham C. Mullen and the court clerk. The lion’s share of Disner’s outlay — $10,000 — was paid to Zeek on July 6, 2012. Zeek collapsed six weeks later, on Aug. 17, 2012.
Disner’s last Zeek withdrawal totaled $102,617.73 and occurred on July 30, 2012, less than three weeks prior to the SEC action that spelled doom for the “program.” His largest withdrawal, according to the receiver’s filing, was for $177,026.27 on July 9, 2012.
A former AdSurfDaily Ponzi pitchman who once sued the United States for alleged misdeeds in the ASD case, Disner regularly withdrew tens of thousands of dollars at a time from Zeek, according to the receiver’s filing.
Zeek operated as part of Rex Venture Group.
Bell also filed today for clerk’s default judgment against alleged winners David Sorrells and Michael Van Leeuwen. The receiver is seeking $1,197,241.12 from Sorrells, including $157,672.63 in interest. Meanwhile, he is seeking $1,617,444.99 from Van Leeuwen, including $213,012.07 in interest.
Disner’s unsuccessful lawsuit against the United States for allegedly violating his right to privacy in the ASD case was docketed on Nov. 7, 2011.
Bell’s filing shows that Zeek paid Disner $7,199.49 on the same day.
BULLETIN: (UPDATED 9:55 A.M. EDT, JULY 3, U.S.A.) The court-appointed receiver in the Zeek Rewards Ponzi- and pyramid case has moved for default against alleged Zeek winner Todd Disner. Disner, of Miami, also was a pitchman for the 2008 AdSurfDaily Ponzi scheme, a $119 million fraud that put ASD operator Andy Bowdoin in federal prison.
Disner received more than $1.875 million through Zeek, receiver Kenneth D. Bell alleged. Zeek launched after the U.S. Secret Service exposed the ASD Ponzi scheme. ASD was a 1-percent-a-day scam. Zeek, according to court filings, sucked in participants with claims payouts averaged more than 1.4 percent a day over the course of a week.
Bell said in court filings today that Disner was among a number of Zeek winners who have failed to plead or otherwise defend against the clawback lawsuits filed against them in February. June 30 was the deadline for filing responsive pleadings.
The receiver also is seeking default against alleged Zeek winner and clawback defendant Michael Van Leeuwen, also known as “Coach Van,” of Fayetteville, N.C., and David Sorrells of Scottsdale, Az. Van Leeuwen allegedly received more than $1.4 million through Zeek, and Sorrells allegedly received more than $1 million.
Meanwhile, Bell also is seeking default against alleged Zeek insider Darryle Douglas of Orange, Calif.
Douglas received more than $1.975 million from Zeek, Bell said in court filings in February.
From a promo for Zeek online in 2012. The “program” operated through Rex Venture Group and later was charged by the SEC with selling unregistered securities as investment contracts.
EDITOR’S NOTE: On Feb. 5, 2014, Zeek figures and alleged insiders Dawn Wright-Olivares and Daniel Olivares pleaded guilty to federal crimes. Wright-Olivares pleaded guilty to investment-fraud conspiracy and tax-fraud conspiracy. Olivares pleaded guilty to investment-fraud conspiracy. Federal prosecutors in the Western District of North Carolina are maintaining an information site here.
Kenneth D. Bell, the court-appointed receiver in the SEC civil case, also is the special master in the criminal prosecution. The charging document in the criminal case references unnamed “co-conspirators” who are “known and unknown” to federal prosecutors.
UPDATED 5:10 P.M. EDT U.S.A. In court filings apt to find favor in MLM HYIP Ponzi Land, some alleged “winners” in the Zeek Rewards “program” have tried to turn the tables on the court-appointed receiver by claiming he owes them “treble” damages for alleged violations of the North Carolina Unfair and Deceptive Trade Practices Act.
Similar claims were made from the sidelines of the AdSurfDaily MLM Ponzi scheme in 2008. Some ASD members contended that then-Florida Attorney General Bill McCollum should be charged with Deceptive Trade Practices, apparently for having the temerity to bring a pyramid-scheme action against ASD.
Other ASD members contended at the time that federal prosecutors and a U.S. Secret Service agent should be investigated and charged with crimes for their roles in the ASD Ponzi prosecution.
Among the alleged winners in Zeek who’ve filed a counterclaim against receiver Kenneth D. Bell are Rhonda Gates of Nashville, an alleged winner of more than $1.425 million; Durant Brockett of Las Vegas, an alleged winner of more than $1.72 million; and Aaron and Shara Andrews of Lake Worth, Fla., alleged winners of more than $1 million through a Florida shell entity known as Innovation Marketing.
In addition to claiming Bell owes them damages for Deceptive Trade Practices, the counterclaimants assert Bell interfered in contracts with payment processors such as Payza and NXPay and violated their rights under the Fourth Amendment to the U.S. Constitution.
Bell sued them in late February, alleging in a clawback action that their gains were illicit because Zeek was illicit. He also sued several other Zeek alleged winners, including former ASD members Todd Disner of Miami and Jerry Napier of Owosso, Mich. Disner allegedly received more than $1.875 million through Zeek; Napier allegedly received more than $1.745 million.
Disner, in 2011, sought unsuccessfully to sue the United States for alleged violations of his Fourth Amendment rights in its prosecution of the ASD Ponzi case. His co-plaintiff in the case was Dwight Owen Schweitzer, whom filings by Bell described as a Zeek winner of more than $1,000. Several alleged Zeek winners ventured into the “program” after earlier stints at ASD, including Terralynn Hoy, a Florida MLMer who moderated a forum that called purported “sovereign” being Curtis Richmond a “hero” for his efforts to derail the civil-forfeiture action against ASD-related assets.
Richmond, a Californian, was a member of a “sham” Utah “Indian” tribe that once sought to have U.S. Marshals serve bogus arrest warrants against federal judges. ASD figure Kenneth Wayne Leaming later was arrested by an FBI Terrorism Task Force, after allegedly harboring federal fugitives from a separate home-business caper, being a felon in possession of firearms and filing false liens against a judge and prosecutors involved in the ASD case.
Other alleged Zeek winners sued by Bell in clawback litigation include Trudy Gilmond of St. Albans, Vt. (more than $1.75 million); Darren Miller of Coeur d’Alene, Idaho (more than $1.635 million); Michael Van Leeuwen, also known as “Coach Van” of Fayetteville, N.C. (more than $1.4 million); David Sorrells of Scottsdale, Az. (more than $1 million); T. Le Mont Silver Sr. of Orlando, Fla. (more than $773,000 under at least two user names, and more than $943,000 through a Florida shell entity known as Global Internet Formula Inc. with one or more Zeek user names); Karen Silver, Silver’s wife (more than $600,000); David and Mary Kettner of Peoria, Az. (more than $930,000 via one or more user names and shell companies known as Desert Oasis International Marketing LLC and Kettner & Associates LLC); and Lori Jean Weber of Land O’Lakes, Fla. (more than $1.94 million through a shell company known as P.A.W.S. Capital Management LLC.)
Whether other alleged winners would join Gates, Brockett and Aaron and Shara Andrews in asserting claims for damages against Bell was not immediately clear.
What is clear is that a legal war has broken out over Zeek, with alleged winners challenging Bell’s clawback claims by asserting Zeek wasn’t selling unregistered securities as alleged in 2012 by the SEC, that they worked for the money they received or were due, that the alleged winners were not investors, that the SEC’s case against Zeek cannot withstand scrutiny under the “Howey Test” for what constitutes a security, that the SEC had a duty to catch Zeek much earlier — and, in any event and if all else fails, attorneys Bell sued last week and Bell himself are to blame for the unpleasantness.
From Brockett’s June 30 “affirmative defenses” to the receiver’s clawback claims (italics added):
The Receiver has filed suit against two attorneys who provided legal advice to [Zeek operator Rex Venture Group] and Affiliates, including Brockett. Brockett relied on that advice in concluding that RVG was a legitimate business and in committing over $100,000 in his personal resources to grow his now defunct business. Because Brockett’s damages were caused in part by the conduct of the two lawyers, Brockett is entitled in equity at and at law to a credit for all money the Receiver recovers from the two attorneys as a result of his claims against them.
Also from Brockett’s “affirmative defenses” (italics added):
On information and belief, the SEC knew or should have known of the RVG Ponzi scheme, but delayed unreasonably in its prosecution of claims against RVG. Alternatively, the SEC knew for some time that RVG was operating as a Ponzi scheme but intentionally delayed disclosing that information to Affiliates and to the public. That unreasonable delay has prejudiced Brockett because he has paid taxes on the money he earned working on behalf of RVG, contributed a significant portion of his earnings to his retirement plan, and has incurred business expenses as a part of his work on behalf of RVG. The Receiver in this action stands in the SEC’s shoes and also delayed to Brockett’s detriment and now seeks return of all monies Brockett earned in connection with RVG, with no credit for the taxes or business expenses that Brockett legitimately paid, but that could have been avoided had the SEC or the Receiver timely advised Brockett of RVG’s true nature or acted in a more expeditious manner.
And from Brockett’s counterclaims against the receiver (italics added/editing for space performed):
On information and belief, RVG was not involved in the sale or marketing of any securities, so the SEC was without jurisdiction and the Court did not have subject matter jurisdiction over the SEC Action. Consequently, the appointment of the Receiver was void and of no effect, and all of the Receiver’s actions in his capacity as receiver for RVG have been unlawful and without justification . . .
RVG’s and the Receiver’s conduct described above and in the Complaint constitutes unfair methods of competition, unfair trade practices, and deceptive trade practices in violation of the North Carolina Unfair and Deceptive Trade Practices Act, N.C. GEN. STAT. § 75-1.1, et seq.
The conduct was illegal, offends public policy and is immoral, unethical, oppressive, unscrupulous, and deceptive.
Bell, the Zeek receiver, is a former federal prosecutor who once received a prestigious award from the U.S. Department of Justice for his work prosecuting a Hezbollah terrorist cell operating in North Carolina.
But some of the alleged Zeek winners now describe him with adjectives that could peel paint.
And as they do this, they seek to gut or circumvent the SEC’s authority to prosecute HYIP schemes while contending the agency fumbled the ball in investigating and prosecuting Zeek — that is, if anything was worth investigating and prosecuting at all.
It is a narrative apt to go over well in MLM HYIP Ponzi Land, the latest major expression of which is TelexFree, a rabbit hole case if ever there was one.
URGENT >> BULLETIN >> MOVING: (8th Update 2:40 p.m. ET March 4, U.S.A.) The court-appointed receiver in the Zeek Rewards Ponzi- and pyramid-scheme case has sued alleged insiders and net winners, including members of the 2008 AdSurfDaily Ponzi scheme.
Parts of the complaint read like a re-living of the ASD scheme, with Zeek Receiver Kenneth D. Bell alleging Zeek’s penny-auction arm (Zeekler) was in trouble early on and that Zeek operator Paul Burks borrowed money from another insider to keep things going. The fraud later expanded massively, Bell alleged.
At one point, according to Bell, former Zeek COO Dawn Wright-Olivares “excitedly” told Burks, “I think we can blow this OUT together — we’ve already attracted a great many big fishes.”
But the insiders “were aware that the payouts to Affiliates would be funded by new participants rather than retail profits from the penny auctions,” Bell alleged.
Named defendant “insiders” were Burks of Lexington, N.C.; Wright-Olivares of Clarksville, Ark.; Daniel Olivares of Clarksville, Ark.; the estate of the late Roger Anthony Plyler of Charlotte; Alexandre “Alex” de Brantes, the husband of Wright-Olivares and a resident of Clarksville, Ark.; and Darryle Douglas of Orange, Calif.
Burks, the receiver alleged, received “in excess” of $10 million from Zeek; Wright-Olivares received more than $7.8 million; Daniel Olivares received more than $3.1 million; Plyler, who once lent money to Burks, received more than $2.3 million; Douglas received more than $1.975 million. An amount was not listed for de Brantes.
Named winners were former AdSurfDaily member Todd Disner of Miami (more than $1.875 million); former ASD member Jerry Napier of Owosso, Mich. (more than $1.745 million); Trudy Gilmond of St. Albans, Vt. (more than $1.75 million); Durant Brockett of Las Vegas (more than $1.72 million); Darren Miller of Coeur d’Alene, Idaho (more than $1.635 million); Rhonda Gates of Nashville (more than $1.425 million); Michael Van Leeuwen, also known as “Coach Van” of Fayetteville, N.C. (more than $1.4 million); David Sorrells of Scottsdale, Az. (more than $1 million); T. Le Mont Silver Sr. of Orlando, Fla. (more than $773,000 under at least two user names, and more than $943,000 through a Florida shell entity known as Global Internet Formula Inc. with one or more Zeek user names).
One of Silver’s usernames was “mentor,” Bell alleged.
Also named winners were Karen Silver, Silver’s wife (more than $600,000); veteran HYIP pitch team Aaron and Shara Andrews of Lake Worth, Fla. (more than $1 million through a Florida shell entity known as Innovation Marketing); David and Mary Kettner of Peoria, Az. (more than $930,000 via one or more user names and shell companies known as Desert Oasis International Marketing LLC and Kettner & Associates LLC); Lori Jean Weber of Land O’Lakes, Fla. (more than $1.94 million through a shell company known as P.A.W.S. Capital Management LLC).
Bell also sued a “Net Winner Class” of as many as 9,000 U.S. residents or entities who allegedly harvested illicit gains of $1,000 or more from Zeek. Lawsuits against international winners will come later, Bell said.
In December 2013, Wright-Olivares and Olivares were charged criminally. They pleaded guilty last month for their roles in the scheme and are liable for more than $11.4 million in restitution and penalties, the SEC said.
As the SEC previously alleged, Zeek relied on a so-called “80/20” program to sustain the Ponzi deception. Bell today built on that theme. From the complaint against insiders (italics added/spacing modified):
Dawn Wright-Olivares explained and promoted the plan in a Skype chat as follows:
Here’s a scenario here where you could be receiving $3,000 per month RESIDUALLY. Let’s use a 1% daily cash-back figure in this example (Please note: This is only an example and the actual amount will vary day to day).
When you reach 50,000 points in your account, then you could start doing an 80/20 cash-out plan. Pay close attention? When you hit 50,000 points in your account, if the daily cash-back percentage is 1%, ZeekRewards will be awarding you with $500.00 each day. First of all, did you catch that? … you’re making $500 per day … it’s your money! Ok, the 80/20 plan works like this, take 80% of that $500 (or $400) and purchase more VIP bids to give away to new customers as samples to continue growing your points balance.
Then, keep doing what you’ve been doing every day, which primarily consists of giving free bids away as samples and placing one free ad per day for Zeekler.com’s penny auctions and submitting into your ZeekRewards back office. Then, pull out 20% of the $500 (or $100) and request a check weekly. That’s $700 per week, or about $3,000 per month in residual income! And keep in mind, these amounts can continue to grow day after day and month after month.
HYIP schemes, including ASD and Zeek, often implement deceptions such as 80/20 programs as part of a bid to reduce cashout amounts to let the scheme continue to live. Insiders and veteran Ponzi pushers typically know they’re a crock.
Daniel Olivares, Bell said, has a Zeek user name of “dcolive.”
On June 14, 2012, about two months prior to the collapse of Zeek, RealScam.com moderator and PP Blog poster “Glim Dropper” posted a link on the PP Blog that established a tie between Zeek promoters and ASD promoters. ASD was a $119 million Ponzi scheme operated by now-jailed operator Andy Bowdoin.
RealScam.com is an antiscam forum.
The link “Glim Dropper” posted was at a URL styled “dcolive.com.”
From “Glim Dropper’s” observations at the time (italics added):
I’d draw your attention to about five minutes into the call when Dawn recalls a conversation with Jerry Napier. Jerry was quoted as loving ZR and never wanting to have to build another organization with another program and mentioned a previous program and the litigation it was still facing and he mentioned “similarities” between ZR and that previous program.
It is common in the HYIP sphere for promoters to move from one fraud scheme to another.
Napier’s exposure to ASD is unknown. But the Zeek receiver now says Napier received illicit gains of more than $1.745 million. The alleged illicit Zeek gains of former fellow ASD member Todd Disner are even higher: $1.875 million.
Precisely how many ASD members went on to join Zeek is unclear. What is clear is that both firms used similar business models and sweetened the deal for certain members.
Bell alleged today that Zeek had a “Sweet 16” deal in which participants paid $999 to mine even more “passive” gains.
“The Sweet 16 was another means by which [Rex Venture Group] made payments on a passive investment,” Bell alleged. “It did not involve the sale of a product, nor did it require a member to recruit other participants into the program.”
Disner once filed suit against the United States, alleging its ASD Ponzi case was a “tissue of lies” and a “house of cards.” A federal judge tossed the lawsuit, after Bowdoin pleaded guilty to wire fraud and admitted ASD was a Ponzi scheme.
URGENT >> BULLETIN >> MOVING: (UPDATED 5:27 P.M. ET DEC. 16 U.S.A. ) The court-appointed receiver in the Zeek Rewards Ponzi scheme case has advised a federal judge that he intends to sue Zeek operator Paul R. Burks and five alleged insiders, amid allegations they developed and operated a colossal fraud, breached their fiduciary duties, converted and wasted corporate assets and enriched themselves unjustly.
Included with Burks as alleged insiders are former Zeek COO Dawn Wright-Olivares, Daniel Olivares, Roger Plyler, Darryle Douglas and Alexandre “Alex” De Brantes. De Brantes and Wright-Olivares are husband and wife.
Receiver Kenneth D. Bell suggested the lawsuit could be filed within days and has asked Senior U.S. District Judge Graham C. Mullen to approve the filing of the complaints.
And in a move that could send shockwaves across the HYIP Ponzi landscape, Bell advised Mullen that he intends to sue alleged net winners Todd Disner and Jerry Napier, both of whom were AdSurfDaily Ponzi pitchmen. Disner, Bell advised the court, is associated with an entity known as Kestrel Spendthrift Trust and will be sued in his individual capacity and in his capacity as trustee for Kestrel.
How a spendthrift trust somehow became involved in Zeek could not immediately be determined. Such trusts typically exist to protect the assets of individuals who may be irresponsible with money.
Also on Bell’s defendants’ list are legendary hucksters T. LeMont Silver, Aaron Andrews and Shara Andrews. The Andrews are known as “Team Aaron Shara.”
Other alleged Zeek winners Bell advised the court he intends to sue include Trudy Gilmond, Trudy Gilmond LLC, Darren Miller, Rhonda Gates, David Sorrells, Innovation Marketing LLC, Global Internet Formula Inc., Karen Silver, Michael Van Leeuwen, Durant Brockett, David Kettner and Mary Kettner.
Lawsuits will not be limited to just these 17 alleged winners, Bell advised the court. The plan, he said, was to sue “those who received at least $1,000 more from ZeekRewards than they paid in.”
Their profits “came from the scheme’s victims,” Bell said, proposing to the judge that they be treated as a “defendant class of the remaining ‘net winners.’”
The final list of defendants is expected to include many names. Bell has asked the court to impose the rules of complex litigation and to order an initial conference to be held as early as Jan. 13.
Gilmond’s clawback exposure may exceed $1.364 million, according to court filings in December 2012. Sorrells’ exposure may exceed $943,000. The Kettners may have exposure that exceeds $1 million.
How much exposure the other prospective defendants have was not immediately clear.
What is clear is that Zeek’s alleged $600 million Ponzi- and pyramid scheme that was popularized in part on infamous Ponzi forums could land promoters in court soon.
After the U.S. Secret Service exposed the $119 million ASD Ponzi scheme in 2008, Disner sued the United States — and lost. Disner’s lawsuit was filed even as he was promoting Zeek, a “program” that planted the seed it paid out even more than ASD’s 1 percent a day. Alongside the SEC, the Secret Service also is investigating Zeek.
Among Disner’s contentions when he sued the government over its ASD-related actions was that the Ponzi case was a “house of cards” and a “tissue of lies.”
ASD operator Andy Bowdoin, however, later admitted ASD was a Ponzi scheme and that his company never operated lawfully from its inception in 2006 through its collapse in 2008.
Bowdoin, now 79, was sentenced in August 2012 to 78 months in federal prison. He pleaded guilty to wire fraud in May 2012, after prosecutors produced evidence that Bowdoin had participated in at least two other MLM fraud schemes while out on signature bond and awaiting trial in the ASD Ponzi case.
URGENT >> BULLETIN >> MOVING: Senior U.S. District Judge Graham C. Mullen has denied a motion by Zeek Rewards affiliates aligned with Robert Craddock to appoint an “examiner.”
Craddock’s Fun Club USA and Zeek members and alleged “winners” David Sorrells, David Kettner and Mary Kettner asked for their attorney — Michael Quilling of Dallas — to be appointed examiner late last year. Mullen said no today.
“First of all, it is readily apparent to the Court that such an examiner would be unable represent the interests of both the net winner and net loser affiliates, two groups with inherently adverse interests,” Mullen said in an order dated today. “Secondly, the Court is of the opinion that appointing an examiner would cause unnecessary and significant depletion of the assets of the receivership.”
Although Craddock has sought to demonize Zeek receiver Kenneth D. Bell, Mullen today said the court had “utmost confidence” in Bell.
“The receiver is working diligently to maximize and protect the assets and the Court has utmost confidence in the receiver’s efforts,” Mullen wrote.
The Kettners and Sorrells potentially have about $1.94 million in combined clawback exposure, according to court filings.
Both the SEC and Bell opposed the appointment of Quilling.
In a blistering memo in December, the SEC accused Craddock of encouraging Zeek affiliates “not to cooperate” with Bell. Craddock has not been charged with wrongdoing.
BULLETIN: (UPDATED 2:34 P.M. ET U.S.A.) The court-appointed receiver in the Zeek Rewards Ponzi scheme case has advised a federal judge that he “has obtained information indicating that large sums of Receivership Assets may have been transferred by net winners to other entities in order to hide or shelter those assets.”
The dramatic assertion by receiver Kenneth D. Bell that Zeek winners may have hidden cash appeared in a motion to Senior U.S. District Judge Graham C. Mullen to compel certain alleged Zeek “winners” to produce documents in advance of anticipated clawback actions.
Bell’s move may send shudders across the HYIP sphere because it signals an effort to unmask bids by willfully blind hucksters and professional Ponzi players — known derisively as “pimps” — to benefit from serial scamming on a national and international scale. It is known, for instance, that some Zeek participants also pitched AdSurfDaily, which the U.S. Secret Service described in 2008 — at least two years before the launch of Zeek — as an international Ponzi scheme that had gathered tens of millions of dollars.
ASD operator Andy Bowdoin pleaded guilty to wire fraud in May. In August, he was sentenced to 78 months in federal prison.
HYIP schemes thrive in part because serial scammers race from scheme to scheme to scheme while turning blind eyes to obvious markers of fraud, including purported returns that dwarf the marketplace and are unusually consistent. Zeek planted the seed that it provided a daily return of between 1 percent and 2 percent. In August, the SEC said Zeek’s payout “consistently has averaged approximately 1.5% per day.”
Zeek operator Paul R. Burks, the SEC charged, “unilaterally and arbitrarily” determined the daily dividend rate to give “investors the false impression that the business is profitable.”
In 2009, the U.S. Secret Service effectively accused Bowdoin of doing the same thing. ASD purported to pay 1 percent a day. In August 2012, the Secret Service said it also was investigating Zeek. Court filings in the ASD case show that some members of ASD established entities through which to receive proceeds from ASD. One was described as a “ministry of giving,” for instance. Another was described as a nonprofit religious entity.
The Secret Service described ASD as a “criminal enterprise” that directed tainted proceeds potentially to thousands and thousands of participants while scamming the very people it purported to be helping earn money through its 1-percent-a-day revenue-sharing “program.”
Zeek also described itself as a revenue-sharing program and, like ASD, preemptively denied that anything untoward was occurring. Burks did not contest the SEC’s case against his firm, neither admitting nor denying wrongdoing. ASD’s Bowdoin eventually acknowledged that he was at the helm of a massive Ponzi scheme and that ASD had never operated lawfully from its inception in 2006 through it collapse in 2008.
Bell also revealed in the filing that he had filed paperwork in “all” 94 U.S. federal court districts to inform judges and court officials that he was presiding over the receivership ordered by Mullen in August after the SEC described Zeek as a $600 million Ponzi- and pyramid scheme operated through Rex Venture Group LLC (RVG) and Burks. The move was designed to consolidate jurisdiction over clawback actions in a single place: Mullen’s courtroom in the Western District of North Carolina, the home base of Zeek.
Among other things, Bell is seeking “All documents constituting or relating to any communication involving or related to RVG.”
“The Receiver has asked for these documents to learn more about how the recipient was involved in Zeek, portrayed the scheme to others, solicited others, and otherwise conducted activities related to Zeek,” Bell said in court filings.
Meanwhile, Bell is seeking “All documents constituting or related to any communication to any affiliate, vendor, customer or client of RVG related to RVG.” At the same time, he is seeking “Documents sufficient to show all user names, passwords, email addresses and accounts used . . . in connection with RVG.”
That information is needed because many “individuals used multiple user names, and this information will clarify which user names a given net winner used,” Bell advised Mullen. “In addition, the account information will help to allow the Receiver to verify the financial figures calculated from RVG’s records.”
Bell’s motion to compel specifically references Zeek affiliates Robert Craddock, David Sorrells, David Kettner and Mary Kettner as the recipients of subpoenas from the receivership. In October, Bell mailed a first wave of subpoenas to about 1,200 Zeek affiliates. He effectively is seeking the same information from them that he is seeking from Craddock, the Kettners and Sorrells.
Craddock, the Kettners and Sorrells “have failed to produce any of the documents requested by the Receiver despite multiple requests,” Bell advised Mullen. “Therefore, the Receiver has filed a motion to compel production of a portion of the documents originally requested by the Receiver.”
The Kettner and Sorrells potentially have nearly $2 million in combined clawback exposure, according to court filings. Craddock’s exposure is unclear. He has referred to himself as a Zeek “consultant.”
One of the authorities Bell pointed to in advance of Zeek clawback actions and in his motion to compel the production of documents is a case involving Michael Quilling, an attorney for Craddock, the Kettners and Sorrells. Quilling himself has presided over SEC receiverships.
Bell pointed out to Mullen that Quilling once sued the estate of a a deceased individual who’d received proceeds from the Frederick J. Gilliland Ponzi scheme in 2002. That lawsuit was filed on the same legal theory Bell is pursuing in the Zeek case: that recipients of fraudulent proceeds from a Ponzi scheme are not entitled to keep them.
“The ZeekRewards scheme has claimed hundreds of thousands of victims who lost hundreds of millions of dollars at the hands of the scheme’s winners who solicited their participation. Now, apparently not appreciating the irony, the lawyer for hundreds of the largest net winners asks the Court to pay him to be an ‘examiner’ or ‘representative for the affiliates,’ yet again at the expense of the scheme’s victims. The requested appointment is unnecessary and ill-advised because it would duplicate and complicate this Court’s, the Receiver’s, and the SEC’s efforts to compensate the victims, not to mention directly reduce the Receivership Assets available to pay them. Furthermore, the individual whom the net winners recommend for appointment (or more correctly who recommends his own appointment) ignores the inherent conflict of interest in seeking to somehow represent both the scheme’s ‘winners’ and ‘losers,’ two groups with irreconcilably adverse interests.” — Zeek receiver Kenneth D. Bell, Dec. 17, 2012
Section from an email received by the court-appointed receiver in the Zeek Rewards Ponzi scheme case. The note asks the receiver to oppose efforts by Zeek winners to intervene in the case. Source: federal court files.
Shortly after the SEC described Zeek Rewards on Aug. 17 as a $600 million Ponzi- and pyramid scheme, Zeek figure Robert Craddock solicited donations purportedly to hire an attorney and form a “protected” group of affiliates. Whether Zeek losers gave to the effort conducted at ZTeamBiz through Fun Club USA, Craddock’s Florida-based entity, remains unclear.
Today the court-appointed receiver effectively was asking the same question. His conclusion was that they could not — and he asked Senior U.S. District Judge Graham C. Mullen to reject a contention by certain Zeek “winners” that they could.
“The net winners have already been put on notice that they will be asked to return their winnings to the Receiver for reimbursement to the net losers,” Bell said in court filings. “On the other hand, the net losers hope that they can recoup some of their losses from the gains of the scheme’s net winners . . . Thus, the winners and losers are plainly opposed in their respective interests regarding the winners’ efforts to keep their winnings.”
Presumptive Zeek clawback targets Dave Kettner, Mary Kettner and David Sorrells asked Mullen last month to appoint Dallas attorney Michael Quilling as “examiner” over all Zeek affiliates. That should not be permitted to happen, Bell contended, because Quilling “has appeared in this case already as an attorney for Fun Club USA and represents the interests of those net winners.”
In a bid to bolster his claim, Bell cited Craddock ties to Dave Kettner through ZTeamBiz and quoted from a letter attributed to Kettner.
“In a similar vein, Mr. Kettner sent a letter seeking donations from affiliates that stated, “The SEC has tried to make us all believe that Zeek Rewards was an ‘investment’ and a Ponzi scheme. All the pages that were submitted by the SEC indictment [sic] has [sic] all been one sided and what we believe to be a misrepresentation of the truth and facts of what Zeek Rewards was as a viable and legal business,” Bell advised the judge in a footnote that included the URL to ZTeamBiz.
Beyond that, Bell argued, the Craddock entity, the Kettners and Sorrells had no standing in the case brought by the SEC.
And Bell said he has heard from Zeek members who want him to oppose the appointment of Quilling as examiner.
Here, according to Bell, is a passage from one such Zeek member who contacted Bell after learning about the “examiner motion”:
As one of the many losers in Zeek Rewards I wish to encourage you to do whatever is possible to block the motion filed on behalf of Fun Club USA (Robert Craddock) David & Mary Kettner and David Sorrells, asking that their personal attorney Michael J Quilling be appointed as the Examiner to oversee and represent the interest of ALL former Zeek Rewards affiliates.
To many of us this is just another way for another attorney firm to slow up your process of recovery and to diminish the amount of funds to be returned to those of us who are in hopes of being able to recover some of our losses.
Personally I feel that their agenda is also to help block your efforts to recover funds from the 1200 who received subpoenas.
The Kettners and Sorrells potentially have exposure of nearly $2 million in receivership clawback litigation, Bell said.
At least two apparent Zeek winners represented by attorney Ira Lee Sorkin also oppose the appointment of Quilling as examiner, according to filings last week.
Todd Disner, a Zeek affiliate and figure in the AdSurfDaily Ponzi scheme story, once was on a conference call with Craddock.
Reports now have surfaced that Craddock is pitching a “program” known as Offer Hubb that uses a Wyoming mail drop as its address. Disner’s name was listed on the Offer Hubb pitch, according to BehindMLM.com.
URGENT >> BULLETIN >> MOVING: (3RD UPDATE 11:33 P.M. ET (U.S.A.) Famed defense attorney Ira Lee Sorkin is seeking pro hac vice admission to practice in U.S. District Court for the Western District of North Carolina on behalf of two prospective clawback targets in the Zeek Rewards Ponzi scheme case.
Sorkin is with Lowenstein Sandler PC in New York. He perhaps is best known as Ponzi schemer Bernard Madoff’s defense counsel. Sorkin also is the former head of the SEC’s New York regional office.
Sorkin’s clients are Zeek affiliates Trudy Gilmond and Kellie King, and Sorkin is arguing that Zeek did not sell securities and that the receivership should be dissolved.
Gilmond is the prospective target of a clawback action for more than $1.364 million, with receiver Kenneth D. Bell asserting she put in only $3,105, according to Sorkin’s motion. King potentially faces a claim from Bell for more than $205,180 after paying in only $1,492, Sorkin said in the filing.
Sorkin, according to a separate motion, also contests how the receiver issued subpoenas and is opposing a motion late last month by Dallas attorney Michael J. Quilling to be appointed “examiner.”
Quilling sought “to represent the collective interests of the Affiliates and all creditors of the receivership estate” and desired to “be compensated out of the receivership estate,” Sorkin argued.
But that should not be permitted to happen, Sorkin contended.
From Sorkin’s motion (italics added):
It is quite clear from the Receiver’s Preliminary Liquidation Plan and the defective subpoena issued to Ms. Gilmond that Qualified Affiliates have inherently conflicting positions as to one another, and thus cannot be jointly represented. To illustrate, it is in the interests of a Qualified Affiliate who is a “net-winner” to challenge the Receiver’s authority to clawback funds because the Receiver intends to use the “net-winner’s” money to pay net-losers. To the contrary, it is in the interests of a Qualified Affiliate who is a net-loser to support the Receiver’s efforts because the Receiver will take money from the “net-winner” and distribute it to the “net-loser” Qualified Affiliate. As such, an Examiner cannot be appointed to represent all of the Qualified Affiliates because the Examiner would have clients with inherently contradictory positions as to one another.
The motion by Sorkin potentially puts Gilmond and King at odds with positions taken by Quilling clients and potential Zeek clawback targets Dave Kettner, Mary Kettner and David Sorrells. The Kettners and Sorrells, for example, moved to have Quilling appointed examiner.
The Kettners and Sorrells potentially have a combined clawback exposure of nearly $2 million, according to court filings.
Zeek records, according to letters from Bell cited by the trio, suggest Sorrells received $945,539 from Zeek while paying in only $1,695. Dave Kettner received $537,577.95 while paying in only $1,378, and Mary Kettner received $465,866.67 while paying in only $1,495.
“[Zeek operator Paul] Burks is solely responsible for determining the amount of ‘net profits’ to share in the Retail Profit Pool . . . Defendants represent that daily awards are calculated by dividing ‘up to 50%’ of daily net profits by the number of Profit Points outstanding among all Qualified Affiliates. This calculation results in a daily dividend paid to each Qualified Affiliate that consistently has averaged approximately 1.5% per day . . . In fact, the dividend bears no relation to the company’s net profits. Instead, Burks unilaterally and arbitrarily determines the daily dividend rate so that it averages approximately 1.5% per day, giving investors the false impression that the business is profitable.” — From the SEC complaint in the Zeek Rewards Ponzi scheme case, Aug. 17, 2012
“The most successful Affiliates worked the hardest, placed numerous ads, and explained the Zeekler.com penny auction to groups of people several times a month. Some of the Movants, for example, traveled extensively to maintain contact with their network of peers and to educate them, among other things, on how to be successful in the program. These Movants’ successes were a direct result of the amount of time and effort they poured into the effort to promote the penny auction.” — Zeek Affiliates Dave Kettner, Mary Kettner and David Sorrells, Dec. 11, 2012
Although the SEC accused Rex Venture Group LLC/Zeek Rewards operator Paul R. Burks in August of conducting a massive Ponzi scheme and duping members into believing he was presiding over a business that created enormous profits legitimately, three members of the MLM “program” with potentially millions of dollars in ill-gotten gains subject to clawback aren’t buying it.
At stake for Dave Kettner, Mary Kettner and David Sorrells of Arizona is at least $1.94 million they allegedly earned in the “program” through hard work, according to court filings.
Zeek was a legitimate venture, they argued in filings dated Dec. 11. And it was no Ponzi scheme, they advised Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina. Mullen is presiding over the Zeek Ponzi scheme case brought by the SEC Aug. 17.
It was not immediately clear whether the Kettners and Sorrells were the recipients of payouts from Zeek’s Retail Profit Pool (RPP) or commissions for sponsoring new members — or some combination of both. The RPP also is known as the Retail Points Pool.
What is clear, according to their filings, is that each received a letter and subpoena from Zeek Receiver Kenneth D. Bell that paint them as potential clawback targets. The information about the sums Bell is seeking is contained within exhibits filed by the Kettners and Sorrells.
Zeek records, according to letters from Bell cited by the trio, suggest Sorrells received $945,539 from Zeek while paying in only $1,695. Dave Kettner received $537,577.95 while paying in only $1,378, and Mary Kettner received $465,866.67 while paying in only $1,495.
Bell has said Zeek created approximately eight losers for each winner. The SEC described Zeek as a $600 million Ponzi and pyramid scheme that potentially defrauded more than 1 million people.
The PP Blog is working on a related story about assertions by the Kettners and Sorrells that significant sums of money that belong to them effectively are trapped in NxPay, a payment processor used by Zeek. More later . . .
