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Tag: Paul R. Burks

URGENT >> BULLETIN >> MOVING: Zeek Receiver Sues MLM Attorney Kevin Grimes For Sum In Excess Of $100 Million

URGENT >> BULLETIN >> MOVING: (11th Update 9:43 p.m. EDT U.S.A.) The court-appointed receiver in the Zeek Rewards Ponzi- and pyramid case has sued MLM attorney Kevin Grimes and the Grimes & Reese law firm, alleging malpractice, negligence and breach of fiduciary duty.

In the Grimes action, the receiver is seeking “an amount in excess of $100 million.”

In another action concerning a professional who worked for Zeek or was associated with purported “opportunity,” the receiver has sued attorney and tax consultant Howard N. Kaplan. Zeek operated an MLM “program” tied to a purported penny auction.

As is the case in the Grimes action, the receiver is seeking a sum of more than $100 million against Kaplan for alleged damages.

Both Kaplan and Grimes should have known better, but nevertheless helped Zeek thrive while helping Zeek gain unwarranted credibility by lending their professional reputations to a fraud scheme that gathered hundreds of millions of dollars, receiver Kenneth D. Bell alleged.

“By virtue of his knowledge of [Zeek operator Rex Venture Group] and ZeekRewards and his legal expertise, Grimes knew or should have known that RVG was perpetrating an unlawful scheme which involved a pyramid scheme, an unregistered investment contract and/or a Ponzi scheme. Despite this knowledge, Grimes actively encouraged investors to participate in the scheme by creating a so-called ‘compliance’ program that provided a false façade of legality and legitimacy and knowingly allowed his name to be used to promote the scheme,” Bell said in the complaint against Grimes.

Bell accused Grimes of turning a “blind eye” to markers of fraud at Zeek such as unusually consistent payout percentages.

“This fake consistency should have, at a minimum, caused reasonably diligent legal counsel to inquire further about the validity of the alleged profits,” Bell alleged. “Indeed, the program publicly advertised historical average returns of 1.4% per day, which no legitimate investment could accomplish. But, Grimes deliberately turned a blind eye to these incredible claims and chose not to seek further information.”

And Kaplan, Bell alleged, “knew or should have known that insufficient income from the penny auction business was being made to pay the daily ‘profit share’ promised by ZeekRewards.

“Kaplan knew or should have known that the money used to fund ZeekRewards’ distributions to Affiliates came almost entirely from new participants rather than income from the Zeekler penny auctions,” Bell continued. “Further, Kaplan knew or should have known that the alleged ‘profit percentage’ was nothing more than a number made up by [Zeek operator Paul R.] Burks or one of the other Insiders. Rather than reflecting the typical variances that might be expected in a company’s profits, the alleged profits paid in ZeekRewards were remarkably consistent, falling nearly always between 1% and 2% on Monday through Thursday and between .5% and 1% on the weekends, Friday through Sunday.”

From Bell’s complaint against Kaplan (italics added):

Instead of properly informing Affiliates of the different tax implications they would face if their Zeek payments were properly characterized as coming from an ‘investment’ rather than a ‘trade or business,’ Kaplan failed to inform Affiliates, either on the calls or in his FAQs, of the material fact that payments to Affiliates should be characterized as investment income for tax reporting purposes.

For example, in the FAQs that he drafted and allowed ZeekRewards to post to its website, Kaplan advised that Affiliates should use IRS Schedule C (“Profit or Loss from Business”) to record their income, making no mention of the fact that they should use IRS Schedule D (“Capital Gains and Losses”) . . . If Kaplan had candidly disclosed the material fact that Affiliate income would be properly characterized by the IRS as capital gains, the obvious negative tax implications would have caused many Zeek Affiliates to remove their cash earnings from the program rather than reinvesting them, short-circuiting the scheme much earlier. Since he did not, Affiliates were placated in their misguided belief that ZeekRewards was a lawful program.

It has been a remarkably awkward time for MLM attorneys. Gerald Nehra, Richard Waak and their law firm have been accused by plaintiffs in TelexFree-related litigation with racketeering and violations of the federal securities laws. TelexFree plaintiffs have asserted Nehra also counseled Zeek.

From the Zeek receiver’s complaint against Grimes and Grimes & Reese (italics added):

Defendants played an indispensable role in the scheme. Because of the lucrative, seemingly ‘too good to be true’ claims being made by RVG and ZeekRewards, many potential investors were skeptical of whether the scheme was legal and legitimate. So, RVG enlisted the aid of Grimes and other legal counsel to assist in promoting and legitimizing the scheme.

Grimes helped in several ways. First, despite his knowledge that ZeekRewards was a fundamentally flawed and unlawful pyramid and/or Ponzi scheme and was selling unregistered securities, Grimes offered to create and did create a so-called
‘compliance course’ specifically designed to encourage investors and potential investors to believe that if they satisfied the course then it would be a lawful enterprise.

Thus, Grimes knowingly allowed Zeek to portray a false appearance of legality through his bogus ‘compliance’ course.

Grimes profited personally from the compliance courses while allowing ZeekRewards yet another source of investor money. Upon information and belief, Grimes received payments from ZeekRewards not only for his legal counsel, but also for sales of his compliance course to Affiliates. Upon information and belief, Grimes provided the compliance course to ZeekRewards for $5 per affiliate, while allowing ZeekRewards to charge affiliates $30 each for the course, personally profiting from it and allowing RVG yet another means of extracting money from unsuspecting Affiliates.

Zeek collapsed in August 2012. The SEC and federal prosecutors now say the “program” gathered on the order of $850 million in less than two years. Two months after the collapse, two members of Zeek sent Senior U.S. District Judge Graham C. Mullen a copy of the “compliance” certification allegedly provided by Grimes (pictured below):

Both Grimes and Kaplan were aware that the Zeek “program” raised issues about the sale of unregistered securities, but nevertheless marched forward, Bell alleged.

In February 2012, Bell said, Grimes emailed a Zeek adviser, saying, “I am still in the process of getting my arms around its program, but I have some SERIOUS concerns that it very likely meets the definition of an ‘investment contract.’ It may have other issues as well, but I’m still reviewing their documents.”

By June 2012, according to Bell, a Zeek participant contacted Grimes, saying, “I have completed your compliance course with Zeek and really loved it. I am a great advocate of Zeek and have signed up 31 people whom I feel responsible for. . . . One of my downline is asking questions . . . there is a tremendous amount of income going into Zeek and he is concerned the profit share is coming from the new affiliates – which would make it a ponzi scheme. Can you direct me as to what is the best way to confirm this is not a ponzi scheme[?]”

In response, Grimes emailed Zeek executive Dawn Wright-Olivares, stating, “Do you want me to forward these types of communications to you or anyone else, or would you prefer that I simply discard them? I get several of these each week.”

Grimes, Bell alleged, appeared to have “no concern” about the affiliate’s email.

The MLM lawyer “took advantage of the situation, creating and marketing a compliance training course as window dressing for this illegitimate scheme, allowing the course to be sold to the Affiliates for his own profit,” Bell alleged.

NOTE: Our thanks to the ASD Updates Blog.

Jun 25, 2014
URGENT >> BULLETIN >> MOVING: Zeek Receiver Sues Alleged Insiders, Winners; Emails, Skype Chats Helped Expose Fraud; ‘We’ve Already Attracted A Great Many Big Fishes,’ Wright-Olivares ‘Excitedly’ Told Paul Burks Early In Scheme, Kenneth D. Bell Alleges

Dawn Wright-Olivares

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.”

Zeek operated through Rex Venture.

To read the lawsuits, visit the ASD Updates Blog.

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.

Visit the receiver’s website.

Mar 3, 2014
From Zeek To ‘The Healthy Hog’

Hearty cuisine and the Internet are the things at The Healthy Hog. Source: 5News video.

EDITOR’S NOTE: A “razorback” is a wild (feral) hog present in certain U.S. states, including Arkansas. The University of Arkansas calls its sports teams the “Razorbacks.” Zeek Rewards Ponzi-scheme figure Dawn Wright-Olivares, an Arkansas resident, recently opened a Clarksville restaurant called “The Healthy Hog.” Though the words “healthy” and “hog” may appear to be in conflict, the marriage of such incongruous-sounding words might be perfectly at home, completely inoffensive and good for business in Arkansas, which is known as “The Razorback State.”

Until a TV report aired yesterday, Clarksville residents may not have known that Ponzi history has touched their town of fewer than 10,000 residents in a big way. The Johnson County community is known for its scenic beauty and annual Peach Festival.

5News (KFSM-TV in Fort Smith and KXNW-TV in Fayetteville) sent a crew to The Healthy Hog after Wright-Olivares was charged criminally and civilly in the Zeek Rewards Ponzi-scheme case in December 2013.

Zeek, the SEC says, gathered at least $850 million. Wright-Olivares appears to have parachuted into Lexington, N.C., from time to time as part of her role as Zeek’s onetime marketing maven.

Kenneth D. Bell, the court-appointed receiver in the civil case and the special master in the criminal case, has noted that Zeek operated from Lexington and drew in participants from at least 100 countries around the globe.

In terms of the number of victims and the creation of net losers (an estimated 800,000), the Internet-driven Zeek scheme may be the largest Ponzi scheme in U.S. history. By comparison, the 2008 AdSurfDaily Ponzi scheme — at the time considered the largest Internet-based Ponzi scheme in U.S. history — affected about 100,000 people and gathered about $120 million.

Wright-Olivares, 45, was Zeek’s former COO. She has settled the SEC civil case against her and agreed to plead guilty to Zeek-related criminal charges of investment-fraud conspiracy and tax-fraud conspiracy, federal investigators said. Her stepson, Daniel Olivares, 31, also has settled the SEC’s civil allegations and agreed to plead guilty to a criminal charge. In Daniel’s case, it’s a charge of investment-fraud conspiracy.

The criminal charges were the first in the long-running Zeek probe, which became public in August 2012 and also involves the U.S. Secret Service, the IRS and the office of U.S. Attorney Anne M. Tompkins of the Western District of North Carolina. The SEC filed its first Zeek-related civil case on Aug. 17, 2012, naming Zeek operator Paul R. Burks of Rex Venture Group LLC a defendant.

Bell has identified Alexandre “Alex” De Brantes, the husband of Wright-Olivares, as member of a group of alleged Zeek insiders. Images of De Brantes appear briefly in the 5News report. Bell is expected to file lawsuits against alleged Zeek insiders and “net winners” soon.

Jan 3, 2014
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.

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.

Dec 28, 2013
EDITORIAL: Zeek Jungleland Exposed: A Brilliant Disguise No More
“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
Dec 25, 2013
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.

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.

Dec 20, 2013
URGENT >> BULLETIN >> MOVING: Lawsuits Against Zeek Insiders, Winners Believed Imminent; Paul Burks, Dawn Wright-Olivares, Darryle Douglas Among Alleged Insiders; AdSurfDaily Figures Todd Disner And Jerry Napier Among Alleged Winners; Prospective Defendants’ List Also Includes Legendary HYIP Hucksters T. LeMont Silver And Aaron/Shara

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.

NOTE: Our thanks to the ASDUpdates Blog.

Dec 12, 2013
Judge Approves Settlements With Zeek Receiver, Says Agreements Are In ‘Best Interests Of The Zeek Victims’

“The Court has reviewed Receiver’s brief and proposed settlement and finds that the proposed settlement is fair and equitable and is in the best interests of the Zeek victims.” — Senior U.S. District Judge Graham C. Mullen, July 26, 2013

UPDATED 9:43 P.M. EDT U.S.A. If you’re from the camp that claims Zeek Rewards victimized no one, a federal judge set you straight today.

Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina has approved a motion by the court-appointed receiver to settle with certain Zeek winners at discounts. The judge deemed the agreements “fair and equitable” and “in the best interest of the Zeek victims.”

Mullen’s order applies to at least 136 winners who entered successful prelitigation settlement negotiations with receiver Kenneth D. Bell, who said the agreements provided immediate and concrete benefits to the receivership estate. The order is expected to cause about $1.8 million to flow into the Zeek estate over time, some of it immediately. Bell listed the “Settlement as % of Winnings” at 56.12 percent in a June 28 filing.

Bell is marshaling Zeek assets for return to victims.

Zeek “winners” of $1,000 or more who bypassed the springtime opportunity to settle now face the prospect of clawback litigation beginning sometime this summer. Records show that even some winners of less than $1,000 settled with Bell

In August 2012, the SEC described Zeek as a $600 million pyramid and Ponzi scheme. The purported Zeek “opportunity” operated through Rex Venture Group LLC, a North Carolina MLM firm.

Rex and Rex/Zeek operator Paul R. Burks duped members into believing that payouts averaging about 1.5 percent a day were legitimate, the SEC alleged.

Zeek’s business model was similar to AdSurfDaily, which the U.S. Secret Service and federal prosecutors described as a $119 million Ponzi scheme operating from Florida. The Secret Service raided ASD in 2008.

The Zeek scam created hundreds of thousands of victims, according to Bell. In April, he warned winners of ill-gotten gains that the time for court action is drawing closer.

See June 29 PP Blog story and Comments thread.

NOTE: Our thanks to the ASD Updates Blog.

Jul 26, 2013
URGENT >> BULLETIN >> MOVING: Federal Judge Denies Alleged Zeek Winners’ Motion To Intervene In Case And Dissolve Receivership

URGENT >> BULLETIN >> MOVING: (3RD UPDATE 8:44 P.M. EDT U.S.A.) Senior U.S. District Judge Graham C. Mullen has denied a motion by alleged winners in Zeek Rewards to intervene in the SEC’s Ponzi-scheme case and to dissolve the receivership.

In December 2012, alleged Zeek “winners” Trudy Gilmond and Kellie King asked Mullen for permission to intervene in the case and to end the court-appointed receivership, arguing that Zeek did not sell securities as defined under federal law.

Mullen today denied the motion on both fronts.

Kenneth D. Bell is the receiver. He opposed the Gilmond/King motion. So did the SEC, which described Zeek in August 2012 as a $600 million Ponzi- and pyramid fraud selling unregistered securities through Rex Venture Group LLC in North Carolina.

Gilmond may have more than $1.364 million at risk in a clawback lawsuit. King potentially faces a claim from Bell for more than $205,180, according to court filings.

“Gilmond and King seek to improperly interfere with a settled SEC enforcement action against defendants Rex Venture Group and Paul Burks to deny the Receiver the ability, as directed by the Court, to marshal the estate’s assets for the benefit of all aggrieved ZeekRewards investors,” the SEC argued in January. “The Motion to Intervene is a transparent attempt to obtain prospective relief in an improper forum with respect to clawback litigation the Receiver has yet to initiate.”

For his part, Bell said Gilmond and King were engaging in “delaying tactics.”

Gilmond and King are represented by Ira Lee Sorkin, Bernard Madoff’s defense attorney.

“The issue Gilmond and King seek to litigate — whether the ZeekRewards program was an ‘investment contract’ or ‘security’ — has been resolved for the purposes of this settled SEC enforcement action,” the SEC argued in January. “As a result, Proposed Intervenors assert no ‘claim or defense that shares with the main action a common question of law or fact.’ Thus, there is no basis for intervention.

“Finally,” the SEC continued, “Proposed Intervenors provide no factual or legal support for their request to dissolve the receivership in this matter. Therefore, the Motion to Intervene should be denied in its entirety.”

Mullen did just that today.

Zeek operator Paul R. Burks consented to a judgment in the SEC case in August 2012.

NOTE: Thanks to the ASDUpdates Blog.

Jul 23, 2013
Zeekers Share Their Conspiracy Theories At Newspaper Site
The Dispatch of Lexington, N.C., published a story June 7 to update readers on Zeek Rewards-related litigation — specifically the date of a hearing on a motion by certain Zeek members (alleged net winners) to dissolve the receivership. (See link to story/Comments below.) As of this morning, about 27 comments appear below the story. The comments appear to be from Zeek supporters. Zeek was based in Lexington.

Zeek, the SEC said in August 2012, was a $600 million Ponzi- and pyramid fraud that duped investors into believing they were receiving a legitimate return averaging about 1.5 percent a day. Zeek’s business model was similar to AdSurfDaily, a Florida-based Ponzi scheme that collapsed in 2008. Federal prosecutors said ASD had gathered about $119 million.

ASD became infamous not only for its purported payout of 1 percent a day, but also for the extremely strange behavior of some of its supporters. Curtis Richmond, one of the scheme’s cheerleaders, was a purported “sovereign” being once sued successfully under the federal racketeering statute for his role in various bizarre plots advanced by a purported “Indian” tribe in Utah known derisively as the “Arby’s Indians.” (The “tribe” once held a meeting in an Arby’s restaurant.) Among other things, the “tribe” issued arrest warrants for public officials and litigation opponents and used the address of a Utah doughnut shop as the address of its purported “Supreme Court.”

Richmond accused the judge presiding over the ASD case of dozens of felonies, saying she was guilty of “TREASON.” Moreover, Richmond claimed the judge’s supervising judge was conspiring with the judge to deny ASD members justice. For these claims (and more), Richmond was accorded the title of “hero” on the “Surf’s Up” forum, an ASD cheerleading site set up after the U.S. Secret Service raided ASD in August 2008. Among the Surf’s Up faithful was Terralynn Hoy, who later presided over at least one conference call for Zeek. (See this PP Blog Comments thread from June 2012. Props to GlimDropper of RealScam.com.)

Many highly peculiar narratives were advanced by ASD supporters. One of them held that the U.S. government took about $80 million seized in the ASD case and plowed it into a secret fund through which it almost immediately generated $1 billion in interest that the United States used to pay for black ops. Another held that all commerce is lawful as long as the parties agree that it is lawful, a position that would legalize slavery. Yet another held that the ASD judge was on the take and “brain dead” if she ruled against ASD. Still another held that undercover agents who joined ASD to get the lay of the land had a duty to inform ASD management.

On Surf’s Up, an ASD supporter claimed that a “militia” should storm Washington with guns. Another claimed a federal prosecutor should be placed in a medieval torture rack. Beyond that, a purported “prayer” was circulated that called for federal prosecutors to be struck dead.

Given that ASD operator Andy Bowdoin once described himself (from a stage in Las Vegas) as a Christian “money magnet” and later claimed that the Secret Service was “Satan” and compared the agency to the 9/11 terrorists who killed nearly 3,000 people in New York, Pennsylvania and Washington, it’s no surprise that it became next-to-impossible to keep track of all of the ASD conspiracy theories.

What is surprising is that any number of Zeekers seem willing to buy into the same sort of mind-numbing mind-set.

At The Dispatch site, apparent Zeek supporters are claiming that:
- the “SEC messed us all up.”
- the court-appointed receiver “should be on trial.”
- “someone paid these guys off with MINIMAL evidence!”
- “Gestapo/KGB/SS tactics” are being used against Zeek by people in the “Executive Branch.”
- the government is “not allowing anyone to [grow] economically.”
Friends, a 1.5-percent-a-day “program” pushed on well-known fraud forums such as TalkGold and MoneyMakerGroup is a scam. Period. The SEC acted in the best interest of Zeek investors — and in the best interest of the people of the United States who are sick and tired of seeing their country used as a playground for HYIP scammers or worse. The security condition created by “programs” such as Zeek, Profitable Sunrise, JSSTripler/JustBeenPaid and others is untenable.

Kenneth D. Bell, the court-appointed receiver for Zeek, has been doing a commendable job amid extremely trying circumstances. (In terms of the number of victims, Zeek may be the largest Ponzi scheme in U.S. history.) Bell is a former federal prosecutor known for having once successfully prosecuted a Hezbollah terrorist cell operating in the United States. He was appointed by a federal judge who is a former Naval officer. Claiming Bell should be put on trial is pure idiocy. So is clinging to a belief that the government somehow has outlawed the growth of business in the United States.

No one got “paid off” to do anything against Zeek — and the evidence that Zeek had an insurmountable mountain of unfunded liabilities and was paying members with money from other members is overwhelming.

Claims about Gestapo, KGB and SS tactics also were made by ASD members. Dwight Owen Schweitzer, later of Zeek, sued the United States (with fellow ASD and Zeek member Todd Disner). Among other things, Schweitzer and Disner claimed they were “unaware of any remission payments having been made” through the government-sponsored restitution program — this despite the fact the government had returned tens of millions of dollars to ASD investors and had issued news releases repeatedly about the program.

For good measure, Schweitzer and Disner also claimed that undercover agents who joined ASD “should have reported their own violations of the ASD terms of service” to ASD management. The pair made this bizarre claim long after ASD lost in the District Court and in the U.S. Court of Appeals. Amazingly, the claim also was made after prosecutors pointed out that some ASD members were recruiting for ASD even though they knew it was a Ponzi scheme and that Andy Bowdoin’s silent partner in ASD was his sponsor in the 12DailyPro Ponzi scheme broken up by the SEC in February 2006 — months before ASD launched and years before Zeek launched.

So, if you’re inclined to call accused Ponzi schemer and Zeek operator Paul R. Burks a genius while ranting against the government, you are according that title to a man who appears to have learned nothing from the ASD and 12DailyPro (and Legisi and PhoenixSurf and CEP and Imperia Invest IBC) prosecutions. If you are unhappy that the government’s Zeek action froze money you were counting on — well, that’s understandable. At the same time, however, there is a good chance you don’t understand the context of your own unhappiness. Zeek and Burks are to blame, not the SEC and the receiver.

If you joined another Zeek-like “program” after the SEC action, the best that can be said is that you are slow to learn. The worst is that you are a budding “Ken Russo,” perhaps the most intransigent Ponzi-board scammer in the Western Hemisphere. Zeek member “Ken Russo” sells people into Ponzi misery for a fee.

Repeatedly.

What ASD and Zeek both appeared to be was a bid to dupe investors into believing that, if 12DailyPro’s return of 12 percent a day for 12 days for thousands of members was impossible, the “smaller” daily returns of ASD (1 percent) and Zeek (1.5 percent) for between 90 and 150 days for hundreds of thousands of members somehow were more plausible.

Read story and Comments thread in The Dispatch. While you’re doing so, remember that Zeek once auctioned sums of U.S. currency (while wrapping itself in the American flag) and told successful bidders they could pick up their cash via offshore payment processors that enable fraud schemes like JSSTripler/JustBeenPaid and its 2-percent-a-day “program” globally.
Jun 21, 2013
Zeek Rewards Claims Portal Is Open

The claims portal for Zeek Rewards has opened on schedule. It is accessible through a “File a Claim” button on the website of the court-appointed receiver and also has a separate URL. Claims must be filed by 11:59 p.m. (prevailing Eastern time) on Sept. 5, 2013.

A claims FAQ is accessible here.

Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina approved the Zeek claims process on May 8.

In a letter to Zeek participants last week, receiver Kenneth D. Bell said there potentially is more than 1 million claimants.

In August 2012, the SEC described Zeek as a $600 million Ponzi- and pyramid fraud operated by Paul R. Burks and Rex Venture Group LLC of Lexington, N.C. Zeek, the SEC said, was selling unregistered securities and duping investors into believing they were receiving a legitimate return of about 1.5 percent a day.

Since that time, the SEC has filed an action against a murky HYIP known as Profitable Sunrise that promoted returns that exceeded even Zeek’s purported numbers and appears to have been using a series of offshore bank accounts. The Profitable Sunrise action was filed in April 2013, amid allegations pitchmen may not have known for whom they were working in a bid to glean commissions.

Reload scams surfaced in the immediate aftermath of the SEC’s Zeek action. The same thing is happening in the aftermath of the Profitable Sunrise action. Various “opportunities” are being pitched as cure-alls for losses in the “programs.” Some of the reload scams appear to be bids to intercept information from Zeek and Profitable Sunrise victims.

At least 36 U.S. states or provinces in Canada have issued cease-and-desist orders or Investor Alerts against Profitable Sunrise. Notices also have been published by the governments of the United Kingdom, Italy and New Zealand. The state of North Carolina has published at least two warnings about reload scams. Some of the actions by state regulators in the United States have identified alleged Profitable Sunrise pitchmen.

Despite the warnings, pitchmen for other HYIP schemes have been spamming websites with offers for other “programs” that promise absurd rates of return.

Bogus “refund” sites have surfaced after the fall of other major Ponzi schemes. Scammers also have been known to discourage participants in “programs” from filing claims, apparently as part of bids to minimize the victims’ count. Some participants in the AdSurfDaily Ponzi scheme, for example, planted the extortive seed that they might sue anybody who filed a claim.

May 15, 2013