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Tag: Paul R. Burks

  • Pitchman Says Hong Kong-Based ‘Program’ Is ‘1,000 Percent Better’ Than Profitable Sunrise And Zeek Rewards

    John Schepcoff says he potentially lost more than $193,000 in Profitable Sunrise but that a new "program" is "1,000 percent" better.
    John Schepcoff says he potentially lost more than $193,000 in Profitable Sunrise but that a new “program” is “1,000 percent” better.

    In a bizarre and disturbing video playing on YouTube, a former Profitable Sunrise pitchman claims a new “program” he joined is operating from Hong Kong and is purveyed by an unidentified  “doctor.”

    The purported opportunity is “1,000 percent better” than Profitable Sunrise or Zeek Rewards, according to the video.

    News of the video first was reported on the RealScam.com antiscam forum.

    Pitchman John Schepcoff did not identify the new “program” in the 14:32 video. But he described it as invitation-only. Zeek made similar claims, according to the SEC’s August 2012 Ponzi- and pyramid action against the North Carolina-based firm and accused operator Paul. R. Burks. The SEC described Zeek as a $600 million fraud scheme.

    In April 2013, the agency described Profitable Sunrise as a pyramid scheme that may have gathered tens of millions of dollars, in part through using financial conduits in the Czech Republic, Australia, Panama and China.

    “There’s a litttle bit of a [learning] curve, like also Zeek Rewards in a way, but he made it 1,000 percent better,” Schepcoff said of the new Hong Kong “program.”

    Earlier in the video, Schepcoff claimed the new program was “1,000 percent better” than Profitable Sunrise.

    Schepcoff put $8,225 into the new program, he claimed in the video. He further claimed he’d potentially lost more than $193,500 in Profitable Sunrise but is holding out hope that “Roman Novak” somehow will resurrect the “program.”

    It is unclear whether “Roman Novak” actually exists, according to court filings.

    Among other things, Schepcoff claims in the video that Profitable Sunrise participants need to accept personal responsibility for their losses in the “program” and should not blame individuals such as himself or Profitable Sunrise pitchwoman Nanci Jo Frazer.

    “Stop blaming people, and say, ‘I am responsible,’” Schepcoff coached. Other people who should not be blamed include “Roman Novak,” he noted.

    And Schepcoff claimed he is “so happy” and “really, really happy” he got into the new program. Smiles, however, are absent from his face throughout the video.

    With respect to Profitable Sunrise, Schepcoff described the “program’s” scheme that purportedly permitted “compound[ing]” at a daily interest rate of between 2.15 percent and 2.7 percent as a “no-brainer” for a coach and mentor in finance such as himself.

    “And I teach people about the . . . way how things are done,” he said.

    When he heard about Profitable Sunrise in December 2012, Schepcoff said, “I basically ran to my bank, and I couldn’t get the money in fast enough.”

    Just four months earlier — in August 2012 — the SEC said Zeek duped people into believing they were receiving a legitimate return of about 1.5 percent a day. The Profitable Sunrise “Long Haul” plan purported almost to double Zeek’s purported daily payout.

    “I kept putting wire transfers after wire [transfer]” into Profitable Sunrise,” Schepcoff said, suggesting he took money out of retirement accounts to do so.

    “Greed” that became like a “cancer” controlled his behavior in Profitable Sunrise, he said. Schepcoff did not explain what was driving his behavior in sending funds to the purported Hong Kong “program” purportedly purveyed by the “doctor.”

    The new program apparently relies on a secret strategy designed to prevent links from being shared publicly and is “amazing” in “what it does,” he said. “There’s people — I can tell you this — that are bringing out only in five months over [$]40,000.”

    One person, according Schepcoff, told him that he’d taken out “over [$]200,000” from the new program in a single day.

    Some HYIP “programs” are pitched by “sovereign citizens” and political extremists who divine a construction by which participants are “free” to spend their money as they see fit and that specific word combinations insulate purveyors from any liability if a “program” collapses or becomes the subject of an action by law enforcement.

    HYIP scams typically are promoted on social-media sites such as YouTube, Twitter and Facebook, FINRA said in a 2010 warning.

  • RECEIVER: AlertPay And SolidTrustPay May Hold Additional Zeek Assets; Forensic Team Is Working ‘To Investigate And Seize These Funds’

    EDITOR’S NOTE: One way to read a report filed yesterday by the court-appointed receiver in the Zeek Rewards Ponzi-scheme case is as a warning manual that brings to life the kind of vexing problems HYIP schemes create for operators, vendors and participants — including “insiders.” Kenneth D. Bell’s report to Senior U.S. District Judge Graham C. Mullen of North Carolina strongly hints that the receivership has identified “key insiders.” Their names have not been published in court filings . . .

    recommendedreading1UPDATED 4 P.M. EDT (U.S.A.) Although early filings last year in the Zeek Rewards Ponzi scheme case suggested that offshore payment processors Alert Pay (Payza) and Solid Trust Pay held more than $40 million connected to Zeek, the court-appointed receiver has advised a federal judge that the two processors may hold even more than originally believed.

    Both AlertPay and SolidTrustPay operate from Canada. Their names appear constantly in Ponzi-board promos for fraud schemes. The companies’ names also have appeared in court filings related to various HYIP schemes, including the alleged $72 million Pathway To Prosperity fraud in 2010 and the $119 million AdSurfDaily fraud in 2008.

    In 2009, while the ASD case was still in the courts, some members of AdSurfDaily received mysterious “final refunds” from SolidTrustPay through an STP-connected email address of oceannamusic@xplornet.com. The purported pro rata refunds led to questions about whether some ASD members were benefiting at the expense of others while the case still was in the U.S. courts and whether ASD actually had money in SolidTrustPay under the name of a different company or a user other than President Andy Bowdoin. (See July 2009 post by PP Blog guest columnist Gregg Evans here.)

    Later, an emerging scam known as JSSTripler/JustBeenPaid purportedly operated by former ASD pitchman Frederick Mann began to use the offshore processors — amid claims from JSS/JPB pitchmen that they not only were recruiting for JSS/JBP, but also managing both the JSS/JBP accounts of their sign-ups and the payment-processor accounts of the sign-ups.

    Because HYIP schemes proliferate in part through the willful blindness of promoters and serial con artists, a situation has evolved over the years in which fraudulent proceeds circulate between and among scams and their individual promoters. “Alan Chapman,” a Zeek pitchman, also was promoting JSS/JPB and a follow-up scam known as “ProfitClicking,” for instance. Serial huckster “Ken Russo” also promoted Zeek and JSS/JBP — and many more schemes, including ASD and Profitable Sunrise, which the SEC described last month as a scam that may have gathered tens of millions of dollars.

    But a new filing by Kenneth D. Bell, the Zeek receiver, suggests that the receivership may seek to foreclose any after-the-fact opportunities for offshore processors to duck their responsibilities to the receivership estate and for holders of the offshore accounts to benefit from Zeek after the SEC brought spectacular allegations of Ponzi- and pyramid fraud against Zeek in August 2012.

    Zeek, the SEC said last year, was a $600 million fraud scheme that used at least 15 foreign and domestic financial institutions.

    A forensic accounting has led Bell to believe that “both Payza and SolidTrustPay may have additional Receivership assets.”

    In a report to Senior U.S. District Judge Graham C. Mullen, Bell said he is working “to investigate and seize these funds.”

    And, Bell advised Mullen, “[t]o the extent these entities allowed affiliates to withdraw funds after receiving notice of the Receivership, the Receiver may seek reimbursement of indemnification for the funds from the payment service providers.”

    If Bell somehow is able to foreclose chicanery involving serial Ponzi pitchmen and the scamming insiders with offshore accounts, it could go a long way toward minimizing the spread of fraud schemes over the Internet.

    Bell’s April 30 filing also reveals that the receivership has recovered $291,000 from a “merchant services account reserve” that had been held by American Express for Rex Venture Group, Zeek’s parent company. At the same time, it reveals that Bell — to date — has recovered $36,000 from Zeek net winners in prelitigation settlements. That number may grow. The deadline to enter into negotiations for a prelitigation settlement is May 31.

    More than anything, though, Bell’s report to the court showcases the enormous problems created by HYIP schemes. Among the problems outlined in the filing:

    Potentially costly and time-consuming litigation disputes for all parties. Zeek operator Paul Burks is claiming privilege on certain matters. Some Zeek “winners” have filed motions that could slow down the refund process for Zeek victims at large.

    Taxes: Zeek appears to have misclassified certain employees as independent contractors, which has tax ramifications.

    Incomplete records. Because of poor records at Zeek, some members who received 1099 tax forms from the receivership received forms that showed earnings either higher or lower than actual earnings. The receivership has prepared amended 1099s for certain Zeek members.

    Possible disputes with vendors. Bell’s report noted that USHBB Inc. asserted it was owed $878,856 by Zeek. USHBB produced video promos for Zeek. In September 2012, the PP Blog reported that Zeek once listed USHBB executive OH Brown as an employee. Meanwhile, USHBB once produced videos for a collapsed MLM scheme known as Narc That Car.)

    Clawback litigation: In the absence of settlements, the receiver potentially could file actions that involve thousands of Zeek affiliates in possession of ill-gotten gains from the scheme.

    Read the receiver’s April 30 filing. (Our thanks to the ASD Updates Blog for providing the filing.)

    Visit the receivership website.

     

     

     

  • CNN’s Anderson Cooper 360 Expected To Air Segment On Zeek Rewards Tonight; [UPDATE: Report Apparently Delayed]

    acteaser040313UPDATE 8:07 A.M. EDT (APRIL 4, U.S.A.) The report did not air during the 8 p.m. or 11 p.m. broadcasts, possibly because developments in other stories took precedence. Our April 3 story is below . . .

    The Blog of CNN’s Anderson Cooper 360 is carrying this teaser today: “360 Wednesday[:] One of the biggest financial schemes in U.S. history went down in a small North Carolina town with many losing their life savings. Watch AC360 at 8 and 11 p.m. ET.”

    In August 2012, the SEC called Zeek Rewards a $600 million Ponzi- and pyramid scheme that had defrauded people by the hundreds of thousands. Zeek was operated by Paul R. Burks and Rex Venture Group LLC of Lexington, N.C.

    CNN’s apparent airing of a segment on Zeek will occur against the backdrop of mysterious disappearance of the Profitable Sunrise “program,” which purported to pay out more on a daily basis than even Zeek.  Zeek planted the seed that it paid out an average of 1.5 percent a day; the bizarrely named Profitable Sunrise “Long Haul” plan claimed it paid out 2.7 percent a day.

    Payouts from the Long Haul were dubbed an “Easter Gift” and were due April 1, April Fool’s Day. The Profitable Sunrise website, however, has been offline since at least March 14. At least 34 regulators in the United States and Canada have issued Investor Alerts or cease-and-desist orders against Profitable Sunrise.

    New Zealand and the United Kingdom also have issued warnings.

    CONSOB, the Italian securities regulator, yesterday issued a suspension order against an alleged Profitable Sunrise promoter.

    Some Zeek promoters also promoted ProfitableSunrise, which traded on Bible verse

    Zeek also has promoters’ ties to the $119 million, 1-percent-a-day AdSurfDaily Ponzi scheme, which operated from the small town of Quincy, Fla., and purported to be a Christian enterprise.  ASD collapsed after the U.S. Secret Service filed Ponzi allegations in 2008.

     

  • ZEEK RECEIVER TO NET WINNERS: ‘The Time For Court Action Is Drawing Closer’

    UPDATED 1:20 P.M. EDT (APRIL 4, U.S.A.) The court-appointed receiver in the Zeek Rewards Ponzi scheme case has warned net winners that “the time for court action is drawing closer” and that “there is an opportunity for settlement.”

    Receiver Kenneth D. Bell published a letter to winners today on the website of the receivership.

    A snippet from the letter (italics added):

    The time for court action is drawing closer. I am sending this message to make sure that net-winners understand that there is an opportunity for settlement, but that the window for the opportunity is closing. To allow a reasonable time for all those who would like to pursue a settlement to do so, I am going to continue to make my team available to negotiate settlements for at least 60 more days. Therefore, if net winners want to pursue a settlement they should contact us by no later than May 31, 2013. After that date, I will assume that all net-winners that want to avoid the legal process by discussing settlement have done so, and I will move forward with court action, likely in June 2013, against the remaining net-winners.

    breakingnews72In August 2012, the SEC descibed Zeek as a $600 million Ponzi- and pyramid scheme operated by Paul R. Burks through Rex Venture Group LLC. Based on the number of victims, Zeek may be the largest Ponzi scheme in U.S. history.

    Bell noted in the letter that he already has discussed settlements with a “number of net-winners” and that “we have successfully negotiated payments which will, subject to Court approval, result in the release of the Receiver’s claims against those winners.”

    Some winners have received significant discounts, Bell said. But he noted that settlements depend on circumstances and that not all winners will get the same deal.

    “The settlements take into account the amount of the affiliate’s winnings, the nature of their involvement and their involvement of others, their cooperation, their ability to repay the money (and the time period in which the repayment can reasonably be made) and other individual factors and circumstances,” Bell said in the letter.  “The amounts of the settlements have ranged from approximately 40% to 80% of the affiliate’s net winnings. However, not all net winners have been or will be offered discounted settlements and the amounts of future settlements may vary from this range. The amount of the settlement offered to each net-winner will be based on the affiliate’s particular circumstances and ultimately must – in both my and the Court’s opinion – be in the overall best interests of the victims, considering the costs associated with the legal process.”

    Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina is presiding over the Zeek case.

    Mullen’s name also was in the news last week as a result of a different government action that alleged fraud.

    On March 27, the CFTC sought an asset freeze against James Harvey Mason of Graham, N.C., The JHM Forex Only Pool (JHM) and Forex Trading at Home (FTAH).

    Mullen granted the freeze, amid CFTC allegations that Mason fraudulently solicited “at least $1.1 million from at least 60 individuals to participate in off-exchange foreign currency (forex) commodity pools and misappropriat[ed] at least $600,000 of participant funds.”

     

  • AP (VIA YAHOO NEWS): Zeek’s Paul Burks Says Participants At Fault For Losing Money In Alleged $600 Million Ponzi Scheme

    The Associated Press is reporting that Zeek Rewards operator Paul R. Burks claims that he is not at fault and that Zeek participants are to blame if they lost money.

    From the AP (via Yahoo News/italics added):

    “I never told anyone to invest more money than they could afford,” Burks snapped. “I didn’t tell them to do that. Never.”

    He said if they lost money, “it’s their fault. Not mine. Don’t blame me.”

    Read the full story.

    recommendedreading1Zeek rose in part through promotions on well-known Ponzi scheme forums such as TalkGold and MoneyMakerGroup. In August, the SEC alleged that Zeek was a $600 million Ponzi- and pyramid scheme operating from Lexington, N.C.  Court records suggest the SEC’s Zeek probe began at least in April 2012.

    Serial hucksters on the Ponzi boards often rationalize Ponzi train wrecks by claiming that no one advised participants to spend more than they could afford to lose.

    Convicted Ponzi schemer Dennis Bolze — one of the original so-called “mini-Madoffs” — tried a version of the “don’t invest more than you can afford to lose” rationalization in an unsuccessful bid to reduce his 27-year prison sentence for his brick-and-mortar scheme. A judge applied a sentencing enhancement in the Bolze case because senior citizens were among the victims.

    As the PP Blog reported on Jan. 12, 2012 (italics added):

    Bolze used a similar argument for a sentencing reduction, asserting that his victims invested only “discretionary money.”

    He further argued that age alone was  not sufficient to justify the enhancement “and that the present poor financial condition of his victims is not relevant to whether they were unusually vulnerable at the time they invested their money with him,” according to the 6th Circuit.

    Meanwhile, Bolze “denied that he forced anyone to invest” and claimed “that he did not know” certain investors “because his associate dealt with them.”

    The panel rejected each of those arguments.

    Burks, 66, has not been charged criminally. The SEC sued Burks and Zeek parent Rex Venture Group LLC last year.

    Ponzi-board hucksters have promoted numerous Internet-aided scams. AdSurfDaily, a $119 million Ponzi scheme opearting from Florida, had a presence on the boards. So did Legisi, a $72 million Ponzi scheme operating from Michigan. So did Pathway to Prosperity, a $70 million scam alleged to have penetrated 120 countries. So did Imperia Invest IBC, a shadowy entity that stole millions of dollars by targeting people with hearing impairments.

    The most recent Ponzi-board scam to make major news is Profitable Sunrise, another shadowy entity purportedly operated by “Roman Novak.” Profitable Sunrise purported to pay interest of 2.7 percent a day through its bizarrely named “Long Haul” plan targeted at Christians. Members were due a purported “Easter gift” on Monday, April Fool’s Day.

    The Profitable Sunrise website has been missing for more than two weeks. At least 34 U.S. states or provinces in Canada have issued Investor Alerts or cease-and-desist orders against Profitable Sunrise. The United Kingdom and New Zealand also have issued warnings.

    Research shows that Profitable Sunrise had members in common with ASD and Zeek.

  • UPDATE: ASD’s Andy Bowdoin Incarcerated At Oklahoma City Federal Transfer Center

    Thomas Anderson "Andy" Bowdoin
    Thomas Anderson “Andy” Bowdoin

    Convicted 1-percent-a-day Ponzi schemer Andy Bowdoin is listed as an inmate at the Federal Transfer Center in Oklahoma City, a development that likely means the 78-year-old  AdSurfDaily patriarch is on his way to a federal prison. Bowdoin, a Floridian, last year requested to be incarcerated in Florida. The PP Blog was unable to determine immediately if that request was granted.

    Bowdoin pleaded guilty to wire fraud in the ASD Ponzi case in May 2012. He admitted ASD was a Ponzi scheme that had gathered about $119 million and had never operated lawfully from its inception in 2006 through its collapse in 2008. Bowdoin initially was imprisoned in June 2012, after federal prosecutors proffered evidence that he continued to promote scams even after the seizure of more than $80 million in the ASD Ponzi case and even after he was charged criminally in December 2010.

    In August, Bowdoin was sentenced to 78 months in federal prison for his role in the ASD Ponzi.

    Federal prosecutors identified AdViewGlobal and “OneX” as two other scams in which Bowdoin participated after the collapse of ASD amid Ponzi allegations by the U.S. Secret Service in 2008. Like ASD, AdViewGlobal was a purported “program” that planted the seed its paid a daily return of 1 percent. OneX was a “program” Bowdoin said could fetch participants a quick return of $99,000, apparently after an initial outlay of $5.

    Bowdoin targeted former ASD members and “college students” in his OneX promos.

    In August, the SEC accused Zeek Rewards of operating a massive online Ponzi scheme that had gathered about $600 million. Similar to ASD, Zeek Rewards was a “program” that planted the seed it paid a return of 1.5 percent a day.

    The SEC has described its Zeek probe as ongoing. The Secret Service said in August that it also was investigating Zeek.

    Despite the fact Bowdoin was sued civilly, accused of racketeering and charged criminally with wire fraud, securities fraud and selling unregistered securities for the ASD scam, any number of ASD members turned to promoting Zeek, which planted the seed it paid out even more than ASD.

    In August, the SEC accused Zeek of selling unregistered securities. Zeek operator Paul R. Burks, who is in his mid-60s, consented to a judgment in the civil case without admitting or denying the SEC allegations. Two prospective class-action lawsuits also were filed against Burks.

    Despite the legal entanglements of both Burks and Bowdoin and Bowdoin’s prison sentence, some MLMers immediately began promoting similar “programs.”

  • URGENT >> BULLETIN >> MOVING: New Filings By SEC Suggest Zeek Probe Began In April 2012 Or Earlier; Agency, Receiver Oppose Motions To Intervene By Possible Clawback Targets

    breakingnews72UPDATED 9:46 A.M. ET (JAN. 13, U.S.A.) New court filings by the SEC in the Zeek Ponzi scheme case in the Western District of North Carolina strongly suggest that the Zeek probe was under way at least by April 17, 2012. On that date, according to the filings, an IT specialist for the SEC was tasked by the agency’s Division of Enforcement to “conduct Website/video capture” of ZeekRewards.com.

    Four months to the day later — on Aug. 17, 2012 — the SEC alleged in federal court that Zeek was a $600 million Ponzi- and pyramid fraud operating from Lexington, N.C.  Left unanswered in today’s filing is the question about precisely when Zeek operator Paul R. Burks first was contacted by the agency and when he began to cooperate by providing records.

    Burks consented to judgment in the case, without admitting or denying wrongdoing.

    Separately, the SEC and court-appointed receiver Kenneth D. Bell both argued today that petitions to intervene and to dissolve the receivership by alleged Zeek “winners” Trudy Gilmond and Kellie King should be denied by Senior U.S. District Judge Graham C. Mullen.

    Court filings suggest that Gilmond has clawback exposure of more than $1.364 million. King’s potential exposure may exceed $205,000.

    “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. “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.”

     

  • Conference Call By Zeek Receiver Under Way [Call Ended At 6:03 P.M.]

    EDITOR’S NOTE: This post was updated at 2:48 p.m. on Dec. 20 to include this link to a recording of the receiver’s Dec. 17 call. The information below reflects the PP Blog’s original notes from the call on Dec. 17 . . .

    UPDATED 7:27 A.M. (DEC 18, U.S.A.) A conference call by Kenneth D. Bell, the court-appointed receiver in the Zeek Rewards Ponzi scheme case, is under way. (Call ended at 6:03 p.m., as noted below.) The call began at 5 p.m. ET (U.S.A).

    UPDATE 5:15 p.m. Bell, formerly a federal prosecutor, has said he knows what a Ponzi scheme is — and “this was one.” Somewhere between $500 million and $600 million was lost. The receivership estate has recovered about half of that. “We’re roughly half-way home, but that’s a huge gap,” Bell said.

    UPDATE 5:18 p.m. A claims form for victims should be ready by the end of January, Bell said. It’s doubtful that victims can be made 100 percent whole.

    UPDATE 5:21 p.m. There are some sad, Zeek-related stories of loss out there. Bell said he had emails from people who’d lost anywhere from $49 to $10,000.

    Some folks are worried they can’t establish their loss because they sent money to their sponsor, not Zeek parent Rex Venture Group, Bell said. A means of addressing such claims is being established.

    UPDATE 5:25 p.m. Bell said some people have questioned whether he is dragging out the receivership to drive up legal fees. He asked listeners to trust him, and he denied foot-dragging. His “goal is to be the most cost-effective receivership in history,” Bell said.

    UPDATE 5:33 p.m. Bell said he did not know if other people will be charged by authorities in connection with Zeek. (Zeek/Rex operator Paul R. Burks is the only person charged to date — civilly by the SEC.)

    He added that he’ll be prepared to prove Zeek was a Ponzi scheme as he pursues winners in clawback litigation. A motion by Zeek winners to appoint attorney Michael Quilling  examiner was “absurd,” he said. He did not reference Quilling by name.

    UPDATED 5:38 p.m. Bell also will oppose a motion by attorney Ira Lee Sorkin to dissolve the receivership. He did not mention Sorkin’s name. (Sorkin was Bernard Madoff’s defense attorney.)

    UPDATED 5:41 pm. Bell is contemplating an interim distribution to victims. More study needs to be done, but “I don’t see any reason to sit on $300 million,” he said. No timetable has been established for an interim distribution.

    UPDATED 5:44 p.m. Zeek’s database “is a real mess,” Bell said. He is studying a means by which victims could gain access to their back offices to gain access to information, but such a capability could be cost-prohibitive.

    UPDATED 5:48 p.m. Some Zeek members have poor records, but others have good records that are helping fill in  gaps in Zeek’s database. “We will try to help you establish your claim,” Bell said. The more records members can submit, the better.

    UPDATED 5:50 p.m. The plan is to treat all Zeek members equally. Distributions likely will occur all at once. No one has received money from the receivership to date.

    UPDATED 5:52 p.m. In the early days of the receivership, Bell said he received “tens of thousands” of emails.

    UPDATED 5:54 p.m. Bell will sell real estate and furnishings owned by Zeek, he said.

    UPDATED 5:58 p.m. There are “eight to 10” core members of the Zeek receivership team. At the moment, some of the lawyers are arguing with lawyers on the other side of the issues, Bell said.

    UPDATED 6 p.m. Bell said if Paul Burks still has Zeek receivership property, he’ll be treated as a winner. The case was not over simply because Burks paid a $4 million fine to the SEC, he said. It was not up to the receivership to determine if Burks would be charged criminally, Bell said.

    UPDATED 6:03 p.m. Call ended. Bell thanked those supporting his efforts and said he understood why some people would not.

    MISC NOTES AT 6:05 p.m. What happens to possible Zeek “ringleaders” is the responsibility of law enforcement, Bell said during the call.

    The current math, he said, looks something like this: 840,000 losers and 77,000 winners. “A lot” of people had more than one Zeek username, Bell said. Every dollar the receivership estate spends on court battles is a dollar that won’t go to victims, Bell said. Prudent choices have to be made when deciding how to fund the receivership estate in a cost-effective manner to maximize the distributions to victims, Bell said. There were “boxes and boxes” of cashier’s checks at Rex headquarters, Bell said.

    Those cashier’s checks were receivership property under the law, Bell said.

  • BULLETIN: Zeek Receiver Says ‘Large Sums . . . May Have Been Transferred By Net Winners To Other Entities In Order To Hide Or Shelter Those Assets’

    breakingnews72BULLETIN: (UPDATED 2:34 P.M. ET U.S.A.) The court-appointed receiver in the Zeek Rewards Ponzi scheme case has advised a federal judge that he “has obtained information indicating that large sums of Receivership Assets may have been transferred by net winners to other entities in order to hide or shelter those assets.”

    The dramatic assertion by receiver Kenneth D. Bell that Zeek winners may have hidden cash appeared in a motion to Senior U.S. District Judge Graham C. Mullen to compel certain alleged Zeek “winners” to produce documents in advance of anticipated clawback actions.

    Bell’s move may send shudders across the HYIP sphere because it signals an effort to unmask bids by willfully blind hucksters and professional Ponzi players — known derisively as “pimps” — to benefit from serial scamming on a national and international scale. It is known, for instance, that some Zeek participants also pitched AdSurfDaily, which the U.S. Secret Service described in 2008 — at least two years before the launch of Zeek — as an international Ponzi scheme that had gathered tens of millions of dollars.

    ASD operator Andy Bowdoin pleaded guilty to wire fraud in May. In August, he was sentenced to 78 months in federal prison.

    HYIP schemes thrive in part because serial scammers race from scheme to scheme to scheme while turning blind eyes to obvious markers of fraud, including purported returns that dwarf the marketplace and are unusually consistent. Zeek planted the seed that it provided a daily return of between 1 percent and 2 percent. In August, the SEC said Zeek’s payout “consistently has averaged approximately 1.5% per day.”

    Zeek operator Paul R. Burks, the SEC charged, “unilaterally and arbitrarily” determined the daily dividend rate to give “investors the false impression that the business is profitable.”

    In 2009, the U.S. Secret Service effectively accused Bowdoin of doing the same thing. ASD purported to pay 1 percent a day. In August 2012, the Secret Service said it also was investigating Zeek. Court filings in the ASD case show that some members of ASD established entities through which to receive proceeds from ASD. One was described as a “ministry of giving,” for instance. Another was described as a nonprofit religious entity.

    The Secret Service described ASD as a “criminal enterprise” that directed tainted proceeds potentially to thousands and thousands of participants while scamming the very people it purported to be helping earn money through its 1-percent-a-day revenue-sharing “program.”

    Zeek also described itself as a revenue-sharing program and, like ASD, preemptively denied that anything untoward was occurring. Burks did not contest the SEC’s case against his firm, neither admitting nor denying wrongdoing. ASD’s Bowdoin eventually acknowledged that he was at the helm of a massive Ponzi scheme and that ASD had never operated lawfully from its inception in 2006 through it collapse in 2008.

    Bell also revealed in the filing that he had filed paperwork in “all” 94 U.S. federal court districts to inform judges and court officials that he was presiding over the receivership ordered by Mullen in August after the SEC described Zeek as a $600 million Ponzi- and pyramid scheme operated through Rex Venture Group LLC (RVG) and Burks. The move was designed to consolidate jurisdiction over clawback actions in a single place: Mullen’s courtroom in the Western District of North Carolina, the home base of Zeek.

    Among other things, Bell is seeking “All documents constituting or relating to any communication involving or related to RVG.”

    “The Receiver has asked for these documents to learn more about how the recipient was involved in Zeek, portrayed the scheme to others, solicited others, and otherwise conducted activities related to Zeek,” Bell said in court filings.

    Meanwhile, Bell is seeking “All documents constituting or related to any communication to any affiliate, vendor, customer or client of RVG related to RVG.” At the same time, he is seeking “Documents sufficient to show all user names, passwords, email addresses and accounts used . . . in connection with RVG.”

    That information is needed because many “individuals used multiple user names, and this information will clarify which user names a given net winner used,” Bell advised Mullen. “In addition, the account information will help to allow the Receiver to verify the financial figures calculated from RVG’s records.”

    Bell’s motion to compel specifically references Zeek affiliates Robert Craddock, David Sorrells, David Kettner and Mary Kettner as the recipients of subpoenas from the receivership. In October, Bell mailed a first wave of subpoenas to about 1,200 Zeek affiliates. He effectively is seeking the same information from them that he is seeking from Craddock, the Kettners and Sorrells.

    Craddock, the Kettners and Sorrells “have failed to produce any of the documents requested by the Receiver despite multiple requests,” Bell advised Mullen. “Therefore, the Receiver has filed a motion to compel production of a portion of the documents originally requested by the Receiver.”

    The Kettner and Sorrells potentially have nearly $2 million in combined clawback exposure, according to court filings. Craddock’s exposure is unclear. He has referred to himself as a Zeek “consultant.”

    One of the authorities Bell pointed to in advance of Zeek clawback actions and in his motion to compel the production of documents is a case involving Michael Quilling, an attorney for Craddock, the Kettners and Sorrells. Quilling himself has presided over SEC receiverships.

    Bell pointed out to Mullen that Quilling once sued the estate of a a deceased individual who’d received proceeds from the Frederick J. Gilliland Ponzi scheme in 2002. That lawsuit was filed on the same legal theory Bell is pursuing in the Zeek case: that recipients of fraudulent proceeds from a Ponzi scheme are not entitled to keep them.

    See post on ASDUpdates.

  • Nearly $2 Million Allegedly At Stake For 3 Arizona Zeek Affiliates Who Received Subpoenas, Filings Say

    “[Zeek operator Paul] Burks is solely responsible for determining the amount of ‘net profits’ to share in the Retail Profit Pool . . . Defendants represent that daily awards are calculated by dividing ‘up to 50%’ of daily net profits by the number of Profit Points outstanding among all Qualified Affiliates. This calculation results in a daily dividend paid to each Qualified Affiliate that consistently has averaged approximately 1.5% per day . . . In fact, the dividend bears no relation to the company’s net profits. Instead, Burks unilaterally and arbitrarily determines the daily dividend rate so that it averages approximately 1.5% per day, giving investors the false impression that the business is profitable.” — From the SEC complaint in the Zeek Rewards Ponzi scheme case, Aug. 17, 2012

    “The most successful Affiliates worked the hardest, placed numerous ads, and explained the Zeekler.com penny auction to groups of people several times a month. Some of the Movants, for example, traveled extensively to maintain contact with their network of peers and to educate them, among other things, on how to be successful in the program. These Movants’ successes were a direct result of the amount of time and effort they poured into the effort to promote the penny auction.” — Zeek Affiliates Dave Kettner, Mary Kettner and David Sorrells, Dec. 11, 2012

    Although the SEC accused Rex Venture Group LLC/Zeek Rewards operator Paul R. Burks in August of conducting a massive Ponzi scheme and duping members into believing he was presiding over a business that created enormous profits legitimately, three members of the MLM “program” with potentially millions of dollars in ill-gotten gains subject to clawback aren’t buying it.

    At stake for Dave Kettner, Mary Kettner and David Sorrells of Arizona is at least $1.94 million they allegedly earned in the “program” through hard work, according to court filings.

    Zeek was a legitimate venture, they argued in filings dated Dec. 11. And it was no Ponzi scheme, they advised Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina. Mullen is presiding over the Zeek Ponzi scheme case brought by the SEC Aug. 17.

    It was not immediately clear whether the Kettners and Sorrells were the recipients of payouts from Zeek’s Retail Profit Pool (RPP) or commissions for sponsoring new members — or some combination of both. The RPP also is known as the Retail Points Pool.

    What is clear, according to their filings, is that each received a letter and subpoena from Zeek Receiver Kenneth D. Bell that paint them as potential clawback targets. The information about the sums Bell is seeking is contained within exhibits filed by the Kettners and Sorrells.

    Zeek records, according to letters from Bell cited by the trio, suggest Sorrells received $945,539 from Zeek while paying in only $1,695. Dave Kettner received $537,577.95 while paying in only $1,378, and Mary Kettner received $465,866.67 while paying in only $1,495.

    Bell has said Zeek created approximately eight losers for each winner. The SEC described Zeek as a $600 million Ponzi and pyramid scheme that potentially defrauded more than 1 million people.

    The PP Blog is working on a related story about assertions by the Kettners and Sorrells that significant sums of money that belong to them effectively are trapped in NxPay, a payment processor used by Zeek. More later . . .

     

     

  • BULLETIN: Proposed Class-Action Against Zeek In Louisiana Transferred To North Carolina

    BULLETIN: A federal judge has transferred from the Eastern District of Louisiana to the Western District of North Carolina a proposed class-action lawsuit against Rex Venture Group LLC, Zeek Rewards and Paul R. Burks.

    The ruling by U.S. District Judge Carl J. Barbier  in New Orleans likely paves the way for Senior U.S. District Judge Graham C. Mullen of Charlotte to issue a specific order to stay the case. Both Burks and Kenneth D. Bell, the court-appointed receiver in the Zeek Ponzi scheme case brought by the SEC on Aug. 17 in Mullen’s courtroom, have sought the stay.

    In August, Mullen issued an order that “[a]ll Ancillary Proceedings are stayed in their entirety, and all Courts having any jurisdiction thereof are enjoined from taking or permitting any action under further Order of this Court. . . .”

    The prospective class action was filed in Louisiana on Aug. 24, a week after Mullen issued the stay in North Carolina.

    Burks has contended that the Louisiana plaintiffs tried to circumvent the Aug. 17 stay issued by Mullen by bringing an action in another federal district.