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Tag: Rex Venture Group LLC

SPECIAL REPORT: Zeek Money May Be In Collapsed Russian Bank

Funds from Zeek, which once auctioned sums of U.S. currency, may have ended up in a collapsed Russian bank. Graphic from the PP Blog archives: April 2012.

EDITOR’S NOTE: For background, see Feb. 17 PP Blog story: RECEIVER: Payza And Payment World ‘Facilitated’ Zeek Ponzi Scheme; Whereabouts Of $13.1 Million An ‘Open Question’

(Updated 11:14 a.m. ET U.S.A.) Money due victims of Zeek Rewards from transactions involving Payza and Payment World may have been transferred from VictoriaBank in Moldova to JSC TusarBank in Russia in violation of an asset freeze imposed in 2012 by a U.S. court, according to court filings by Zeek receiver Kenneth D. Bell.

Meanwhile, OboPay’s name now has surfaced in filings by Bell. This is in the form of an October 2012 email from a Payment World official to a Payza official questioning Payza’s relationship with OboPay. The U.S. Justice Department last year announced a criminal investigation involving Payza and OboPay. The specific reason behind the probe and the targets are unknown.

TusarBank collapsed in September 2015 and has been recommended for criminal investigation, according to the press office of Russia’s central bank. The bank’s website is beaming a “not available now” message.

Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina last week lifted the seal on Bell’s 258-page filing in which Bell alleged Payza, Payment World and VictoriaBank enabled Zeek’s Ponzi scheme shut down by the SEC in 2012. The filing consisted of a 26-page motion and 232 pages of exhibits, including emails between Payza and Payment World. As noted above, one of the exhibits raises the name of OboPay.

Mullen imposed the asset freeze in August 2012.

Whether the possible transfer of Zeek-related funds from Moldova to Russia is part of the Russian probe is unclear.

Adding to the international intrigue is that a second Russian bank that somehow might have been involved in the Payment World-related money flow reportedly collapsed in 2013. This institution is known as Master Bank and is described in Bell’s exhibits as a “sponsoring bank” of a Payment World entity in Hong Kong.

A sponsoring bank provides processors access to Visa or MasterCard networks

On Sept. 13, 2015, just prior to the collapse of TusarBank, the Moscow Times listed Master Bank as one of “Russia’s Biggest Banking Crashes of the Last 2 Years.” This crash occurred in 2013 and was notable for something beyond the 31.3-billion-ruble bailout.

As the Moscow Times reported (italics added):

Even having Igor Putin, a cousin of President Vladimir Putin, on the board of directors could not save Master Bank. The lender’s license was revoked in November 2013 with the Central Bank alleging the bank had violated money laundering legislation and processed large suspicious transactions.

In 2012, just prior to the collapse of Zeek, Zeek figure Keith Laggos claimed he had helped Zeek move payment operations offshore, including to Hong Kong. Specific details of that asserted move are unknown. Zeek had about 15 financial vendors, according to court filings.

Payza, under the leadership of Firoz Patel, has claimed it conducted due diligence on Zeek, according to Bell’s filings. Even if true, it somehow appears to have missed that Zeek was offering an outrageous and unusually consistent return averaging about 1.5 percent a day and also claimed “compounding” was possible.

The SEC has described Zeek as a cross-border Ponzi scheme that gathered nearly $900 million while operating from North Carolina.

From Bell’s filing (italics added):

On August 29, 2010, Paul Burks [of Zeek] onboarded an account with Payza (then, known as AlertPay) in the name of Rex Venture Group LLC that was associated with two websites: www.zeekrewards.com and www.zeekler.com. Prior to the boarding of the account, Payza purportedly conducted due diligence, collecting and reviewing information about Paul Burks and the business. According to Payza, during the course of the relationship, it monitored and mitigated risk. Despite these procedures, Payza did not identify or address the red flags indicating that ZeekRewards was a Ponzi scheme and, instead, together with PaymentWorld and VictoriaBank [of Moldova], facilitated access and payment to and from ZeekRewards by numerous affiliates worldwide.

Bell’s 258-page filing is available on the landing page of the receivership website. It is styled, “Memorandum in Support of the Receiver’s Motion for an Order Directing Payza, Payment World, and VictoriaBank to Turn Over Receivership Assets and/or Find Them in Contempt of the Court’s Order Freezing and Preserving Receivership Assets.”

NOTE: Our thanks to the ASD Updates Blog.

Feb 21, 2016
Defense Attorney With Ties To Zeek Case Now Representing Kristi Johnson Of Achieve Community In Criminal Case

UPDATED 9:08 A.M. EDT JULY 21 U.S.A. Matthew G. Pruden, an attorney with the Tin Fulton Walker & Owen law firm, is a defense lawyer in the June 2015 criminal case against “Achieve Community” figure Kristine Louise Johnson (Kristi Johnson), according to the docket of the case.

North Carolina-based Tin Fulton Walker & Owen also is representing alleged Zeek Rewards’ operator Paul R. Burks in the criminal case against him brought by federal prosecutors in the Western District of North Carolina last year and in the civil case brought by the SEC in 2012. Pruden’s name appears on a Plainsite.org version the docket in the SEC’s civil case against Rex Venture Group LLC, the company through which Burks allegedly operated Zeek.

Achieve, like Zeek, is alleged to have been a pyramid- and Ponzi scheme. Pruden was appointed by the court to represent Johnson, who has pleaded guilty to a charge of wire-fraud conspiracy.

Though bizarrely dismissed by some Zeek cheerleaders as country bumpkins in the early days after the SEC brought its civil case, Tin Fulton Walker & Owen is a distinguished law firm. (Read GlimDropper of the RealScam.com antiscam forum, posting at Quatloos, covering a 2012 Robert Craddock barb against the firm.)

Among the firm’s most famous clients is Gen. David Petraeus, the former director of the Central Intelligence Agency who received probation and a fine after admitting “to the unauthorized removal and retention of classified information and lying to the FBI and CIA about his possession and handling of classified information.” (Jake Sussman, the Petraeus lawyer quoted in this April 23, 2015, AP story on the Petraeus sentence, also is a lawyer for Zeek’s Burks.)

Achieve’s Johnson pleaded guilty to wire-fraud conspiracy on June 30. She is free on bail. Though listed as a Colorado resident, she was charged criminally in the Western District of North Carolina — the same venue in which the criminal charges against Burks were filed.

It is known that Zeek and Achieve had members in common.

Whether the cases against Burks and Johnson raise any potential conflicts for Tin Fulton Walker & Owen was not immediately clear.

Certain documents that appear to be related to Johnson’s passport have been sealed in the criminal action against her. Certain documents in the Zeek case also are sealed.

Pruden assisted Johnson when she appeared in court last month and pleaded guilty, according to documents in the case.

NOTE: Our thanks to the ASD Updates Blog.

Jul 20, 2015
CLAIM: UFunClub Opponents Are Like Zombies From ‘The Walking Dead’

‘Dominator’ Michael Mansell tells the UFunClub/UToken troops that opponents of the program are like the disease-spreading zombies on ‘The Walking Dead’ television series. Source: YouTube promo dated May 4, 2015.

If you want to sell UFunClub/UToken, you have to understand that you’ll encounter opposition from “sheeples,” according to American promoter Michael Mansell of the UFUN Dominators Team.

These sheeples will be trapped in their miserable lives to the point of being brain dead, and therefore will not understand that the visionary Dominators seek to “change the status quo,” “don’t expect the norm” and “do not accept ordinary.”

How to deal with the sheeples? Well, you bash their heads with baseball bats, he jokes.

“You gotta push through those crowds of people,” he says in a 1:13:55 YouTube promo featuring three other American Dominators while UFunClub/UToken is under investigation in Thailand, where people are being arrested and property and assets are being seized.

“I liken it to pushing through a bunch of zombies from ‘The Walking Dead.’ They’re gonna bite you; they’re gonna try to scratch you; they’re gonna try to infect you with their disease,” Mansell continues.

“But you gotta keep swinging that bat at their brains to make sure they don’t get in your way. And you gotta keep pushing through those zombies until you get to the other side, where you create your own new world.”

There may be up to 3,000 Americans in UFunClub/UToken, even though there is no official office in the United States, according to the video.

Precisely how so many Americans became involved remains unclear. If the 3,000 number is correct, however, it would mean that Americans potentially dumped more than $1.9 million into the cross-border scheme. Promoters advertised a minimum buy-in of $635. Buy-in sums of $1,230, $6,040, $12,100 and $57,500 also were advertised, meaning that American involvement in UFunClub/UToken could far exceed $1.9 million.

Mansell was not advocating for actual violence against the purportedly brain-dead opposition; he was simply playing off a baseball-bat theme handed him by Rodney Burton, a fellow American Dominator.

American MLMers/network marketers, Burton suggests, should be like slugger Babe Ruth: They should swing for the fences and not worry about fanning. After all, he says, people remember Ruth for his homeruns, not the number of times he whiffed.

As for the American UFunClub/UToken Dominators?

“We’re going to stand and keep on swinging until there’s no more bat left,” Burton says.

He also contended during that call that UFunClub/UToken has an office in the United States that hasn’t opened. He didn’t say where, but claimed U.S. members would be able to fund their accounts through ACH transactions tied to an ewallet gateway.

If any of that sounds familiar to PP Blog readers, it perhaps is because the U.S. Department of Justice sued Four Oaks Bank in North Carolina in 2014 for turning a blind eye to fraud markers and processing “close to $60 million in ACH transactions in furtherance of the illegal scheme.”

Which illegal scheme was that? Why, Rex Venture Group LLC, the operator of the cross-border Zeek Rewards scheme that ultimately gathered $897 million.

Any UFunClub/UToken ACH vendor could be at the same risk. In the context of UFunClub/UToken, the risk even could be amplified.

Why?

The case of TelexFree, an alleged $1.8 billion cross-border Ponzi- and pyramid scheme, may provide a strong clue. Records show that Brazilian regulators opened probes into its activities in that country in 2013.

Any number of TelexFree promoters turned a blind eye to the Brazil developments and continued to promote the purported opportunity. U.S. regulators later charged several American TelexFree promoters with securities fraud.

Records say that an American undercover agent for the U.S. Department of Homeland Security joined the TelexFree scheme under a promoter based in the United States.

In other news from the Dominators’ video, American promoter Jamison Palmer was said to be back in the United States after promoting the scheme from Thailand.

May 5, 2015
Lawyer Linked To Zeek Rewards Scheme Disbarred

A California attorney alleged to have stolen at least $800,000 that originated in Zeek Rewards while serving as counsel for a Zeek financial vendor has been formally disbarred.

The California Supreme Court issued the order against Scott Stone Mehler on Feb. 23, according to the docket of the case.

Mehler was an attorney for Plastic Cash International (PCI), a vendor sued by Kenneth D. Bell, the court-appointed receiver in the SEC’s pyramid- and Ponzi case filed against Zeek in August 2012. Zeek operated through Rex Venture Group LLC of North Carolina.

Although the Zeek case is referenced in documents prepared by the State Bar of California, the disbarment order against Mehler is tied to a swindle he carried out against the operators of a sheet-metal business. He has been ordered to pay restitution of $647,795.37 in that case.

Whether a separate Bar prosecution is pending against him specifically for Zeek-related actions is unclear. Also unclear is whether a criminal investigation is under way. Mehler asserted his Fifth Amendment right against self-incrimination, according to a July 2014 Bar report.

Bell is pursuing PCI for the return of millions of dollars alleged to be Zeek assets. PCI contends it is a victim of both Zeek and Mehler and was rendered insolvent owing to its business relationship with Zeek.

NOTE: Our thanks to the ASD Updates Blog.

Apr 13, 2015
SEC Enforcement Chief References Investor Alert On ‘Pyramid Schemes Posing As Multi-Level Marketing Programs’ In Congressional Testimony Today, Says ‘Coordinated Effort’ To Disrupt Them Under Way

“The staff also has recently seen what appears to be an increase in pyramid schemes . . . under the guise of ‘multi-level marketing’ and ‘network marketing’ opportunities . . . These schemes often target the most vulnerable investors, and social media has expanded their reach. The Division is deploying resources to disrupt these schemes through a coordinated effort of timely, aggressive enforcement actions along with community outreach and investor education. We are also using new analytic techniques to identify patterns and common threads, thereby permitting earlier detection of potential fraudulent schemes.” — Andrew Ceresney, SEC Enforcement Division director, March 19, 2015

3RD UPDATE 6:09 P.M. EDT U.S.A. Bad news for “program” scammers and their willfully blind enablers: Andrew Ceresney, the director of the SEC’s Divison of Enforcement, told lawmakers on Capitol Hill today that scams using an MLM or network-marketing business model are on the radar.

In fact, according to written testimony Ceresney delivered to the House Capital Markets and Government Sponsored Enterprises subcommittee, they are enforcement “priorities” — right up there with insider trading, microcap fraud and other forms of securities fraud.

“The Division is deploying resources to disrupt these schemes through a coordinated effort of timely, aggressive enforcement actions along with community outreach and investor education,” Ceresney told the panel.

New Jersey Republican Rep. Scott Garrett chairs the panel. Rep. Carolyn B. Maloney, a New York Democrat, is ranking member.

In October, an SEC official attending a symposium sponsored by the Federal Trade Commission on the subject of how fraud affects communities told the audience that the SEC has a “newly established pyramid-scheme task force.”

Ceresney didn’t reference the task force in his prepared remarks today. However, the agency already has filed two actions against MLM or network-marketing schemes this year. In February, the agency sued the “Achieve Community,” alleging it was a Ponzi- and pyramid scheme that had gathered about $3.8 million and had spread on social media. One or more criminal probes related to the SEC’s Achieve investigation are believed to be under way, amid concerns Achieve was funneling scam proceeds offshore.

Also in February, the SEC sued a “program” known as Wings Network, alleging it was targeting Latino communities and that its promoters “used Facebook to publicize ‘business meetings’ that took place at hotels and other locations in Connecticut, California, Florida, Massachusetts, Pennsylvania, Texas, Georgia, and Utah.

“The promoters also set up storefronts or ‘training centers’ to lure investors into attending Wings Network presentations,” the agency charged. “For example, one promoter used a storefront in downtown Philadelphia to make presentations to prospective investors, and another promoter rented office space in Pompano Beach, Fla., and spread the word in the local Latino community to attract prospective investors to come in and hear presentations.”

Wings appears to have gathered at least $23.5 million.

In addition to targeting vulnerable population groups, Wings Network tried to sanitize itself by falsely trading on the name of the Direct Selling Association, the SEC said in court filings. Wings has been tied to two companies that used the name Tropikgadget.

Both ostensibly operated from Portugal through business entities set up in Madeira, a Portuguese island in the North Atlantic, and through Sharjah, a city in the United Arab Emirates, the SEC alleged.

Court records suggest Wings had a strong presence in Marlborough, Mass., the town from which the TelexFree MLM scheme was based. In April 2014, the SEC described TelexFree as a massive Ponzi- and pyramid scheme largely targeting immigrant populations. A court-appointed trustee says TelexFree may have gathered $1.8 billion through its pyramid scheme in about two years.

Participants hailed from dozen of countries. A partial list of U.S. participants shows many names that appear to be Latino. Trustee Stephen B. Darr said in court filings that the full list of worldwide participants “contains 1,894,940” names and spans “35,110 pages.”

A list of alleged “winners” in the 2012 Zeek Rewards scheme broken up the SEC and the U.S. Secret Service also appears to include a disproportionate share of Latino names or names from other vulnerable population groups. Zeek is estimated to have rounded up $897 million in less than two years and to have affected on the order of 800,000 victims.

Zeek’s name (through parent Rex Venture Group LLC) was referenced in a footnote and related link in today’s written testimony by Ceresney.

So was the name of CKB168, a “program” that allegedly targeted members of Asian-American communities in New York and California and was taken down by the SEC in 2013. The alleged haul was pegged at at least $20 million.

The footnote pointed to an SEC investor alert dated Oct. 1, 2013, and titled, “Beware of Pyramid Schemes Posing as Multi-Level Marketing Programs.” The alert, which has been translated into Chinese, Spanish, Portuguese, Vietnamese and Creole, has been updated to include information on “programs” such as TelexFree and Wings Network.

Though not referenced specifically in the October 2013 alert, “programs” such as eAdGear, Zhunrize and WCM777 also have encountered SEC actions. All three appear to have affected Asian population groups. WCM777 also clearly affected Latino groups and has emerged as one of the strangest MLM schemes of all time.

Court filings suggest that $750,000 in WCM777 money was siphoned off and provided to one or more lobbying firms. On March 13, the PP Blog reported that more than $400,000 in proceeds allegedly were directed to a former CIA operative who once worked as a political fundraiser and has two felony convictions.

Some WCM777 promoters had claimed that $14,000 sent to the California-based “program” returned $500,000 in 52 weeks. WCM777 appears to have gathered more than $80 million in about a year, with the proceeds from the MLM “program” diverted to purchase golf courses, real estate and more. Tens of millions of dollars appear to have been diverted to Hong Kong.

The alleged haul of eAdGear was $129 million. Two persons have been charged criminally.

Zhunrize, the SEC said, gathered about $105 million.

Today’s Congressional testimony took place against the backdrop of continuing clashes between Herbalife and activist investor Bill Ackman, an Herbalife short-seller who has accused the MLM program of being a pyramid scheme that targets Latinos.

Herbalife, which was not referenced in today’s testimony, denies it is a pyramid scheme and says it is proud of its appeal to Latinos and serves the community honorably. (Ackman also isn’t mentioned in the testimony.)

Responding on web forums such as Seeking Alpha, fans of Herbalife have accused Ackman of pandering to enforcement agencies, members of Congress and Latino groups as part of a scheme to inspire investigations that would line his pockets by driving down Herbalife’s stock price.

In media accounts, Ackman has said he won’t keep personal profits if his Herbalife short pays off. At the same time, he asserts he is pursuing profit for his hedge-fund investors through a strategy that also delivers social justice.

Perhaps the only thing clear right now is that MLM, no stranger to controversy, never before has been under a light this intense.

The Capital Markets and Government Sponsored Enterprises subcommittee is under the House Financial Services Committee. The committee is chaired by Rep. Jeb Hensarling, a Texas Republican. Rep. Maxine Waters, a California Democrat, is ranking member.

Read Ceresney’s written, footnoted testimony.

Mar 19, 2015
In Extraordinary Development, Federal Judge Approves Temporary Restraining Order ‘Without Notice’ That Directs Zeek Vendor ‘To Immediately Deposit With The Receivership’ Nearly $5 Million

Paul Burks.

DEVELOPING STORY: (Updated 10:02 p.m. EDT U.S.A.) In an extraordinary development on this Halloween Friday, the federal judge presiding over the SEC’s Ponzi- and pyramid-scheme case against Zeek Rewards has issued a Temporary Restraining Order and directed a Zeek vendor to immediately turn over to the receivership more than $4.85 million.

The order was entered “without notice,” owing to concerns the money could go missing. It applies to Zeek financial vendor Preferred Merchants Solutions LLC and Jaymes Meyer, Preferred’s California-based sole member and manager.

Events that led to the order involve a bizarre circumstance that allegedly occurred in June 2012, when tens of millions of dollars in undeposited checks — enough to fill six to eight mail bins — had backed up at Zeek, starving the Rex Venture Group LLC enterprise for cash during a period in which Zeek was having banking problems in North Carolina and its alleged Ponzi was crumbling.

Zeek operator Paul Burks allegedly hired Preferred to solve the problem and also to provide trust services. According to a document filed by Preferred in August 2014, the first time the company visited Zeek headquarters, “ex- or off-duty police officers [were] providing security.”

Preferred contends it solved Zeek’s problem with the backed-up checks and legitimately is owed the $4.85 million at issue.

But receiver Kenneth D. Bell, who is seeking a contempt sanction against Preferred and alleges that Preferred effectively transferred Zeek Ponzi cash to itself after it learned from the SEC on Aug. 16, 2012, that an order freezing Zeek assets was imminent, asked Mullen for the TRO on Oct. 28.

Bell alleges that “the evidence establishes that Preferred Merchants and Meyer directed the $4.8 million transfer from the RVG trust account to Preferred Merchants’ account just 19 minutes after the SEC told them about the asset freeze and imminent shutdown of RVG” on Aug. 16, 2012.

He further alleges that “[n]ot only did Meyer fail to tell the SEC about his custody and control over RVG assets, Meyer also failed to disclose that he anticipated making any transfers, or, after the transfers were executed, that he had done so.”

From the order entered at 11 a.m. today by Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina (italics added):

The Receiver has satisfied the requirements of Federal Rule of Civil Procedure 65(b) and established that an order is appropriate in this case to avoid irreparable injury, loss, or damage to the Receivership Estate of Rex Venture Group, LLC, including the further waste and dissipation of Receivership Property. Notably, the Court finds that the large amount of money at stake, the liquidity of the funds which could be transferred overseas or hidden, and Preferred Merchants’ and Meyer’s apparent pattern of misconduct present a likelihood of irreparable harm and necessitate this order being entered without notice. Accordingly, and for the reasons stated in the motion and memorandum, the Court will GRANT the motion.

IT IS, THEREFORE, ORDERED, ADJUDGED, AND DECREED that:
1. This Order is entered at 11 a.m. on October 31, 2014.
2. The Receiver’s Motion for Temporary Restraining Order is GRANTED;
3. Preferred Merchants Solutions, LLC (“Preferred Merchants”) and Jaymes Meyer (“Meyer”) are directed to immediately deposit with the Receivership $4,854,010.40, which is the amount they transferred from RVG’s trust account after the SEC notified them of the asset freeze and requested that they freeze all RVG accounts and assets;
4. The Receiver is directed to deposit and maintain these funds in a segregated account;
5. This injunction shall expire no later than fourteen (14) days from the entry of this Order or sooner upon further order of the Court.
6. The Court will conduct a hearing on this matter on Wednesday, November 12, 2014 at 2 p.m. in Courtroom 3 at the Charles R. Jonas Federal Building, 401 W. Trade Street, Charlotte, NC 28202. The Receiver is directed to use all reasonable efforts to notify Meyer and Preferred Merchants of the date, time, and location of the hearing.

Burks, 67, of Lexington, N.C., was indicted a week ago today on criminal charges, including mail fraud, wire fraud and conspiracy. A separate lawsuit filed by Bell last month against alleged Zeek winners in Canada contends that Zeek “insiders often worried about being caught.”

Mountains of undeposited checks also were an issue in the AdSurfDaily Ponzi-scheme case in 2008. ASD purported to pay a dividend of 1 percent a day. Zeek’s average daily payout was about 1.5 percent, according to the SEC.

ASD and Zeek had members in common.

NOTE: Our thanks to the ASD Updates Blog.

Oct 31, 2014
URGENT >> BULLETIN >> MOVING: Justice Department Sues Four Oaks Bank, Says It Turned Blind Eye To Red Flags At Rex Venture Group, Operator Of Zeek Rewards

URGENT >> BULLETIN >> MOVING: (4th Update 5:14 p.m. ET U.S.A.) The U.S. Department of Justice has sued North Carolina-based Four Oaks Bank, alleging that it turned a blind eye to fraud markers at Rex Venture Group LLC and processed “close to $60 million in ACH transactions in furtherance of the illegal scheme.”

Rex Venture was the operator of Zeek Rewards, which the SEC has described as a Ponzi- and pyramid scheme that gathered at least $850 million.

In “Spring 2012,” the Justice Department alleged, Four Oaks granted ACH access to Rex Venture, a merchant client of a payment-processing entity known as TPPP-TX.

Four Oaks did this, the Justice Department alleged, “despite knowing that: (1) Rex Venture’s principals could not be identified through business database searches; (2) the Bank could not independently verify the type of legitimate business in which Rex Venture Group was engaged; (3) one of the two addresses reported by the company was a vacant lot, and the other was a different business; and (4) the Social Security Number of one of the company’s purported principals was associated with a different person. A Bank official even concluded that the purported owner of Rex Venture Group “keeps changing company names so his reputation will not catch up with him.”

And, the Justice Department alleged, “By August 17, 2012, the public learned what Four Oaks Bank already knew or should have Known — Rex Ventures Group allegedly was a massive Ponzi and pyramid scheme.”

The lawsuit against the bank was filed yesterday by the office of U.S. Attorney Thomas G. Walker of the Eastern District of North Carolina. The Zeek Ponzi case is filed in North Carolina’s Western District.

In a statement today, Four Oaks said it had cooperated with the Justice Department and agreed to a settlement in which “the Bank does not admit any facts alleged in the accompanying complaint nor does the Bank admit to any liability. ”

Four Oaks also is accused in the complaint of aiding the processing of illegal payday loans and gambling transactions for other TPPP-TX clients.

See story at WRAL.com, which lists the settlement amount at $1.2 million.

Four Oaks is referenced in Zeek-related court files, including a 2012 filing in which the bank said it held a commercial account in the name of “Nx Systems Inc.”

Nx Systems was a Zeek payment vendor. See Sept. 1, 2012, PP Blog story.

Jan 9, 2014
SPECIAL REPORT: Attorney Linked To Zeek’s Wright-Olivares Has Record Of Disbarment And Suspensions; Possible Co-Agent Spent Time In Federal Prison For Credit-Card Swindle And Was Charged In Arkansas With Theft And Making False Statements To Securities Commissioner; Corporate Registrations Of 2 Firms Linked To Zeek COO And Purported Marketing Maven Revoked

Zeek’s Dawn Wright-Olivares

SPECIAL REPORT: (Updated 5:48 a.m. Jan. 7, U.S.A.) N. Donald Jenkins Jr., an Arkansas attorney listed as a registered agent for Wandering Phoenix LLC, a firm federal prosecutors have linked to Zeek Rewards’ figure Dawn Wright-Olivares, was ordered disbarred on May 30, 2013, records show.

He thrice previously was ordered suspended from the practice of law and has a thick disciplinary history with the Arkansas Supreme Court Committee on Professional Conduct dating back to 2003. His full name is Newton Donald Jenkins Jr.

Jenkins Jr. once worked as the city attorney and prosecutor for Van Buren, Ark. He was paid an annual salary by the small town of more than $56,000 while maintaining a private law practice that repeatedly landed him in trouble.

A long string of corporate revocations accompanies the name of Jenkins Jr. as a registered agent in Arkansas, a state in which the most common reason for revocation is a corporation’s failure to pay franchise tax. The string includes at least 125 names of revoked business entities. One of the revocation casualties was Jenkins Law Firm PLLC, the lawyer’s own firm.

Another revocation casualty, according to Arkansas records, was Wandering Phoenix, the business entity linked to Wright-Olivares through which prosecutors say she received Zeek payments. Either Wright-Olivares or Wandering Phoenix received $7.2 million, according to a federal charging document. Franchise tax nevertheless remained unpaid.

One law-license suspension order against Jenkins Jr. was stamped and docketed on Aug. 17, 2012, the same date the SEC moved against Zeek and the U.S. Secret Service announced it, too, was investigating the North Carolina-based MLM entity. Neither Zeek nor Wright-Olivares is referenced in the disbarment and suspension orders.

Did Wright-Olivares Have Business Relationship With Felon?

Records suggest — but do not demonstrate conclusively — that Wright-Olivares also had a business relationship with the late father of Jenkins Jr.: tax accountant N. Donald Jenkins, apparently also known as Donald Jenkins Sr. and Newton Don Jenkins Sr. “N. Donald Jenkins” — with no designation as either Jr. or Sr. — is listed alongside Jenkins Jr. as a registered agent for Wandering Phoenix. Meanwhile, “N. Donald Jenkins” also is listed as an officer and “Incorporator/Organizer” of Wandering Phoenix.

Wright Olivares was a 95-percent owner of Wandering Phoenix, according to criminal charges filed against her in North Carolina on Dec. 20. She has agreed to plead guilty to tax-fraud conspiracy and investment-fraud conspiracy, federal prosecutors said last month.

In the mid-1990s, Jenkins Sr. hatched a scheme by which he duped a man who’d approached him for advice about opening a computer business, according to federal records. Jenkins Sr., who was convicted on federal charges in 1999, encouraged the man to open a bank account and give him limited Power of Attorney.

The man complied, according to court records. After that, Jenkins Sr. entered into a merchant agreement with an Arkansas bank and defrauded the bank by depositing “over $78,000 in credit card slips reflecting sales purportedly made” by the computer business.

The slips “were drawn on credit cards recently issued to Jenkins [Sr.], his relatives” and the man who’d approached Jenkins Sr. for advice, according to court records.

But the man who’d approached Jenkins Sr. testified that the firm “never sold a computer, and that he never applied for or knew of the credit cards issued in his name,” according to court records.

“After the sales amounts were credited to the account, Jenkins [Sr.] would withdraw money through checks and ATM transactions,” according to court records.

In 1988, Jenkins Sr. was implicated by the state of Arkansas in a securities swindle and was arrested on criminal charges of theft by deception and lying to the Arkansas Securities Commissioner. The final outcome of the case could not immediately be determined. On March 23, 2009, ArkansasBusiness had this (and plenty more) to say about Jenkins Sr. (italics added):

Jenkins came to our attention way back when investors across Arkansas began accusing him of defrauding them of hundreds of thousands of dollars in elaborate investment schemes. Those civil lawsuits by angry investors drew the attention of criminal investigators, which culminated in Jenkins receiving a 27-month prison sentence following his August 1999 conviction.

The identities of the person or persons who owned the remaining 5 percent of Wandering Phoenix are unclear. What is clear is that Arkansas has revoked its corporate registration.

Enter/Exit ‘Wandering Rex’

Arkansas records also link Wright-Olivares to an entity known as Wandering Rex LLC. The registration of Wandering Rex also has been revoked.

Zeek operated through a North Carolina-based entity known as Rex Venture Group LLC, controlled by Zeek operator Paul R. Burks of Lexington. Why Wright-Olivares also had a “Rex” entity in Arkansas is unclear.

Wright-Olivares, 45, also appears to have controlled another Zeek-related entity known as Zeeklers.com. The Ozark, Ark., street address for the Zeeklers.com web domain is the same address listed in corporate records for Wandering Phoenix, one of the two revoked entities linked to Wright-Olivares, Zeek’s former COO.

Both Jenkins Jr. and his father were active in Republican politics in Arkansas. Jenkins Jr., for example, has a listing on the website of the Republication National Lawyers Association (RNLA) that identifies him as “Asst. Legal Counsel Republican Party of Arkansas.” The listing includes a link to the website of his law firm, but the domain is generating a “timed out” error message.

Meanwhile, the obituary for Jenkins Sr. as published in October 2012 at swtimes.com notes that he “served in various positions with federal, state and local candidates and Republican groups, including as chairman over the first and fourth Congressional districts, and chairman for Ronald Reagan for President. He was a true American patriot who held very strong opinions about people who tailgated him on the road.”

Disciplinary History Of Jenkins Jr.

How Wright-Olivares came to use the registered-agent services of Jenkins Jr. is unclear. It’s also unclear if Jenkins Sr. ever did any accounting work for her or if she knew him personally.

What is clear is that Jenkins Jr. has a long history of disciplinary action in Arkansas and that at least one of his other clients (a married couple) contracted with Jenkins Jr. after meeting with Jenkins Sr. in Jonesboro, Ark. The couple later filed a complaint against Jenkins Jr. for alleged inaction after he’d been hired to address a wage-garnishment issue with the IRS. In 2007, the state issued a formal reprimand known as a “CAUTION” against Jenkins Jr., finding that he “failed to return the messages” of his garnishment clients. The state also ordered Jenkins Jr. to apologize to the clients and to return their $900 retainer.

The 2007 “CAUTION” was the second against Jenkins Jr. The first was issued in 2003, after a client accused him of never informing the client that a lawsuit he’d filed on behalf of the client had been dismissed. Records say the lawsuit had been filed in the wrong county. The state ordered Jenkins Jr. to pay a $500 fine and pay the client $250 in restitution.

In February 2010, the state ordered the law license of Jenkins suspended for three months, after allegations surfaced that he’d improperly served yet-another client, had maintained “a frivolous proceeding” on behalf of the client in a disability case and had falsified court records. Later in 2010, the state reprimanded Jenkins, amid allegations he’d butchered yet-another client’s bankruptcy case.

On Aug. 17, 2012 — the same date as the Zeek action — the Arkansas Supreme Court Committee on Professional Conduct docketed a two-year suspension of the law license of Jenkins Jr. He was accused in that proceeding of filing a bankruptcy case in the wrong state, using the wrong state when filing 2008 tax returns for two clients and not filing 2009 tax returns for the clients, another married couple who had hired him.

One of the suspensions of the law license of N. Donald Jenkins Jr. was docketed on Aug. 17, 2012, the same day the SEC moved against Zeek Rewards. (Red highlight by PP Blog.)

Jenkins’ overall disciplinary history shows at least six actions: three suspensions, two “CAUTIONS” and one “REPRIMAND.”

In May 2013, Jenkins Jr. was disbarred. A special judge “found that, in the disbarment proceedings alone, Respondent had committed at least eight violations for conduct involving dishonesty, deceit, fraud, or misrepresentation.” And the special judge also observed that Jenkins Jr. had a prior disciplinary history of numerous other violations for serious conduct involving dishonesty, deceit, fraud, or misrepresentation.”

View the disciplinary record here.

View the disbarment order at Leagle.com

Jan 5, 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
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