Troy A. Barnes ran “The Achieve Community” (TAC) scam along with Kristine L. “Kristi” Johnson.
Barnes, 53, of Riverview Mich., now has been sentenced to 33 months in federal prison, the office of U.S. Attorney Jill Westmoreland Rose announced. Johnson, of Colorado, earlier was sentenced to 21 months.
Achieve was a Ponzi-board program that used a “triple algorithm” cover story to fleece investors, the SEC said in a February 2015.
Through Rose’s office, the U.S. Secret Service later charged Barnes and Johnson criminally.
Similar to other schemes, Achieve participants were told they were not making an investment and the company wasn’t offering one, despite dangling a return.
According to court filings, as the scheme grew in size and scope, Barnes and Johnson concealed the true nature of the scheme through multiple misrepresentations. According to court records, when the conspirators became concerned that the use of the term “investment” would draw scrutiny from regulators, they instructed victim-investors, “We ARE NOT an INVESTMENT program, please don’t use that term when you speak or post about our re-purchase strategy.” Even when TAC was unable to operate because their payment processor concluded that TAC was indeed operating a Ponzi scheme and ceased doing business with the company, Barnes and Johnson lied to victims, falsely stating that, “The only reason that [TAC] is not paying out today is that our processor can’t handle the volume of money we are paying our members.”
Achieve created more than 10,000 victims worldwide, prosecutors said.
Barnes also was sentenced to three years’ probation after his release, ordered to forfeit $4.7 million and to pay $302,297 in restitution, prosecutors said.
2ND UPDATE 8:38 P.M. EDT U.S.A. Kristine Louise “Kristi” Johnson, one of the two principals of “The Achieve Community” (TAC) Ponzi- and pyramid scheme, has been sentenced to 21 months in federal prison, the office of U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina said moments ago.
The SEC sued Johnson and codefendant Troy A. Barnes in February 2015. Johnson, 60 at the time of the SEC action, listed an address in Aurora, Colo. In June 2015, she was charged criminally with wire-fraud conspiracy and agreed to plead guilty.
Barnes, 52 at the time of the SEC action, was charged criminally later. He listed an address in Riverview, Mich.
By the time Achieve collapsed in February 2015, it owed investors more than $51 million, prosecutors said.
“[H]er conspirators and TAC had available only 4% or approximately $2.6 million,” federal prosecutors said.
Like many scams, Achieve was a Ponzi-board “program” that operated over the Internet and created thousands and thousands of victims with promises of absurd returns on the order of 700 percent. At least 4,000 of the victims lived outside the United States, prosecutors said.
The Johnson sentencing was the second involving a Ponzi-schemer in the Western District of North Carolina in the past 24 hours. Paul Burks of Zeek Rewards was sentenced yesterday to 176 months for his scam involving hundreds of millions of dollars.
Achieve hauled something on the order of $6.8 million.
3RD UPDATE 4:52 P.M. ET U.S.A. Paul Burks, the principal behind the $939 million Zeek Rewards Ponzi- and pyramid scheme broken up by the SEC and the U.S. Secret Service in August 2012, has been sentenced to 176 months in federal prison, the office of U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina said moments ago.
U.S. District Judge Max Cogburn Jr. presided over sentencing court for Burks, 70. Zeek was an MLM scam that created hundreds of thousands of victims globally.
“But anyone could have seen what was going to occur outside himself and his (marketing) cheerleaders,” the judge said in court, according to the Winston-Salem Journal.
When Burks was indicted in October 2014, the grand jury alleged that Burks and others offered a “bogus 125% return on investment” through a “sham internet-based penny auction company.”
Bell earlier alleged that some of the winners he sued were “serial” participants in Zeek-like schemes to defraud. Among the clawback defendants were Todd Disner, a figure from the AdSurfDaily Ponzi scheme, and T. LeMont Silver, a promoter of multiple Ponzi schemes.
“Programs” such as Zeek and ASD often try to sanitize themselves by calling themselves revenue-sharing schemes.
Burks also was sentenced to make restitution in the amount of $244 million and to serve three years’ probation after his prison release. There are media accounts today that suggest Burks is in poor health.
Though 176 months is a lengthy term, there has been speculation that Burks would receive an even longer term, given the enormous size of Zeek and the number of victims.
Said Bell, the receiver, in a statement dated Feb. 13. “Judge Cogburn cited the need to balance the harm caused by Mr. Burks’ conduct against Mr. Burks’ extremely poor health and [the fact he is] 70 years of age.”
At sentencing, Judge Cogburn stated that for the defendant’s scheme to work would have required a miracle on the order of the “loaves and fishes.” Judge Cogburn stated that a significant sentence was necessary to promote respect for the law, provide just punishment, and also deter others considering committing fraud. Judge Cogburn further noted that the scheme was “almost breathtaking” and emphasized that the defendant had time to stop it.
BULLETIN: Dawn Wright-Olivares, the former COO of Zeek Rewards, has been sentenced to seven and one-half years in federal prison. The sentence was imposed by U.S. District Judge Max O. Cogburn Jr. of the Western District of North Carolina. The office of U.S. Attorney Jill Westmoreland Rose prosecuted Wright-Olivares for investment- and tax-fraud conspiracy.
Daniel Olivares, the stepson of Wright-Olivares and Zeek’s key programmer, also was sentenced today. Cogburn imposed a two-year prison term against Olivares, who was charged with investment-fraud conspiracy.
Both defendants had agreements with prosecutors and pleaded guilty in February 2014, more than two years in advance of the trial of Zeek operator Paul Burks. Burks, 69, was convicted by a jury in July 2016 on charges of mail fraud, wire fraud, conspiracy to commit both and tax-fraud conspiracy. No sentence date has been set.
Prosecutors said Zeek was a cross-border fraud that had gathered hundreds of millions of dollars operating over the Internet. Hundreds of thousands of victims were defrauded. Only TelexFree, another cross-border MLM “program,” may be larger when measured by the number of persons fleeced.
In addition to the criminal charges, Wright-Olivares, 48, and Olivares, 34, both of Clarksville, Ark., faced serious civil litigation from the SEC and from the court-appointed receiver in the Zeek case. The SEC accused them of keeping Zeek participants in the dark about a federal investigation and Zeek’s “imminent collapse” while accepting “substantial sums of money from the scheme.”
In the end, Wright-Olivares and Olivares ended up with nothing.
Before its August 2012 collapse in a pile of Ponzi rubble, Zeek tried to dupe people into believing they were not making an investment. Any number of current schemes are doing the same thing.
Among other things, the Zeek case shows that key executives aren’t the only people who risk prosecution for pushing online fraud schemes. In December 2015, the SEC charged alleged Zeek promoter Trudy Gilmond with fraud.
Separately, Kenneth D. Bell, the Zeek receiver, has been pursuing hundreds of millions of dollars in clawback claims against alleged net winners globally. Bell said he’d be in court today to present the sentencing judge letters from Zeek victims.
UPDATED 4:31 P.M. EDT U.S.A. Zeek Rewards was always inexcusably horrid, fueled by serial willful blindness and the sort of practiced disingenuousness that props up so many MLM “programs.” In dollar volume, Zeek ended up being more than seven times larger than the $119 million AdSurfDaily MLM Ponzi scheme that put ASD operator Andy Bowdoin in federal prison for six and a half years. By this measuring stick, Zeek’s Paul Burks could be staring at 45 or more years.
Bowdoin, 77 when he accepted a plea deal before trial in 2012, received the maximum term of 78 months under the deal after earlier facing decades in prison. He pleaded guilty to a single count of wire fraud and acknowledged ASD was a Ponzi scheme and that the “program” never had operated lawfully from its 2006 inception. Other charges that could have led to a longer term were not pursued.
Burks did not have a plea deal. The $939 million dollar volume of the Zeek scam will not be the sole measuring stick considered by U.S. District Judge Max O. Cogburn Jr. when Burks’ sentencing date comes around. Even so, 45 years is not out of the question, given the terms imposed on other Ponzi schemers. Scott Rothstein, for example, received 50 years for a $1.2 billion scam.
Rothstein reportedly cooperated with the government after his convictions with the hope of receiving a sentencing reduction. Whether Burks will have a similar option or be able to argue successfully for mitigation is unknown.
What is known is that even 20 years for Burks, nearing his 70th birthday, is a virtual life sentence. Like Rothstein, he has some serious thinking to do.
Zeek was a tragedy for many, many investors lured in by promises of enormous returns. Can there be any doubt it’s also a personal tragedy for Burks and his family, given what the Zeeker-in-chief now faces?
“This massive scam is one of the largest in breadth and scope ever prosecuted by this office,” U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina said about Zeek.
Another problem for Burks is that North Carolina, a U.S. banking center, can be downright unfriendly to Ponzi schemers. Keith Franklin Simmons was sentenced to 50 years for his $40 million “Black Diamond” scheme, a scheme much smaller than Zeek. Although that sentence later was reduced on appeal to 40 years, four decades is hardly a bargain — and Zeek had something else in common with Black Diamond in addition to operating in the same federal district in the same state.
Indeed, with both Zeek and Black Diamond, the Feds pursued actions against banks that allegedly were asleep at the wheel. Ponzi schemes put economic security at risk.
Burks had to know that Zeek was going to cause his world to crumble. He’d been an MLMer for years, he knew about the ASD case, Bernard Madoff, Rothstein, Ponzi pain in general throughout society and bizarre happenings in his own company.
Why he moved forward is a sort of maximum imponderable. Why so many in the trade followed him after ASD is an even more disturbing question.
Zeek’s wing of MLM, which also includes ASD, TelexFree, WCM777 and others, has harmed millions and millions of people. It is a vast wasteland of wink-nod disingenuousness and racketeering. The cross-border nature of these schemes is truly frightening.
Kenneth D. Bell, the court-appointed receiver for Zeek, is pursuing class-action litigation involving more than 9,000 alleged Zeek winners. It is known that some of the winners also participated in ASD. These winners were at the scene of two crimes. Some of them were at the scene of more than two.
This is a major problem for MLM, whether the trade acknowledges it or not. Recruits were told Zeek couldn’t be a Ponzi scheme because MLM lawyers were involved.
And they were told that Zeek was on the up-and-up because it issued 1099 tax forms. These longstanding MLM myths have been shattered in both criminal and civil prosecutions.
With respect to Burks’ sentencing, the government’s recommendation is not yet known. Lengthy sentences for senior-citizen Ponzi schemers, however, are hardly unprecedented. Madoff, in his seventies, received 150 years.
Richard Piccoli, 83, received 20 years for a scheme far smaller than Zeek in dollar volume and number of victims. Piccoli advertised in Catholic publications, and is believed to have caused about $25 million in losses to about 250 people.
Zeek advertised online and in MLM publications, creating hundreds of millions of dollars in losses while creating hundreds of thousands of victims.
“Rather, [Andy] Bowdoin manufactured the revenue numbers to deceive members into believing that they could reasonably expect to receive an average daily return on their investment with [AdSurfDaily] of at least 1%. This percentage in no way corresponded to the daily revenue that ASD was generating, but had been determined by ASD’s operators to be the amount needed to attract a steady stream of newcomers.” — U.S. Secret Service affidavit in AdSurfDaily forfeiture case, Feb. 26, 2009
“Defendant [Paul] Burks simply made up the ‘daily net profit’ without any reference at all to profits. The true revenue from the [Zeek] scheme, approximately 98% of all incoming funds, came from victim-investors . . . [T]he co-conspirators published bogus daily figures of Zeek’s profits, averaging approximately 1.4% a day . . .” — Office of U.S. Attorney Jill Westmoreland Rose, June 24, 2016
“Burks and his co-conspirators were very aware of ASD and of the fact that it was shut down. For example, on March 26, 2011, a few months after the owner of ASD was indicted, Burks and Dawn Wright-Olivares emailed regarding an affiliate[‘]s advertisement for ZeekRewards that included in the title, ‘[i]f you were in ASD or AVG then you will know how good this is.’” — Office of U.S. Attorney Jill Westmoreland Rose, June 24, 2016
With the July 5 trial date for alleged Zeek Rewards’ operator Paul Burks fast approaching, federal prosecutors making a case for willful blindness now say Burks and co-conspirator Dawn Wright-Olivares plowed forward even though they were “very aware” of the Ponzi-scheme case against AdSurfDaily and operator Andy Bowdoin.
In fact, the office of U.S. Attorney Jill Westmoreland Rose said in June 24 filings, the subject of ASD had come up at Zeek at least by March 2011, only a few months after Bowdoin had been indicted in November 2010.
The triggering event for an email discussion between Burks and Wright-Olivares had been an affiliate’s promotion for Zeek that in part read, “[i]f you were in ASD or AVG then you will know how good this is,” prosecutors said.
“AVG” is short for AdViewGlobal, a 1-percent-a-day scam Bowdoin and others launched just two months after the U.S. Secret Service, using forfeiture law, seized tens of millions of dollars from Bowdoin for his operation of ASD in August 2008. A federal judge revoked Bowdoin’s bail in the ASD case after she found out about AVG.
Wright-Olivares, in February 2014, pleaded guilty to criminal charges for her role in Zeek. She and stepson Daniel Olivares, who also pleaded guilty, are expected to testify against Burks.
The Zeek affiliate’s March 2011 promo using the names of both ASD and AVG prompted Wright-Olivares to advise the affiliate to be “careful with [her] subject line,” prosecutors said. A lecture using all-caps allegedly ensued.
“We cannot have ZeekRewards compared to ASD or AVG EVER for ANY REASON,” Wright-Olivares allegedly wrote to the affiliate. “They were both shut down. We are very very different from both companies.”
It was unclear from the filing whether the Zeek affiliate also had belonged to ASD and AVG. Zeek receiver Kenneth D. Bell has raised the issue of some MLMers moving from one fraud scheme to another, actions that lead to a sort of permanent fog of preposterous disingenuousness and willful blindness in the HYIP sphere.
After ASD had become a topic of discussion inside Zeek in March 2011, the subject came up again in June of that year, prosecutors alleged.
“Similarly, on June 28, 2011, over [S]kype, Wright-Olivares told Burks that changes needed to be made to the program to make it sustainable,” prosecutors alleged. “Burks retorted: ‘I’m the one with my neck in the noose…not you…If the swat team shows up it’s MY ass in the can…’ Wright-Olivares responded, ‘[i]’ll be there too… they will seize it all and we are liable ask the ASD people.’”
By June 2011, it was public knowledge that ASD had gathered at least $110 million. Burks’ prosecutors now are suggesting that, despite the lessons of the ASD case, Burks and Wright-Olivares did not abandon Zeek because the money was simply too good.
“In 2011 alone, Burks received approximately $11 million in income from ZeekRewards out of total revenue of approximately $37 million,” prosecutors alleged in their June 24 brief. They earlier pegged the total haul of Wright-Olivares at about $7.2 million.
Burks is facing charges of with mail- and wire-fraud conspiracy, mail fraud, wire fraud and tax-fraud conspiracy. Some MLMers have insisted for years that the issuance of tax forms by a “program” demonstrates no fraud is under way.
With Zeek, prosecutors have laid bare that notion.
From prosecutors’ assertions (italics added):
In total, Defendant Burks, and others, reported to the IRS supposed income by the victim-investors of over $96 million for the year 2011 on the 1099s issued, while ZeekRewards actually paid out less than approximately $13 million in cash to victim-investors during that year. As a result, individual victim-investors filed false tax returns with the IRS reporting phantom income that they never actually received, and Burks, and others were able to use the false tax notices to perpetuate the Ponzi scheme by making the phantom money seem like it actually existed.
Sentencing for Dawn Wright-Olivares, a former Zeek Rewards’ executive who pleaded guilty in February 2014 to investment-fraud conspiracy and tax-fraud conspiracy, has been postponed, the office of U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina said today.
Wright-Olivares, whose age was listed as 45 by federal prosecutors at the time of her guilty plea, was to have been sentenced yesterday at 2:30 pm EDT before U.S. District Judge Max O. Cogburn Jr., according to the government’s Victim/Witness site for the Zeek Ponzi- and pyramid case.
No new sentencing date has been scheduled for Wright-Olivares, prosecutors said.
Sentencing delays are not unusual in federal cases. The plea agreement for Wright-Olivares requires her to be a prosecution witness if called by the government in “any trial, hearing, or grand jury proceeding, including, but not limited to, testimony against any co-defendants, as the United States designates.”
Zeek’s alleged haul clocked in at about $897 million. In terms of the number of victims, it appears to one of the two largest Ponzi schemes in U.S. history, possibly trailing only the TelexFree MLM scheme.
Unlike the boffo web-based schemes of TelexFree, Zeek Rewards and AdSurfDaily, the “Achieve Community” scam in which participants were told they’d glean returns of 700 percent did not perform well (relatively speaking) at the MLM Pyramid/Ponzi Scheme Box Office.
What’s particularly alarming about U.S.-based Achieve is that, though small in dollar volume and victims’ count compared to its larger fraud kin, it still reached into more than 140 countries.
Federal prosecutors from the office of U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina now say Achieve created about 10,000 victims, “including more than 4,000 located outside the United States.”
The U.S. victims’ count also presented a logistical challenge — enough of one, at least, for the Justice Department to assign its “Mega Victim Case Unit” to the Achieve matter. The unit helped prosecutors contact U.S. victims.
As the PP Blog reported in July 2015, prosecutors established a web page for victims. Authorities now say “[a]pproximately 229 victims including 29 located in foreign countries have provided details of their victimization. . .”
When a federal crime is committed, prosecutors said, victims have “[t]he right to reasonable, accurate, and timely notice of any public court proceeding . . . involving the crime or of any release or escape of the accused,” and “[t]he right to be reasonably heard at any public proceeding in the district court involving release, plea, sentencing, or any parole proceeding.”
When a case with a large number of victims such as Achieve presents itself, it becomes a practical impossibility to contact each and every person who has been defrauded. Because of this, prosecutors have asked a judge to approve a plan that provides “notification to victims who reside in other countries through the internet by posting details about the case and relevant victim impact forms on the United States Attorney’s Office website.”
And there are other logistical challenges when victims of a U.S. crime hail from other countries, prosecutors said.
“Because each country has its own procedures and requirements for contacting persons located in its territory, contacting each foreign victim directly is not practical or advisable,” prosecutors said. “Due to sovereignty concerns, many countries limit or prohibit foreign government officials from directly contacting persons within that country’s borders. This case’s 4,000+ foreign based victims hail from over 140 different countries.”
So, Internet notice is the thing.
We’ll conclude this column with a question: If Achieve created a need for the Justice Department to bring in its “Mega Victim Case Unit,” what sort of need will the TelexFree case create? There may be on the order of 1 million victims in that scheme.
Watch for a special PP Blog editorial tomorrow.
Achieve’s Kristi Johnson is scheduled to be sentenced Nov. 19. Matters pertaining to her alleged colleague Troy Barnes appear to be unresolved.
Troy A. Barnes ran “The Achieve Community” (TAC) scam along with Kristine L. “Kristi” Johnson.
2ND UPDATE 8:38 P.M. EDT U.S.A. Kristine Louise “Kristi” Johnson, one of the two principals of “The Achieve Community” (TAC) Ponzi- and pyramid scheme, has been sentenced to 21 months in federal prison, the office of U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina said moments ago.
3RD UPDATE 4:52 P.M. ET U.S.A. Paul Burks, the principal behind the $939 million Zeek Rewards Ponzi- and pyramid scheme 
UPDATED 4:31 P.M. EDT U.S.A. Zeek Rewards was always inexcusably horrid, fueled by serial willful blindness and the sort of practiced disingenuousness that props up so many MLM “programs.” In dollar volume, Zeek ended up being more than seven times larger than the $119 million AdSurfDaily MLM Ponzi scheme that 
