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Tag: SEC

  • Firm Assisting In Zeek Receivership Probe Has Another High-Profile Case; New York Times Reports That Kroll Investigative Firm Discovered ‘Well-Concealed Ponzi Scheme’ At Kabul Bank And ‘114 Rubber Stamps For Fake Companies’

    A company retained by the court-appointed receiver in the Zeek Rewards Ponzi scheme case received a prominent mention in the New York Times yesterday.

    The company, the Kroll investigative firm, uncovered a massive Ponzi fraud at Kabul Bank in Afghanistan in which hundreds of millions of dollars were siphoned from depositors to benefit a “narrow clique” of people tied to the Afghan government, according to an audit report obtained the Times.

    Loan books were “almost entirely fraudulent,” the Times reported, citing the Kroll forensic audit.

    “At one point, Kroll’s investigators found 114 rubber stamps for fake companies used to give forged documents a more legitimate look,” the Times reported, citing the audit.

    From the Times (italics/bolding added):

    What Kroll’s audit found is that on Aug. 31, 2010, the day the Bank of Afghanistan seized Kabul Bank, more than 92 percent of the lender’s loan portfolio — $861 million, or roughly 5 percent of Afghanistan’s annual economic output at the time — had gone to 19 related people and companies, according to the audit.

    Kroll is one of the firms retained by Zeek receiver Kenneth D. Bell. Its name is referenced in the Preliminary Liquidation Plan Bell filed Oct. 8.

    In the filing, Bell informed Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina that Zeek had “at least one foreign account” that had not been seized in the aftermath of the SEC’s Ponzi scheme investigation.

    It was “not clear” whether the funds would be recoverable despite the fact the bank that holds the account has been served with a freeze order, Bell advised Mullen in the filing.

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

    On Aug. 17, the SEC described Zeek as a $600 million Ponzi- and pyramid fraud operating from Lexington, N.C.

    Some Zeek members have worked virtually nonstop since that time to demonize Bell, a former federal prosecutor who once successfully prosecuted a Hezbollah terrorist cell operating in the United States.

    Zeek had “internet customers and contacts throughout the United States and internationally,” Bell advised Mullen.

    Kroll Ontrack has assisted the receivership “with the collection of electronically stored information obtained from” Zeek, Bell advised Mullen.

    In the case in Afghanistan, Kroll prepared the audit for the country’s central bank, according to the Times. Twenty-two people have been charged in the Afghanistan case.

     

  • Nathaniel Woods Plants Seed That Zeek Receiver Issued ‘Bogus Subpoena’ And Committed Felony; Claims Reminiscent Of Assertions Made In AdSurfDaily Ponzi Case

    UPDATED 5 P.M. ET (U.S.A.) Various members of the Florida-based AdSurfDaily 1-percent-a-day Ponzi scheme advanced various theories that judges, prosecutors and investigators committed various felonies during the course of the probe and follow-up actions in court. The claims were absurd on their face and, when the arguments were rejected, they were replaced by conspiracy theories. Time after time the conspiracy theories expanded to accommodate unpleasant fact sets, with various “defenders” of ASD retreating into an infinite set of contingencies and conflating one artificial reality after another.

    Now, a Florida resident and apparent participant in Zeek Rewards has filed a document in federal court that accuses the court-appointed receiver in the Zeek Ponzi scheme case of committing a felony. The receiver, Kenneth D. Bell, is a former federal prosecutor who once successfully prosecuted a Hezbollah terrorist cell operating in the United States.

    The PP Blog contacted the Zeek receivership today to seek comment from Bell. The Blog’s message was not immediately returned.

    In separate filings that appear on the docket of Senior U.S. District Judge Graham C. Mullen of the Western District of North Carolina, Nathaniel Woods claimed Bell or Bell’s receivership team unlawfully mailed a “bogus subpoena” to him in Ocala, Fla., thus committing a felony under Florida law.

    Mullen is presiding over the Zeek Ponzi case. In August, the SEC accused Zeek of operating a $600 million Ponzi- and pyramid scheme. Zeek’s business model was very similar to the model of ASD. ASD’s business practices triggered both civil and criminal investigations by the U.S. Secret Service in 2008.

    The subpoena, Woods claims, was meant for the purposes of “intimidation and harassment” on the part of the receiver.

    And Woods further claims that sending a “bogus subpoena” from North Carolina to Florida through the U.S. Mail constitutes “simulated process” under Florida law, a “third degree felony.”

    An accompanying document filed by Woods as an exhibit claims that “preliminary Zeek Rewards records” reviewed by the the receivership show that Woods received more than $496,000 from Zeek but paid nothing (“$0.00”) into the purported program.

    Bell is seeking the return of the money, describing it as “money lost by victims,” according to the exhibit.

    Woods is seeking to quash the subpoena, which demands records of Woods’ interactions with Zeek dating back to January 2010. He also claims the subpoena was only an “alleged subpoena” and was improperly served.

    A domain styled “500FREEBIDS4U.COM” is registered in the name of Nathaniel Woods at the Ocala street address to which the subpoena was sent, according to records. Other domains listed with an email address that appears on the registration data attributed to Nathanial Woods include Mybidshack10k.com, Mybidshackhow.info, Mybidshack4u.com and Mybidshackearn.info.

    Daryle Douglas, a onetime purported Zeek executive, also has been associated with a MyBidShack entity, according to researcher “K. Chang.”

    Zeek was a purported “penny auction” company operated by Paul R. Burks through Rex Venture Group LLC in Lexington, N.C. The penny-auction site was known as Zeekler. Zeek’s MLM arm was known as Zeek Rewards. Burks has consented to a judgment in the case. He has neither admitted nor denied the SEC’s allegations, which include securities fraud and the sale of unregistered securities.

    On Aug. 17, the U.S. Secret Service said it also was investigating Zeek. The SEC has said Burks duped investors into believing the purported Zeek “program” was paying a legitimate return of about 1.5 percent a day.

    Bell has said that perhaps 1 million people sent money to Zeek. Viewed by the number of potential victims and the number of transactions, Zeek may be the largest Ponzi scheme in U.S. history.

    Earlier this month, Bell said the receivership had gathered evidence that nearly 1 billion transactions were conducted through Zeek in about 18 months.

    AdSurfDaily was a Ponzi scheme that promoted a payout of 1 percent a day. It has about 100,000 members and gathered about $119 million, also in about 18 months, according to records.

    Records suggest that Zeek, which launched after the Secret Service brought the ASD Ponzi case, did about five times the dollar volume of ASD and potentially had 20 times the user volume.

    The civil portion of the ASD case dragged out for all or parts of five years. ASD President Andy Bowdoin admitted in May 2012 that ASD was a Ponzi scheme. In August 2012, less than two weeks after the SEC brought the Zeek case, Bowdoin was sentenced to 78 months in federal prison.

    ASD and Zeek are known to have had members in common.

  • BULLETIN: SEC: Purported ‘Trust’ Was $15 Million Prime-Bank Ponzi Swindle Operated By Two 70-Year-Olds; 1 Of The Accused Hucksters Has Prior Conviction For Trafficking Cocaine; Investors Were Told ‘Department Of Homeland Security’ Was A Customer And That The Devil Was Behind The Adage, ‘If It Sounds Too Good To Be True . . .”

    EDITOR’S NOTE: They don’t come any weirder than prime-bank swindles — and this one is one of the strangest we’ve ever reported on. 

    UPDATED 8:19 A.M. ET (NOV. 20, U.S.A.) Two individuals — both now 70 — conducted a prime-bank Ponzi swindle known as “the Trust” since at least 2004, the SEC said late this afternoon.

    The scheme allegedly operated in more than 20 states, but was concentrated in Georgia, the SEC said.

    One of the accused allegedly claimed he first heard about the Trust in the 1990s from a man named “John” in London. The other allegedly claimed this adage — “If it sounds too good to be true, it probably is” — was the work of the devil.

    Investors were told the U.S. Department of Homeland Security was a lending customer of the purported trust, a purported “loan” program that operated secretly in England and provided a return of 38 percent a year, the SEC said.

    They also were told that the trust “was started after World War II and is comprised of several extremely wealthy European families,” that the trust “owns banks in Europe,” that the trust “has the power to create money through fractional banking and the sale of banking debentures” and “funds humanitarian projects around the world,” the SEC alleged in the complaint.

    Charged in the alleged $15 million caper were Billy W. McClintock of Bradenton, Fla., and Dianne Alexander of Carlsbad, Calif. Alexander also is known as Linda Dianne Alexander and previously lived in Cumming, Ga. McClintock has claimed to be a gospel singer, was convicted of cocaine trafficking in 1989 and served prison time in Kentucky, the SEC said.

    “McClintock and Alexander pitched an investment opportunity that simply did not exist,” said William P. Hicks, associate director of Enforcement in the SEC’s Atlanta Regional Office. “They merely reshuffled funds between investors in a modern take on a classic prime bank scheme.”

    Some of the allegations against McClintock and Alexander are reminiscent of elements of the AdSurfDaily, Legisi and Zeek Rewards cases.

    In the ASD, Legisi and Zeek cases, for instance, investors were told not to refer to the programs as “investment” programs, according to records.

    Here is one of the allegations against McClintock and Alexander (italics added):

    Apparently attempting to avoid scrutiny by federal securities enforcers, McClintock told Alexander not to refer to investor payments as an “investment,” but rather as a “loan,” and that she should never refer to those whose money she took as “investors,” but rather as “Trust lenders.”

    Alexander recruited at least 220 people into the scam, which had “downline” investors, the SEC said.

    “Alexander recklessly relied solely on McClintock’s representations about the profits to be generated by the Trust, without taking any independent steps to either verify the existence of the Trust or whether McClintock was in fact receiving payments from the Trust,” the SEC charged.

    And Alexander issued appeals to religious faith to reel in investors, calling the adage “If it sounds too good to be true, it probably is” a “lie that came from the pit of hell,” and saying, “Put your money in the Trust and your trust in God,” the SEC charged.

    Clarence Busby, a figure in the AdSurfDaily Ponzi story, was implicated by the SEC in three prime-bank swindles in the 1990s, according to records.

    Read the SEC complaint.

     

     

  • SPECIAL REPORT: AdSurfDaily/Zeek Pitchman Todd Disner Gave Thousands To Gingrich, Romney After Soliciting Money To Sue The United States; Records Show Tax Liens Of More Than $405,000 Dating Back To 1999

    EDITOR’S NOTE: ASD was a multilevel-marketing scheme that planted the seed it paid a return of 1 percent a day on top of two-tiered affiliate commissions totaling 15 percent for recruiters. Federal prosecutors described the purported “opportunity” as a Ponzi scheme based in the the small town of Quincy, Fla., and operated by recidivist securities felon Andy Bowdoin.

    UPDATED 9:46 A.M. ET (NOV. 18, U.S.A.) A Florida man who claimed in a November 2011 lawsuit against the United States that AdSurfDaily was not a Ponzi scheme doled out thousands of dollars to Republican candidates and organizations in the following months, records show.

    The man, ASD promoter Todd Disner of Miami, joined with fellow Miami resident and suspended Connecticut attorney Dwight Owen Schweitzer in suing the United States as pro se plaintiffs after soliciting donations from fellow ASD members to fund the lawsuit earlier in 2011, according to records. As the lawsuit proceeded, Disner and fellow ASD promoter Schweitzer raised the prospect in court filings that the seizure of ASD’s database in a 2008 case brought by the U.S. Secret Service and federal prosecutors in the District of Columbia could lead to the ASD duo’s prosecution for tax evasion.

    A federal judge tossed the lawsuit in August 2012, but Disner and Schwetizer are appealing. They have accused the judge of “sophistry.”

    Both Disner and Schweitzer have been engaged in continuous litigation against the United States for more than a year. Neither has been charged with a crime. After their days promoting ASD, Disner and Schweitzer went on to promote Zeek Rewards, an ASD-like,  1.5-percent-a-day “program” with accompanying commissions that triggered probes by both the SEC and the U.S. Secret Service. On Aug. 17, the SEC accused North Carolina-based Zeek of operating a $600 million Ponzi-and pyramid scheme that potentially swindled more than 1 million investors.

    Zeek operator Paul R. Burks did not contest the SEC’s civil allegations and consented to a judgment in the case. Records show that Burks gave $2,500 to the campaign of GOP Presidential hopeful Ron Paul between 2011 and early 2012.

    On Dec. 26, 2011, only weeks after the Disner/Schweitzer lawsuit was filed against the government, Disner provided a donation of $1,000 to the GOP Presidential campaign of Newt Gingrich (Newt 2012), Federal Election Commission records show. The Gingrich donation by Disner appears to have been his first to a national candidate or organization. The FEC database, for example, shows no donations from Disner between Jan. 1, 1990, and Dec. 25, 2011.

    Disner matched the Dec. 26 donation with another $1,000 to Gingrich in January 2012, according to FEC records.

    Separately, records in Miami-Dade County show that the IRS filed a tax lien against Disner for $101,723 on Aug. 1, 2006. Included in that sum was $95,015.97 allegedly owed from 1999, and $6,707.77 allegedly owed from 2002.

    ASD, operated by the now-convicted and jailed Andy Bowdoin, launched just weeks after the IRS filed the lien against Disner. Two years to the day after the lien was recorded in Miami-Dade, the Secret Service seized $65.8 million from 10 Bowdoin bank accounts.  A raid of ASD’s headquarters followed four days later. Bowdoin later was charged criminally with operating a Ponzi scheme. Among the allegations against Bowdoin was that he had used money from the ASD Ponzi scheme to make a donation to the National Republican Congressional Committee.

    Bowdoin, 77, pleaded guilty to wire fraud in May 2012. In August, he was sentenced to 78 months in federal prison. Prosecutors said he was at the helm of a $119 million Ponzi scheme and promoted other MLM fraud schemes even after his December 2010 arrest.

    On Nov. 21, 2007, according to records, the IRS filed another lien against Disner in Miami-Dade totaling $294,940.89. This lien was for the 2003 and 2004 tax years. The IRS filed yet another lien against Disner on Oct. 22, 2008. This one sought $8,661.36 for the 2000 and 2001 tax years.

    All in all, records show three tax liens against Disner for the combined sum of $405,325.99.

    Whether Disner has cleared the IRS liens is unclear. What is clear is that, in June 2012, he raised the prospect in court filings that he could be prosecuted for tax evasion because of the seizure of ASD’s database in 2008. Records in the Zeek case, meanwhile, show that the Zeek database also has been seized.

    Records suggest that, with Gingrich out of the GOP Presidential race by May 2012, Disner switched his support to Mitt Romney, who went on to become the party’s nominee. Romney ultimately lost in the general election to President Obama, a Democrat seeking a second term.

    Gingrich, a former Georgia Congressman, is a former Speaker of the U.S. House of Representatives.

    On June 25, 2012, Disner gave $1,000 to Romney for President Inc., according to FEC records.

    Just days earlier — on June 18, 2012 — Disner and Schweizer claimed in federal court that the government’s Ponzi case against ASD was a “house of cards,” despite Bowdoin’s guilty plea and acknowledgment that he had operated a Ponzi scheme and that ASD never had operated lawfully after its 2006 inception.

    A month later — on July 17, 2012 — Disner gave $200 to the Republican National Committee, according to FEC records.

    Exactly a month after that — on Aug. 17, 2012 — the SEC filed an emergency action in federal court that accused Burks of presiding over a massive fraud scheme that effectively extended across the world.

    Within days of the SEC action, Disner — who previously solicited money to sue the United States for alleged misdeeds in the ASD Ponzi case — participated in a conference call with self-described Zeek “consultant” Robert Craddock, who himself was soliciting money for some sort of court action against the SEC or the court-appointed receiver in the Zeek case.

    Nothing has been filed by Craddock to date. During one call, Craddock dropped the name of former Florida Attorney General Bill McCollum, claiming McCollum as a “friend.” McCollum is a Republican. In 2008, while attorney general, McCollum accused ASD of operating a pyramid scheme.

    Some ASD members reacted by suggesting that McCollum and a Florida TV station that carried the news of the ASD lawsuit should be charged with Deceptive Trade Practices.

    Despite Craddock’s claim after the SEC action that McCollum’s law firm SNR Denton had become the attorneys for a Craddock and a group of Zeek members, SNR Denton appears to have decided not to represent Craddock or his group.

    FEC records show that Disner gave $1,500 to the Republican National Committee in September 2012.

  • STUNNING: Nearly 1 BILLION Zeek Transactions Over 18 Months, Receiver Says; ‘Sheer Quantity Of Data’ And ‘Inadequate And Incomplete’ Records Necessitate Delay In Filing Of Liquidation Plan

    EDITOR’S NOTE: It’s this simple: Ponzi = Pain — and even “ordinary” Ponzi schemes often result in extraordinary paper chases. The Zeek case may be setting a new standard for the extraordinary.  

    The receiver in the Zeek Rewards Ponzi scheme case informed a federal judge today that “the Receivership Team is still in the process of reconstructing over 18 months of ZeekRewards financial information involving more than 931 million transactions.”

    It was not immediately clear if the jaw-dropping number set a record for a Ponzi case. About 2.2 million “unique users” of Zeek exist, and about 1 million affiliates “paid money into” Zeek, receiver Kenneth D. Bell said.

    Without objection from the SEC, Bell has asked Senior U.S. District Judge Graham C. Mullen for a delay until Dec. 17 in the filing of a liquidation plan.  On Aug. 17, the SEC accused Zeek — through its parent company Rex Venture Group LLC — of operating a $600 million Ponzi- and pyramid scheme. In terms of the number of participants, Zeek may be the largest Ponzi scheme in U.S. history.

    “In short, the magnitude of the transactions, the inadequate and incomplete nature of the Receivership Defendant’s financial records, and the sheer quantity of data and Affiliates all necessitate additional time for the Receiver to analyze, account, and liquidate the assets of the Receivership Defendant,” Bell wrote.

    Bell also filed reports today that showed the McGuireWoods law firm and FTI Consulting Inc., a forensic accounting firm, are providing significant billing discounts to the receivership estate. The law firm is providing a 15 percent discount, Bell said.

    Meanwhile, the accounting firm is providing a discount of more than 22 percent, Bell said.

    “As of September 30, 2012, the Receiver recovered $293.7 million for the Receivership Estate,” Bell said. “Combined, MW and FTI request $853,491.29 in fees and services. The fees requested are less than 0.3% of the recovery for the Estate.”

    Here is the breakdown, according to the receiver’s first application for fees and expenses:

    • Receiver and law firm (billing for services of $718,713.86 and expenses of $49,388.37).
    • FTI (billing for services of $82,430 and expenses of $2,959.06).

    From footnotes in the billing report (italics added):

    1 At the time of the Receiver’s appointment, the Receiver and MW agreed to a 15% reduction in the hourly rates for the Receiver and all of MW’s attorneys and paraprofessionals. In accordance with the SEC Guidelines, long-distance travel time was billed at a rate that was reduced 50% from the already-discounted rates, resulting in an effective discount of 64% or greater for travel time, and a total discount of $21,258.05 in fees related to travel time alone. The Receiver and MW also determined to write off the time for 11 timekeepers in a further effort to increase savings to the estate.

    2 In keeping with the rate discounts applied by MW, FTI reduced the hourly rates for its Senior Managing Directors to $495, Managing Directors to $410, Senior Directors to $395, Directors to $350, Senior Consultants to the range of $270-$320, and Consultants to the range of $210-$225. The average reduction in bill rates is 22.5% per hour.

    3 FTI has agreed to not charge for travel time. Additionally, FTI has waived its customary administrative expense that is usually 6% of fees charged.

    The judge must approve the billings.

    NOTE: Visit the Zeek files site maintained by the ASDUpdates Blog.

  • UNBELIEVABLE: Now, A Scam Known As ‘Her Majesty’s Credit Union’ That Duped Investors By Falsely Claiming To Be Insured By Lloyd’s Of London And Backed By The Government, SEC Says

    The SEC’s complaint against “Her Majesty’s Credit Union” lists the URL for the purported CD business. This screen shot by the PP Blog was taken at the URL.

    A scammer known by three names who’d earlier presided over an “insolvent” credit union in Georgia before being forced out of business in eight months went on to start a bogus credit union in the U.S. Virgin Islands, the SEC said.

    The Virgins Islands enterprise was known as “Her Majesty’s Credit Union” (HMCU) and sold bogus CDs, duping investors by trading on the names of Lloyd’s of London and government entities to sanitize the fraud, the SEC said.

    Charged in the alleged $532,000 caper was Stanley B. McDuffie of Denver. McDuffie formerly was known as Stanley Roberson and Stanley Battle, the SEC said.

    “McDuffie and HMCU held out HMCU as a secure, legitimate, regulated credit union, promised to pay above-market interest rates, and assured investors that their deposits were insured by Lloyd’s of London or the U.S. Virgin Islands’ government,” the SEC said. “In reality, HMCU was an unregulated, illegitimate credit union that never held share insurance covering investor deposits, and McDuffie and HMCU misappropriated investors’ funds.”

    The Better Business Bureau record for HMCU notes a 2010 action by the Colorado Division of Securities against “Stanley B. Roberson.”

    Roberson “was sentenced to one year in jail after being found in contempt of a court order,” the BBB reported, citing Colorado authorities. “Mr. Roberson is the chief executive officer of Her Majesty’s Credit Union, a U.S. Virgin Island company with a servicing office in Denver.”

    In 2010, Fred Joseph, the commissioner of Colorado’s Division of Securities, put it this way (italics added):

    Mr. Roberson failed to produce documents pursuant to a lawful subpoena issued to him as part of our investigation of Her Majesty’s Credit Union. The Division of Securities then filed contempt proceedings in Denver District Court to compel production. Since its accounts are not federally insured, we are attempting to determine if Her Majesty’s Credit Union is offering only uninsured deposits or is engaging in the offer and sale of unregistered securities.

    The SEC today charged McDuffie with selling unregistered securities, saying in its complaint that McDuffie “misappropriated the funds for personal and business expenses, causing investors to lose most of their principal, and rendering it impossible for HMCU to make required interest payments.”

    McDuffie also allegedly clammed up to the SEC, the agency said. From the SEC complaint (italics added):

    After a subpoena enforcement action resulted in McDuffie being ordered by the Court to comply with the SEC’s subpoenas, McDuffie refused to testify in the SEC’s investigation, citing his Fifth Amendment privilege against self-incrimination in response to all substantive questions.

    Named a defendant in the SEC’s action against McDuffie was Jilapuhn Inc., the apparent operator through McDuffie of “Her Majesty’s Credit Union.”

    The defunct Georgia credit union was known as the “Jilapuhn Employees Federal Credit Union,” the SEC said.

    “In August 2005, after JEFCU had operated for only eight months, the [National Credit Union Administration] determined that JEFCU was insolvent, and therefore it issued a Notice of Involuntary Liquidation and Revocation of Charter,” the SEC said.

  • DEVELOPING STORY: Zeek Winners Begin To Receive Subpoenas

    Alleged Ponzi scheme Zeek Rewards wrapped itself in the American flag and symbols such as the American penny coin to attract business. The purported “opportunity”  has created problems for hundreds of thousands of members in the United States and other countries.

    The PP Blog has received a report that some members of Zeek have received subpoenas issued by the court-appointed receiver in the Zeek Rewards Ponzi scheme case. The SEC alleged in August that Zeek was a $600 million Ponzi and pyramid scheme operated by Paul R. Burks and Rex Venture Group LLC.

    Receiver Kenneth B. Bell said earlier this week that a first round of about 1,200 subpoenas would be issued to “affiliates who profited most from ZeekRewards.”

    Early details are sketchy about precisely what information the subpoenas demand. Bell wrote on the receivership website that recipients “are required to fully respond to the subpoena.

    “If you do not have possession, custody or control of any of the documents requested simply say so in responding to the subpoena. However, you are required to make a full reasonable effort to locate all documents requested, including electronic documents and email,” Bell wrote.

    The issuance of the subpoenas demonstrates that online HYIPs dressed up as multilevel-marketing “programs” can — at a minimum — create civil exposure for participants. Profits received from such schemes are viewed as ill-gotten gains subject to clawback.

    In an Oct. 8 court filing, Bell advised Senior U.S. District Judge Graham C. Mullen that he planned to pursue Zeek winners and others through common-law and and clawback claims “under applicable fraudulent transfer statutes.”

    In addition to Zeek winners, potential clawback targets include Zeek officers, employees and professionals who benefited from the scheme, according to Bell’s Oct. 8 filing. As many as 100,000 people potentially received ill-gotten gains from Zeek, while about 800,000 Zeek members experienced losses.

    Zeek wrapped itself in the American flag while pitching its offer globally, claiming among other things that winners of its Zeekler auctions for sums of U.S. cash would be paid through offshore payment processors. North Carolina-based Zeek has never explained the striking incongruity of auctioning U.S. cash and offering to deliver it via payment processors linked to fraud scheme after fraud scheme promoted on Ponzi scheme forums such as TalkGold and MoneyMakerGroup.

    Auctions for cash mysteriously went missing from Zeek in June. On Aug. 4, 13 days before the SEC filed an emergency action to halt the alleged Zeek Ponzi scheme, the company publicly complained about “North Carolina Credit Unions” that were warning customers about Zeek.

    On June 5, the company bizarrely planted the seed that, if Zeek instructed members to change their preference in dispensing toilet paper, they should do it to demonstrate how coachable they are. Just days earlier — on May 28, Memorial Day — the company claimed it was closing two U.S. bank accounts and urged members to cash commission checks by June 1 or they would bounce.

    Zeek’s auction arm was known as Zeekler and was married to Zeek Rewards, the MLM side of the business. The SEC said in August that Zeek commingled funds and that Burks “unilaterally and arbitrarily” determined Zeek’s daily dividend rate so that it averaged “approximately 1.5% per day, giving investors the false impression that the business is profitable.”

    In 2008 and 2009, the U.S. Secret Service made similar allegations against AdSurfDaily and operator Andy Bowdoin. Bowdoin, 77, was charged criminally in December 2010. He pleaded guilty to a Ponzi-related charge of wire fraud in May 2012. Bowdoin was sentenced in August 2012 to 78 months in federal prison.

    ASD operated as an “autosurf” HYIP that planted the seed that members would receive a return of 1 percent a day.

    Precisely how many Zeek members live outside the United States and benefited from the scheme is unclear. In July, the PP Blog reported that a Zeek-related article carried on Google News claimed that Zeek had 100,000 members in Brazil alone.

    An issue that potentially could emerge in the coming weeks is whether the receiver will be successful in seeking clawbacks from non-U.S. members of Zeek who received more from the scheme than they put in. How many Zeek members fit the profile is not yet known.

    HYIPs that operate across borders on the Internet introduce the specter of international red tape and also potentially bring language barriers into play. In the days after the SEC brought the Zeek case, some purported international members of Zeek effectively thumbed their noses at the United States and Zeek victims, crowing on Ponzi-scheme forums that they’d keep their Zeek money no matter what.

     

  • UPDATE: Judge Grants Zeek Receiver’s Request To Treat Preliminary Liquidation Plan As Ponzi Case’s First Status Report

    Senior U.S. District Judge Graham C. Mullen has granted the request of the receiver in the Zeek Rewards Ponzi scheme case to treat the preliminary liquidation plan filed Oct. 8 as the first status report in the case.

    Receiver Kenneth B. Bell said earlier this week in court filings that the request, if granted, would save money. Mullen approved the request in an order today.

    The development means that Bell, who is in the process of issuing subpoenas to a first round of about 1,200 Zeek members believed to have been the biggest winners, will not be required to file another status report until the end of January.

    Potentially “thousands” of subpoenas to other Zeek members who took out more than they put in will follow the first round of 1,200, Bell said in a statement Oct. 30. (See Oct. 31 PP Blog story.)

    The SEC has described Zeek as a $600 million Ponzi- and pyramid scheme. Among other things, status reports inform judges about efforts to recover fraud proceeds and return them to victims. In the Zeek case, status reports from the receiver are due within 30 days of the close of a calendar quarter.

    See Bell’s Oct. 8 preliminary liquidation plan. (Courtesy of ASDUpdates Blog.)

    In September, the SEC said its Zeek probe was ongoing.

     

  • SEC Issues Investor Alert: ‘Be On The Lookout For Investment Scams Related To Hurricane Sandy,’ Agency Says

    Hurricane Sandy pounded New Jersey, New York and other parts of the eastern United States this week. The New York Daily News, via the Associated Press, reported today that the storm’s death toll has reached 74 in the United States.  Reuters is reporting the death toll in “North America” has reached “at least 82.” The storm also reportedly killed at least 69 people in the Caribbean.

    In some areas, the storm knocked out power, heat, phone service, public transportation and gas stations — services that affect the lives of millions of people. It also caused devastating floods and fires. Some people do not have homes or businesses to go back to, and businesses that provide vital services to neighborhoods may be closed or inaccessible.

    Looting has occurred in some areas, and now the SEC is warning about flood-related theft of a different stripe: Scammers lining up to steal insurance proceeds from those left with little or nothing in Sandy’s wake — and investment-fraud schemes, Ponzi schemes and spam capers designed to separate people from their money whether they are storm victims or not.

    From an Investor Alert by the SEC today (italics added):

    Hurricanes, floods, oil spills, and other disasters often give rise to investment scams. These scams can take many forms, including promoters touting companies purportedly involved in cleanup efforts, trading programs that falsely guarantee high returns, and classic Ponzi schemes where new investors’ money is used to pay money promised to earlier investors. Some scams are circulated through spam email, promising high returns for small, thinly-traded companies that supposedly will reap huge profits from recovery and cleanup efforts. For example, the SEC brought a number of enforcement actions against individuals and companies who made false and misleading statements about alleged business opportunities in light of the damage caused by Hurricane Katrina. Some of those cases involved pump-and-dump scams where fraudsters use fake “news” to pump up the stock price of small companies so they can sell shares they own at artificially high prices. We also heard about fraudsters targeting individuals receiving compensation from insurance companies. Individuals, including those receiving lump sum insurance payouts, should be extremely wary of potential investment scams related to Hurricane Sandy.

    Read the full Investor Alert, issued by the SEC’s Office of Investor Education and Advocacy.

     

  • BULLETIN: First Round Consisting Of 1,200 Subpoenas Will Go Out This Week To Zeek ‘Affiliates Who Profited Most,’ Receiver Says; More Subpoenas Will Follow; Winners Also Will Receive ‘Letter Offering To Negotiate Voluntary Surrender Of Profits’

    UPDATED: 7:08 P.M. EDT (U.S.A.) The court-appointed receiver in the Zeek Rewards Ponzi scheme case has announced that about 1,200 subpoenas will go out this week to “affiliates who profited most from ZeekRewards.”

    It’s “victims’ money, really,” receiver Kenneth D. Bell said in a letter posted on the receivership website.

    “The subpoenas ask for financial information, including dealings with Rex Venture,” Bell wrote. “Depositions and litigation will follow if necessary. With each subpoena will be a letter offering to negotiate voluntary surrender of profits (victims’ money, really) instead of going to Court.”

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

    In the receiver’s letter dated Oct. 30, Bell said a preliminary analysis suggests that Zeek losers outnumber winners by a factor of about eight to one. Zeek was operated by North Carolina-based Rex Venture Group LLC and Paul R. Burks.

    “Our preliminary analysis has identified more than 800,000 affiliate User IDs who put more money into Rex Venture than they took out,” Bell wrote. “We estimate that losses will total between $500 million and $600 million. We have already recovered more than $300 million and continue to pursue millions more held in financial institutions. To fill the gap between what we have recovered and what victims lost, we will pursue recovery from those who took out of Rex Venture more than they put in. There are more than 100,000 User IDs in this category representing hundreds of millions of dollars.”

    More subpoenas will be issued in the coming weeks, Bell said.

    “Additional subpoenas and demands for return of profits will be served on thousands more in the weeks to come,” Bell wrote. “I can’t tell you we will recover enough to make all victims 100% whole, but if we don’t it won’t be for lack of trying.”

    A “preliminary, partial” distribution of money to help Zeek victims recover also is being planned, Bell said. No timetable was released, but the receiver noted that he would submit a claims form for the court’s approval. Once Senior U.S. District Judge Graham C. Mullen approves the form, the process of filing claims will begin.

    “Once approved the Form will be posted” on the receivership website, the receiver wrote.  “When that process has run we will ask the Court for permission to make a preliminary, partial distribution to qualified claimants from recovered funds. A final distribution will have to wait until we have finished collecting all recoverable assets. This will unfortunately take quite a while, and I appreciate your support and patience.”

    Bell said he’d received emails from Zeek members inquiring whether they should hire an attorney or “join a group” that has hired an attorney to assist in claims recovery.

    “I cannot and do not advise you one way or another about hiring an attorney,” Bell wrote. “I can tell you that my direction from the Court, and my duty to you, is to seize all recoverable assets and distribute them to victims as fully and fairly as possible.

    “That, I will do,” he concluded.

    UPDATE: 7:08 P.M. EDT (U.S.A.): The receiver has added a “Subpoena FAQ” here. At the time of this update, there are nine entries in the FAQs, including this question and answer (italics added):

    1. Why have I received a subpoena for documents?

    The ZeekRewards Receiver has been authorized by the Court to recover money and pursue claims for the company. You are receiving this subpoena because you have been identified as an “affiliate,” participant, agent or employee in the ZeekRewards operation who may have received significantly more money from ZeekRewards than you put into the operation. The so-called “profits,” “commissions,” or “winnings” that you received were really just money put in by the victims of the Ponzi and pyramid schemes described in the Securities and Exchange Commission Complaint. The subpoena you received is the legally authorized means for the Receiver to gather information from you in connection with the legal process to recover your “profits,” “commissions,” and “winnings” to compensate victims.

     

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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