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Tag: Kenneth D. Bell

  • UPDATE: As Proposed Money-Saving Measure, Zeek Receiver Asks Judge To Treat Oct. 8 Preliminary Liquidation Plan As Status Report; Meanwhile, Yet Another Zeek Member Declares Herself A Fraud Victim

    A woman who described herself as a Zeek victim filed copies of postal receipts in federal court today. Source: Screen shot of federal court files. Redaction by PP Blog.

    UPDATED 8:26 A.M. EDT (OCT. 31, U.S.A.) Saying it would save money, the court-appointed receiver in the Zeek Rewards Ponzi scheme case has asked a federal judge to treat the receiver’s Oct. 8 preliminary liquidation plan as a status report. (See Oct. 9 PP Blog story.)

    Separately, yet another Zeek member has declared herself a victim of the alleged $600 million Zeek fraud scheme operated by Paul R. Burks and Rex Venture Group LLC. Two other Zeek members effectively did the same thing earlier this month. On Aug. 17, the SEC alleged that Zeek was a massive Ponzi- and pyramid scheme that potentially fleeced more than 1 million people.

    In August, Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina ordered receiver Kenneth D. Bell to file the first status report in the case by Oct. 30. Among other things, status reports inform judges about the efforts under way to recover proceeds linked to alleged fraud schemes and return them to victims.

    In the Zeek case, status reports are due within 30 days of the end of a quarter — for example, the third quarter of the calendar year ended Sept. 30, making the first Zeek status report due Oct. 30. The second is due Jan. 31, 2013, a month after the end of the fourth quarter of the calendar year on Dec. 31, 2012.

    Bell said in court filings today that the information in the Oct. 8 report included “the same information” due today.

    “Given that a separate Quarterly Status Report would be redundant, and in the interest of preserving Receivership assets, the Receiver respectfully requests that the Court order that the Preliminary Liquidation Plan be treated as the Receiver’s First Quarterly Status Report,” Bell petitioned Mullen.

    Mullen had not acted on the request by late this afternoon, according to the docket of the case.

    How Zeek enthusiasts on Ponzi-scheme boards such as TalkGold and MoneyMakerGroup will react to Bell’s request was not immediately clear. One-percent-a-day (or more) schemes such as Zeek gain a head of steam in part because willfully blind scammers who populate the Ponzi cesspits position the “programs” as legitimate.

    The demonization of Bell on the Ponzi boards and elsewhere began shortly after the SEC brought the Zeek case. As was the case in the AdSurfDaily prosecution brought by the U.S. Secret Service in 2008, some Zeek members have claimed that the government is manufacturing victims where none exist. The ASD and Zeek Ponzi schemes fetched a combined sum of at least $719 million, nearly three-quarters of a billion dollars, according to court filings.

    Both frauds operated as classic Ponzi schemes that recycled money from members to create the illusion of sustainability and profitability, according to investigators.

    Both Zeek and ASD were promoted on forums listed in federal court filings as places from which Ponzi schemes are promoted. Earlier schemes promoted on the forums include Legisi and Pathway To Prosperity, which gathered a combined sum of more than $140 million and affected tens of thousands of people, according to court filings.

    Legisi operator Gregory McKnight faces sentencing next month in his Ponzi scheme case. Alleged Pathway To Prosperity operator Nicholas Smirnow, meanwhile, is listed by INTERPOL as a wanted fugitive. As was the case with Zeek, the SEC and Secret Service led the Legisi probe. The U.S. Postal Inspection Service brought the Smirnow/Pathway to prosperity case, saying the scam affected individuals in 120 countries.

    ASD operator Thomas A. “Andy” Bowdoin is serving a 78-month prison sentence. He was sentenced in August 2012.

    Despite claims that Zeek created no victims, at least three individuals already have claimed in court filings to have been scammed by Zeek.

    In a filing docketed today, Maria Aide Gomez claimed she sent North Carolina-based Zeek parent Rex Venture Group five postal money orders for $1,000 each in May and paid an additional $300 to maintain her Zeek membership.

    Gomez described herself as a “Victim of fraud and deception” on the part of Zeek, Rex Venture Group and Paul R. Burks, the operator of Zeek and Rex Venture. The money orders Gomez sent to Zeek were purchased at a post office in Washington state, according to exhibits that accompanied the filing.

    Bell, the receiver, is experienced as both a defense attorney and a prosecutor. The U.S. Department of Justice lauded Bell a decade ago for his successful prosecution of a Hezbollah terrorist cell operating in the United States.

  • BULLETIN: Zeek Mystery Deepens: Receiver Says He Discovered ‘Foreign’ Account That Has NOT Been Seized; Meanwhile, $5 Million In Cashier’s Checks From Single U.S. Bank Found At Zeek Headquarters; Firm’s Records Described As ‘Inadequate Or Incomplete’; Secret Service Has Recovered Lion’s Share Of $293 Million Found So Far

    BULLETIN: (5TH UPDATE 6:13 P.M. EDT) The court-appointed receiver in the Zeek Rewards Ponzi scheme case says he discovered that Zeek has “at least one foreign account” that has not been seized.

    It was “not clear” whether the funds would be recoverable despite the fact the bank that holds the account has been served with a freeze order, receiver Kenneth D. Bell said in court filings yesterday.

    Bell did not name the bank or its home country in the filings. Nor did he say how he discovered the account.

    But Bell advised Senior U.S. District Graham C. Mullen of the Western District of North Carolina that he was working with the SEC, the U.S. Secret Service and federal prosecutors to determine “the most efficient and cost effective manner to recover the funds from the entity that controls or the bank that holds this account so that the funds can be used in the distribution plan for this case.”

    The amount allegedly held in the account was not disclosed. Zeek was operated by North Carolina-based Rex Venture Group LLC and Paul R. Burks, the SEC said in August. The agency described Zeek as a $600 million Ponzi- and pyramid fraud operating domestically and internationally.

    Whether Zeek had silent partners or a special class of members is just one of the many mysteries still surrounding the purported “opportunity.”

    Receiver May Have Cooperation Of Certain Insiders

    Bell’s filings yesterday — on the Columbus Day holiday in the United States — made it plain that certain individuals associated with Zeek were cooperating in the receivership probe, sometimes through lawyers. The names of those individuals were not disclosed. Nor was the degree of their cooperation.

    Filings, however, at least hinted that some people close to Zeek had stories to tell.

    “Initial interviews of the Receivership Defendant’s employees and officers who were willing to be interviewed, as well as communications with various third parties, have revealed the identities of numerous other individuals and entities that might have relevant information regarding the Scheme, including potential business associates and investors of the Receivership Defendant and its principals,” Bell advised Mullen.

    Moreover, the report revealed that the U.S. Secret Service largely was responsible for recovering the lion’s share of more than $293 million in Zeek-related financial accounts.

    Forensic Accounting Firm Hired

    Mullen ordered Bell in August to submit a preliminary liquidation plan by Oct. 8 that would update the court on the receivership’s efforts to date and lay out the early groundwork on how Zeek members could file claims.

    Bell described his investigation as “still in its preliminary stages” and “ongoing.”

    During the receivership’s first 52 days, Bell advised Mullen, it was learned that Zeek had about 2.2 million “affiliates,” but that some of those affiliates appeared to have “more than one user id.”

    Approximately 1 million affiliates “paid money into the Zeek Rewards Program,” Bell advised Mullen.

    Bell has hired FTI Consulting Inc., a forensic accounting firm, to assist in the receivership probe, according to yesterday’s receivership filing.

    Meanwhile, the McGuireWoods law firm is counsel for the receiver. Kroll Ontrack is assisting with data recovery and storage, and Gilardi & Co. is hosting the receivership website and providing a means for Bell to communicate with potentially millions of individuals affected by the alleged epic fraud, Bell said in the filing.

    Zeek’s Aug. 17 shutdown by consent after the SEC brought the Ponzi allegations did not stop bills from coming in, Bell said.

    The estate, for example, already has disbursed more than $55,000 for payroll and benefits due employees, “taxes due the United States, North Carolina, and Arkansas” and for property rent and certain ongoing business expenses.

    During the preliminary examination, Bell identified more than $922,000 in accounts payable, including “certain invoices for professional services,” according to the filing.

    Bell advised Mullen that he still was “in the process of determining the validity and amounts of these accounts payable” and ascertaining the priority in which expenses will be paid.

    Zeek Documentation ‘Inadequate Or Incomplete’

    In a passage that may read like a familiar refrain to HYIP Ponzi analysts, Bell advised Mullen that certain Zeek-related financial documentation “has been found to be inadequate or incomplete.”

    Examining paperwork and data will be time-consuming because of “the significant lack of documentation and the organization of this data,” Bell advised the judge.

    Regardless, Bell said, the receivership team would follow the trail “to identify additional assets, trace the proceeds of any fraudulent conduct, evaluate claims of creditor and investors, and identify potential claims against former employees, third parties (including Affiliate-Investors), and others that may have received assets of the Receivership Estate.”

    As the receiver’s probe moves forward and more evidence is gathered and analyzed, clawback claims will be contemplated under “applicable fraudulent transfer statutes against those who ran the operations and ‘net winner’ participants . . .” Bell said.

    Bell envisions an approach that would “first offer those who are required to return money to the Receivership Estate the opportunity to do so cooperatively in an effort to avoid costly litigation for all concerned,” according to yesterday’s filing.

    Below a subhead of “Miscellaneous Assets Recovered,” Bell advised Mullen that $5 million in cashier’s checks from BB&T Bank were located in [Rex Venture Group’s] main office.”

    Zeek mysteriously announced on May 28 — Memorial Day — that it was closing its BB&T account, along with an account at NewBridge Bank. Why Zeek allegedly was in possession of $5 million in cashier’s checks that originated at BB&T was unclear in the receiver’s filing.

    Despite Zeek’s claim online that it was closing the accounts and its prompt to affiliates to cash or deposit Zeek commission checks drawn on the banks before June 1 or they would bounce, court records show that NewBridge still had $11.64 million in Zeek-related funds on deposit.

    Some observers have speculated that events that led to the August collapse of Zeek began in May, with the report from Zeek that it was closing the accounts voluntarily. If the account closures were less than voluntary, however, it may suggest that the banks had become suspicious of Zeek and that the Rex Venture-owned “opportunuity” was engaged in a scramble to find vendors to accept and maintain deposits.

    Court records claim that Zeek used at least 15 domestic and offshore vendors, including Canada’s AlertPay and SolidTrustPay.

    As of Oct. 8, the court-appointed receiver has identified these U.S. domestic companies as providers of services for Rex Venture Group LLC, the operator of the alleged Zeek Rewards Ponzi scheme. The receiver noted in court filings that “certain of the accounts listed above were closed, inactive or had a zero balance” before his August appointment.

    ‘Professionals’ To Receive Scrutiny

    Bell advised Mullen in yesterday’s filing that he also planned to “investigate potential claims against professionals and others” involved with Zeek to determine “who may be liable for the role they played in facilitating the operation.”

    Claims against the unidentified “professionals” and others will be pursued, if warranted, Bell advised the judge.

    Bell further advised Mullen that the receivership would “streamline” operations as much as possible so that Zeek victims and other creditors could receive a disbursement as soon as possible. He did not rule out the possibility of a “preliminary distribution” from seized proceeds.

    No specific timetable was laid out in the filings, but the task of formulating a claims process that potentially needs to accommodate 1 million or more people has begun, Bell said.

    Read the receiver’s filing for more details. (Document provided courtesy of the ASDUpdates Blog.)

     

  • Month After Zeek Ponzi Complaint By SEC, ASD Figures (And Zeek Pitchmen) Todd Disner And Dwight Owen Schweitzer Accuse Judge Who Dismissed Their ASD-Related Lawsuit Of ‘Sophistry’; Duo Tries To Reopen Case And Have Judge Removed

    MLM pitchmen and AdSurfDaily figures Todd Disner and Dwight Owen Schweitzer — both of whom went on to become promoters of the alleged Zeek Rewards Ponzi scheme — have accused a federal judge of “sophistry.”

    Sophistry, according to Dictionary.com, means “a subtle, tricky, superficially plausible, but generally fallacious method of reasoning.”

    Disner turned to MLM after his days as a founder of the Quiznos sandwhich franchise. Schweitzer is a former attorney whose license was suspended in Connecticut. Both men live in southern Florida.

    The curious assertion by Disner and Schweitzer against U.S. District Judge Rosemary Collyer appeared on Collyer’s court docket in the District of Columbia on Sept. 17, one month to the day after the SEC alleged in the western District of North Carolina that the Zeek Rewards MLM “program” was a $600 million Ponzi scheme and pyramid fraud that potentially had affected more than 1 million people.

    Senior U.S. District Judge Graham C. Mullen of the western District of North Carolina is presiding over the Zeek case. Kenneth D. Bell is the court-appointed receiver.

    Zeek and ASD are known to have members in common.

    The ASD Ponzi scheme, which collapsed in 2008, affected at least 97,000 people and created at least 9,000 victims, federal prosecutors said.

    Disner and Schweitzer also were pitchmen for ASD, which federal prosecutors in the District of Columbia have described as a $119 million Ponzi scheme marketed MLM-style. The ASD duo sued the United States in November 2011, claiming their records in ASD’s database were private and thus unlawfully seized and accusing federal prosecutors and a U.S. Secret Service agent of presenting a “tissue of lies” when bringing the civil- forfeiture case against $65.8 million in the bank accounts of ASD President Andy Bowdoin in August 2008.

    On Aug. 29, Collyer sentenced Bowdoin to 78 months in federal prison. Bowdoin, 77, pleaded guilty to wire fraud in May 2012, admitting in a statement of offense that ASD was a Ponzi scheme and that his business never operated lawfully from its inception in 2006.

    Collyer dismissed the Disner/Schweitzer complaint on the same day she sentenced Bowdoin.

    But Disner and Schweitzer now claim Bowdoin’s admission “was a necessary part of his plea bargain” with the government. They further assert that Bowdoin’s admission was the “coerced confession of an 80 year old man.”

    In court filings in May, however, Bowdoin said this:

    “I have read this Plea Agreement and discussed it with my attorneys, Michael McDonnell, Esq. and Charles Murray, Esq. I fully understand this Plea Agreement and agree to it without reservation. I do this voluntarily and of my own free will, intending to be legally bound. No threats have been made against me nor am I under the influence of anything that could impede my ability to understand this Plea Agreement fully. I am pleading guilty because I am in fact guilty of the offense(s) identified in this Plea Agreement.” (Italics/bolding added by PP Blog.)

    In the filing docketed Sept. 17, Disner and Schweitzer claim the Secret Service “manufactured” events to ensure that the ASD case was heard by Collyer. Earlier, Disner and Schweitzer advanced a theory that undercover agents who joined ASD in 2008 had a duty to identify themselves to ASD management.

    Even after Bowdoin pleaded guilty in May, Disner and Schweitzer contended that the government’s case was a “house of cards,” according to court filings.

    Disner and Schweitzer now have asked for their lawsuit to be reopened and to have Collyer removed from the case. In ASD-related litigation, Collyer has ordered the forfeiture of more than $80 million.

    The bid by Disner and Schweitzer to have Collyer removed from ASD-related litigation is at least the third. In 2009, purported “sovereign” being Curtis Richmond unsuccessfully sought to have Collyer removed. So did Bowdoin.

    Disner is now involved with purported Zeek Rewards consultant Robert Craddock in an effort to raise money to challenge either the SEC or the court-appointed receiver in the Zeek case.

    Among the early theories advanced by Craddock was that Mullen — the judge in the Zeek case — was playing politics by appointing Bell’s firm as the receiver to enable the firm to gorge itself on fees.

    Both ASD and Zeek were accused of selling unregistered securities as investment contracts. The U.S. Secret Service brought the ASD case, with the SEC bringing the Zeek case.

    The Secret Service confirmed on Aug. 17 that it also was investigating Zeek. The SEC said that, since January 2011, Zeek had “raised more than $600 million from approximately 1 million investors nationwide and overseas by making unregistered offers and sales of
    securities through the ZeekRewards website in the form of Premium Subscriptions
    and VIP Bids.”

    Zeek was an arm of North Carolina-based Rex Venture Group LLC and was operated by Paul R. Burks, the SEC said.

    In their filing accusing Collyer of sophistry, Disner and Schweitzer appear to suggest that Collyer needs a lesson in MLM from purported MLM expert Keith Laggos and MLM attorney Gerald Nehra.

    Laggos, an  SEC defendant in a 2004 case that alleged he issued laudatory press releases without disclosing he was being compensated, is listed in court records as a Zeek consultant. Laggos settled the 2004 SEC case without admitting or denying liability but agreeing to pay more than $30,000, including a $19,500 civil penalty.

    Laggos once opined that ASD was not a Ponzi scheme. Nehra also opined that ASD was not a Ponzi scheme. Richard W. Waak, Nehra’s law partner, is listed in court filings by Zeek as an attorney for the firm.

    Read the Disner/Schweitzer motion to remove Collyer.

    Screen shot of section of motion by ASD figures Todd Disner and Dwight Owen Schweitzer to remove Judge Collyer for alleged "cause."

  • 2 Attorneys Have Filed Court Notices For Robert Craddock’s Fun Club USA ‘And Other Entities Whose Assets Were Seized,’ According To Zeek Docket

    UPDATED 7:58 P.M. EDT (U.S.A.) The mystery of precisely who would represent Zeek Rewards figure Robert Craddock in a bid to intervene in the Zeek Ponzi scheme case may be over.

    Attorney Rodney E. Alexander of Charlotte has filed an appearance notice for Fun Club USA Inc., Craddock’s Florida business that raised funds for a court action challenging the Zeek case through ZTeamBiz.com.

    Meanwhile, attorney Michael J. Quilling of Dallas has applied to the North Carolina federal court handing the Zeek Ponzi scheme case for permission to represent Fun Club.

    Quilling’s application was sponsored by Alexander. Quilling is with Quilling, Selander, Lownds, Winslett & Moser, P.C.

    In court filings today, Alexander said he “is appearing in this matter as local counsel for Fun Club USA, Inc and other entities whose assets were seized in connection with” the Zeek case.

    Fun Club’s name does not appear as a defendant in the SEC’s civil case against Zeek, and it was not immediately clear whether a specific sum was seized from the company or whether Craddock and the unidentified “other entities” plan to argue that Zeek-related seizures in general by the government were unlawful.

    The filing did not identify the other entities.

    An email attributed to Craddock yesterday suggested that Senior U.S. District Judge Graham C. Mullen had permitted politics to enter the Zeek Ponzi fray. The email described the law firm of the court-appointed receiver in the Zeek case as “politically connected” and therefore potentially lacking “any incentive to protect anyone” and positioned to “run up a bill and submit invoices to the courts so they can pay themselves.”

    Craddock did not explain why Mullen — a former Naval officer with 22 years on the bench — ever would play politics with Zeek. Zeek receiver Kenneth D. Bell, whom Craddock has painted as fee-hungry before Bell has submitted a single bill for the judge to review, is experienced as both a defense attorney and a prosecutor.

    As a prosecutor, Bell was heralded by the U.S. Department of Justice for gaining convictions in a case against a Hezbollah terrorist cell operating in the United States. (See Bell in this YouTube video speaking about the cell.)

    Craddock, though, appears to be dubious of Bell and his firm.

    “So now we have an overzealous government agency, making unsubstantiated claims and convincing a judge to freeze the bank accounts and, dismantle the penny auction and for what, so the receiver can employ 100 people making in excess of 500 an hour for 210 weeks or 4.3 years and burn through the $500 million they have grabbed in 16 bank accounts,” the email attributed to Craddock read in part.

    Scammers on well-known Ponzi-scheme forums such as MoneyMakerGroup also have planted seeds of doubt against the receiver. Zeek was promoted widely on forums listed in court filings as places from which Ponzi schemes are promoted.

    Bell has said there potentially could be 2 million victims in the Zeek case. Yesterday alone attorneys for accused Zeek operator Paul R. Burks of Rex Venture Group filed thousands of Zeek-related records under seal. It is part of Bell’s job to examine those documents.

    Craddock’s suggestion of political tomfoolery was curious, given that Craddock used the name of former Florida Attorney General Bill McCollum and the SNR Denton law firm in Craddock’s initial fundraising efforts to hire counsel. SNR Denton dropped out soon thereafter. McCollum is a partner at SNR Denton.

    AdSurfDaily Ponzi scheme pitchman Todd Disner was present on a Craddock fundraising call last month. Among other things, Disner asserted in court filings earlier this year that ASD was not a Ponzi scheme even after ASD President Andy Bowdoin pleaded guilty to wire fraud and admitted ASD was a Ponzi scheme.

    In a November 2011 lawsuit against the government for alleged misdeeds in the ASD Ponzi case, Disner also accused prosecutors of going shopping for a friendly judge when bringing the ASD Ponzi case in 2008. His claims were dismissed on Aug. 29, the same day Bowdoin was sentenced to 78 months in federal prison.

    At an unclear point in time, Disner became a Zeek pitchman. Like ASD, Zeek featured a 1-percent-a-day (or more) payout plan on top of commissions for sales.

    On Aug. 17, the SEC described Zeek as a Ponzi- and pyramid scheme that sold unregistered securities and raised $600 million.

    Craddock has described himself as a consultant for Rex Venture Group LLC, Zeek’s parent company.

  • ZEEK UPDATE: Thousands Of Records Filed Under Seal

    An entry from the court docket in the Zeek Ponzi scheme case.

    UPDATED 4:20 P.M. EDT (U.S.A.) Attorneys for accused Ponzi schemer Paul R. Burks of the Zeek Rewards MLM “program” operated through North Carolina-based Rex Venture Group LLC have filed thousands of records under seal.

    On Sept. 17, Burks’ attorneys sought the approval of Senior U.S. District Judge Graham C. Mullen to file the documents under seal.

    The “anticipated filing contains account and financial information concerning not only Rex Ventures Group, LLC d/b/a ZeekRewards.com, but also thousands of individuals who either paid funds to and/or received funds from Receivership Defendant since January 1, 2010,” the attorneys said in advance of the massive filing.

    Mullen permitted the attorneys to submit the documents under seal. The filings now have been made and will remain under seal until further order of the court. The precise form of the filings is unclear because they are not available to the public.

    As things stand, the records will be available to Burks, the SEC and to Kenneth D. Bell, the court-appointed receiver in the Zeek case.

    Zeek was described Aug. 17 by the SEC as a Ponzi- and pyramid scheme that had gathered $600 million.

    The sheer complexity of Ponzi-scheme cases often leads to spectacular paper chases because of the enormous number of records that must be reviewed. But the Zeek case could set a new standard for volume because Zeek used as many as 15 financial vendors and perhaps ensnared between  1 million and 2 million victims while operating over the Internet between January 2011 and August 2012.

    Visit the ASD Updates files site to view Zeek-related court documents. Visit the ASD Updates Blog.

     

  • BULLETIN: Zeek Had $20.7 Million In AlertPay/Payza And $20 Million In SolidTrustPay

    Screen shot: Accused Ponzi schemer Paul R. Burks of Rex Venture Group LLC advised Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina today about Zeek's relationships with various financial vendors. The alleged Zeek Rewards Ponzi scheme operated through Rex Venture..

    BULLETIN: (UPDATED 9:18 P.M. EDT U.S.A.) New court filings by accused Ponzi schemer Paul R. Burks of Rex Venture Group LLC show that Zeek Rewards had more than $40 million in offshore payment processors.

    Included in that sum is $20.765 million in Canada’s AlertPay/Payza, and $20 million in Canada’s SolidTrustPay.

    Today’s filing also shows $10 million on deposit at Bank of America. Court filings in the AdSurfDaily Ponzi scheme case brought by the U.S. Secret Service in 2008 show that ASD also banked at Bank of America.

    On Aug. 17, the SEC alleged that North Carolina-based Zeek was a massive online Ponzi- and pyramid scheme that had gathered $600 million since January 2011. Filings by Burks today suggest Zeek did it all with fewer than 40 employees, including part-time contractors such as attorneys and consultants in areas such as payroll, accounting, compliance and marketing.

    Included among the consultants listed by Burks was Keith Laggos, a purported MLM expert. Laggos once opined that AdSurfDaily was not a Ponzi scheme. ASD President Andy Bowdoin later admitted that it was. Bowdoin was sentenced last month to 78 months in federal prison.

    Visit the ASD Update Blog’s files site to read Zeek-related court filings.

    Visit the website of Kenneth D. Bell, the court-appointed receiver in the Zeek case. Read the FAQs on the receiver’s website.

  • William J. Wise, International ‘Mastermind’ Of $129.5 Million Ponzi Fraud Involving CDs, Pleads Guilty To 18 Felonies; Top U.S. Attorney Says Federal Prosecutors ‘Around The Country’ Have Identified ‘Unprecedented Rise’ In Investment Fraud Schemes With ‘Staggering Losses’

    “The fraudsters prey upon vulnerable victims, do not respect local or even state boundaries, and often loot the victims’ life savings.” — Melinda Haag, U.S. Attorney for the Northern District of California, Sept. 13, 2012

    It featured confidence-boosting names: Millennium Bank, United Trust of Switzerland and Sterling Bank and Trust.

    But it was a cross-border Ponzi scheme that operated for 10 years. Its international “mastermind” controlled each of the entities and duped investors into purchasing at least $129.5 million in “bogus CDs,” federal prosecutors in two U.S. districts said this week.

    William J. Wise, the mastermind, was a resident of Canada. But he also operated in the region of Raleigh, N.C., luring investors with tales of outsize returns made possible by profitable overseas investments, prosecutors said. In 2009, the SEC said Wise was assisted by Kristi M. Hoegel of Napa, Calif.

    Hoegel, the SEC said at the time, used as many as five aliases. One proved to be the name under which she was charged criminally in February 2012: Jacquline Hoegel.

    On Wednesday, Wise pleaded guilty to 18 felonies, prosecutors said. He potentially faces decades in prison.

    Here is a breakdown of the Wise guilty pleas: one count of conspiracy to commit mail and wire fraud; twelve counts of mail fraud; three counts of wire fraud; one count of money laundering; and one count of tax evasion.

    “The United States Attorneys around the country have identified an unprecedented rise in investment fraud schemes, involving thousands of victims and staggering losses,” said U.S. Attorney Melinda Haag of the Northern District of California. “The fraudsters prey upon vulnerable victims, do not respect local or even state boundaries, and often loot the victims’ life savings. This case is an example of U.S. Attorneys working together – from the Northern District of California to the Eastern District of North Carolina – to identify the schemes, find the perpetrators and bring them to justice.”

    Haag was backed by Thomas G. Walker, the U.S. Attorney for the Eastern District of North Carolina.

    “The individuals who commit these crimes have no regard for the well-being of their victims – only the desire to make a quick buck,” Walker said. “United States Attorney’s offices, along with federal, state and local law enforcement officials, work diligently each and every day to see that those who commit these crimes are the ones who pay.”

    Prosecutors stressed that “[t]he Sterling Bank and Trust referred to in the indictment and plea agreement is not affiliated with the Sterling Bank & Trust headquartered in Southfield, Michigan, with thirteen branches in the San Francisco Bay Area.”

    It is not unusual for scammers to trade on the name of a well-known entity or to cherry-pick parts of a well-known name to sanitize a fraud scheme and create comfort in the minds of investors. The Trevor Cook Ponzi scheme in Minnesota, for example, cherry-picked the name of UBS and also used names that sounded regal.

    Ponzi-forum hucksters often do the same thing, dazzling investors with tales of fantastic “offshore” profits and using names that instill comfort and confidence.

    Prosecutors noted pointedly this week that Wise “agreed to work with the government and the Receiver appointed by the Texas District Court to obtain control over any remaining investor funds in bank accounts in the United States or in foreign countries. ”

    North Carolina was rocked Aug. 17 with SEC allegations that Zeek Rewards, an MLM “program” married to a penny-auction site known as Zeekler and operated by Paul R. Burks of Rex Venture Group LLC, was a $600 million Ponzi- and pyramid scheme that may affect more than 1 million people.

    Kenneth D. Bell, the court-appointed receiver in the Zeek case, now says there may be 2 million victims. Zeek used as many as 15 financial vendors, including offshore vendors, the SEC said.

    Court records strongly suggest Burks was cooperating with the SEC before the agency’s civil charges became public. The U.S. Secret Service said last month that it also was investigating Zeek.

    The SEC said last month that Burks had agreed to cooperate with the receiver.

    The Wise case resulted from “a lengthy investigation by the IRS-Criminal Investigations Division,” prosecutors said.

     

  • DEVELOPING STORY: Zeek Receiver Says He Has Secured Nearly $300 Million; ‘There May Be Tens Of Millions Of Dollars More Of Recoverable Assets’; Clawbacks May Be In The Offing As Receiver Raises Specter Of Claimants Circulating ‘False Information’

    Kenneth D. Bell, the court-appointed receiver in the Zeek Rewards Ponzi scheme case, said in a statement today that he had recovered nearly $300 million and that “[t]here may be tens of millions of dollars more of recoverable assets.”

    On Aug. 17, the SEC described Zeek as a $600 million Ponzi- and pyramid scheme that had affected more than 1 million people.

    Securing receivership assets has been his “first priority” since his Aug. 17 appointment by Senior U.S. District Judge Graham C. Mullen, Bell said.

    Bell’s statement appeared today on the receiver’s website. He noted that clawback actions may be in the offing, although he didn’t specify when.

    “Among those from whom we intend to recover assets are those affiliates who took more out of Rex Ventures than they put in,” Bell said.

    Rex Venture Group LLC is North Carolina-based Zeek’s parent company.

    “Many of you received little or nothing from this enterprise,” Bell said. “In order to make everyone as whole as possible, those who profited from participating should surrender their gains.”

    And Bell said he was aware that bogus information about Zeek was spreading online.

    “Finally,” Bell said, “I read in many emails and web postings that some affiliates claim to have spoken to me or the SEC. False information is being circulated by these claimants. I have not spoken to any of those claiming to have done so. I will communicate with you through this web site. If I could answer all of the hundreds of thousands of emails and calls from you I would, but obviously I can’t. I also recommend that you consider only what the SEC posts on its web site for its position on this matter.”

    In an Aug. 27 statement, Bell said that his “early investigation shows that the number of victims could be double” the SEC’s Aug. 17 estimate of 1 million.

    “By sheer number of victims, this is one of the largest, if not the largest, Ponzi scheme to go into receivership in U.S. history,” Bell said in the Aug. 27 statement.

    Visit the receiver’s website.  Read the Sept. 13, 2012, statement from the receiver.

  • UPDATE: Zeek Case Gets Top Billing On SEC Website Today; Agency Establishes Information Page

    The SEC has established an information page for victims of the alleged Zeek Rewards Ponzi- and pyramid scheme. The Zeek case, which may affect up to 2 million individuals, is spotlighted today on the SEC's main webpage.

    Information for victims of the alleged Zeek Rewards Ponzi scheme is getting top billing on the SEC’s website today, and the agency has established a webpage for Zeek victims.

    Here is that page, which includes a link to the website of the court-appointed receiver. Kenneth D. Bell is filling that role. Visit the receiver’s website.

    Zeek was operated by Paul R. Burks and Rex Venture Group LLC of Lexington, N.C. The SEC described Zeek as a $600 million Ponzi- and pyramid that operated online.

     

  • Zeek Operator Paul R. Burks Was Cooperating With SEC Prior To Date Of Ponzi Complaint, New Filing Suggests

    Paul R. Burks, the operator of Zeek Rewards, was cooperating with the SEC prior to the filing of the Aug. 17 complaint that alleged Zeek was a $600 million Ponzi scheme and pyramid fraud, a new court filing suggests.

    That “period of cooperation” resulted in the production of “hundreds of thousands of documents, including financial records, e-mails, and all manner of electronic files,” according to the filing by Noell P. Tin, an attorney for Burks.

    The filing does not specify when the cooperation began or say whether others inside of Zeek knew that the SEC had access to Zeek records prior to the filing of the complaint and a freeze on the assets of Zeek’s parent company, Rex Venture Group LLC. But it may explain at least in part why Burks agreed to settle the case without admitting or denying the allegations and to cooperate with Kenneth D. Bell, the court appointed receiver: The SEC effectively already had been inside the company.

    Separately, First Premier Bank of Sioux Falls, S.D., has advised Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina that it is holding more than $31.2 million in three separate Rex Venture accounts frozen under court order. The largest Rex account at the bank holds more than $30.9 million. A smaller account holds more than $284,000, and the smallest account holds only $90, according to a filing by the bank.

    To date, court filings suggest that Rex Venture has an account at Charles Schwab that holds $10.3 million in cash and more than $4.94 million in securities. The company also has an account at North Carolina-based NewBridge Bank that holds more than $11.64 million.

    Rex Venture also holds an account at Four Oaks Bank & Trust Co. Inc., another bank in North Carolina. The bank has asked the judge to give it until Sept. 3 to say how much it is holding because of the “complexity of the financial information that must be analyzed and the need to obtain relevant information from a third party.”

    All in all, the SEC said on Aug. 17 that the Burks-controlled entities used 15 foreign and domestic financial institutions.

    Burks’ personal assets were not frozen in the Aug. 17 SEC action, and the accused Ponzi schemer wants to keep it that way, according to court filings.

    “There is no basis and no need to freeze Mr. Burks’ personal funds,” his attorney wrote in response to a motion by Bell that raised the possibility that “Recoverable Assets” were controlled by Burks and his family. “Mr. Burks has never expatriated the assets of Rex Ventures Group, LLC or his personal money. He has fully cooperated in the SEC investigation, which included examination of relevant financial records. He is 65 years old, married, a two time cancer survivor, and has lived in Lexington, North Carolina for 23 years. He has never been a defendant in any action, civil or criminal, until this matter. Mr. Burks is aware of the importance of this proceeding and will abide by any orders this Court imposes.”

    One of the remaining mysteries of Zeek is how and when key executives found out about the SEC probe and whether they or other insiders feathered their own nests prior to the collapse.

  • Zeek Fallout Almost Too Strange To Contemplate

    For starters, Zeek affiliates being approached by upline sponsors and email/website appeals to send in money “to defend Zeek Rewards and all of our independent businesses as per our legal rights of due process” might want to read this July 25 PP Blog post.

    It’s about how wordplay was used to sanitize HYIP scams.

    For additional background, Zeek affiliates might want to read this July 28 PP Blog post.

    It’s about how purported Zeek “consultant” Robert Craddock sought to disable the Hub of Zeek critic “K. Chang.” Craddock now is part of the effort to raise funds to “defend” Zeek affiliates.

    Zeek and untold thousands of its minions are known to have a tin ear for PR. That tin ear is on full display again today, with a “warning” from the leaders of the effort to “defend” Zeek from the SEC’s Aug. 17 allegations that it was a $600 million Ponzi and pyramid scheme not to contact the SNR Denton law firm.

    “We have asked the firm to provide us the names of the individuals that are calling; we will refund your donation and will remove you from the group to be represented if you call. The law firm is only going to discuss the case with the 12 leaders and we will put out the information to the entire group on this site.”

    “This site,” as it were, is this site, which calls itself ZTeamBiz.

    ZTeamBiz, which calls itself a “professional organization,” says its has hired SNR Denton. The precise reason why is unclear, although ZTeamBiz says 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 has 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.”

    And ZTeamBiz also accused the SEC of misleading a federal judge.

    One of the persons on the ZTeamBiz squad — although it’s unclear if his presence is formal or informal — is Todd Disner. Disner is a former pitchman for the AdSurfDaily Ponzi scheme and, along with former attorney Dwight Owen Schweitzer, sued the government in November 2011. Disner and Schweitzer alleged that prosecutors and a U.S. Secret Service agent presented a “tissue of lies” to a federal judge when bringing the civil portion of the ASD Ponzi case in August 2008.

    Disner and Schweitzer made that claim after ASD had lost the case in U.S. District Court and the U.S. Court of Appeals. Among other things, Disner and Schweitzer claimed the government had gone shopping for a friendly judge when it brought the forfeiture proceedings.

    That judge allegedly was targeted with a false lien by Kenneth Wayne Leaming, who also targeted three federal prosecutors and a Secret Service agent with false liens, according to the FBI. Leaming was arrested by an FBI Terrorism Task Force in November 2011. He is a purported “sovereign citizen.” All five of the federal officials targeted in the alleged lien campaign have ties to the ASD case.

    ASD President Andy Bowdoin pleaded guilty seven months later to a Ponzi-related charge of wire fraud. He is scheduled to be sentenced Wednesday.

    Zeek is known to have members in common with ASD, which federal prosecutors have described as a $119 million Ponzi scheme that created at least 9,000 victims before its 2008 collapse amid allegations by the U.S. Secret Service of Ponzi fraud.

    Like Zeek, ASD claimed it was not offering an investment program. And like Zeek, ASD planted the seed it offered a daily payout rate of 1 percent a day or more.

    Like Zeek, ASD came under investigation by the U.S. Secret Service. The agency has referred to ASD as a “criminal enterprise,” with the U.S. Department of Justice calling ASD “insidious.”

    Those descriptions apparently were not enough to dissuade investors from throwing money at Zeek, which has listed ASD members as “employees.”

    On Aug, 4, Zeek itself blasted unspecified “North Carolina Credit Unions” for raising concerns about Zeek. Zeek warned members to toe the company line.

    The SEC was in federal court 13 days later.

    Zeek also is known to have members in common with JSS Tripler/JustBeenPaid, which appears now to have morphed into something called “ProfitClicking.” Both JSS/JBP and ProfitClicking may have ties to the sovereign-citizens movement.

    A domain registered in the name of purported JSS/JBP operator Frederick Mann once linked to videos featuring Francis Schaeffer Cox, a purported sovereign citizen implicated in a murder plot against public officials in Alaska.

    Because HYIP scams typically are promoted on Ponzi-scheme forums such as TalkGold and MoneyMakerGroup — and because Zeek, JSS/JBP, ProfitClicking and ASD all had a presence on those forums — questions have been raised about whether cash was circulating between and among various fraud schemes and placing U.S. banks in the position of possessing fraudulent proceeds.

    A receiver has been appointed to marshal the assets of the alleged Zeek fraud.

    Despite the appeal by ZTeamBiz for Zeek affiliates to send in money to “defend” themselves and the company, the interests of all Zeek affiliates almost certainly are not equivalent.  Net “winners” almost certainly are at risk of clawback lawsuits from the receiver. Such court actions are used to enlarge the pool through which victims of a Ponzi fraud receive a disbursement designed to make them as whole as possible.

    It’s often the case that victims never are made whole and receive disbursements of dimes or even pennies on the dollar. Such is the case to date for victims of the 2009 Trevor Cook Ponzi caper in Minnesota. That scheme was a form of affinity fraud targeted largely at people of faith, including senior citizens.

    Post-Ponzi receiverships sometimes turn into an international paper chase because scammers hide money offshore.  Reverse-engineering a Ponzi caper can take years. Even as Zeek receiver Kenneth D. Bell begins his duties, scammers on the Ponzi boards are planting the seed that the receivership cannot be trusted.

    In the 2009 Mantria/Speed of Wealth Ponzi scheme case, which in part was pushed MLM-style, a federal judge issued a specific order not to interfere with the receiver.