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Tag: Zeek Rewards

  • REPORT: SEC Moves Against ‘TrafficMonsoon,’ Calls It A Ponzi

    trafficmonsoonlogoThe SEC has filed a lawsuit against the Traffic Monsoon “program” and called it a Ponzi scheme that had gathered $207 million, the Salt Lake Tribune is reporting.

    The assets of Traffic Monsoon and alleged operator Charles Scoville have been frozen, the newspaper reports.

    On June 1, the PP Blog reported that Payza — a payment processor under fire from the court-appointed receiver in the Zeek Rewards Ponzi- and pyramid case brought by the SEC in 2012 — bragged about its attendance at a Traffic Monsoon event in May.

    Zeek’s Paul Burks was found guilty last week of multiple felonies for his operation of Zeek, a purported auction “program.”

    Traffic Monsoon, which may be a whack-a-mole scheme, is a purported “advertising “program” similar to the AdSurfDaily Ponzi scheme and other scams, including Banners Broker.

    The SEC warned about whack-a-mole schemes in March.

    More as the situation develops . . .




  • EDITORIAL: With Conviction Of Zeek’s Burks, Another Senior MLMer Faces Prospect Of Decades In Prison

    paulburkszeekUPDATED 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.

    As things stand, Burks, 69, faces a maximum of 65 years. He was convicted July 21 of mail fraud, wire fraud, conspiracy to commit both and tax-fraud conspiracy. The jury reportedly returned the verdict in less than three hours.

    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?

    Why Burks ever would choose to pursue Zeek after what happened at ASD remains an open question. The frauds were remarkably similar. Bowdoin went to jail for an MLM scam when he was 77. The ASD case practically screamed, “Don’t do this!”

    “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.

    NOTE: Our thanks to the ASD Updates Blog.

     

     

  • Baton Rouge Cop-Killer Was ‘Sovereign Citizen’ And ‘Moor’ — And Also Claimed To Have Been In Dallas

    Gavin Eugene Long, the alleged mass murderer of police officers in Baton Rouge yesterday, was a “sovereign citizen” and “MOOR,” according to a bizarre filing in his name last year with the recorder of deeds in Jackson County, Mo.

    The news of the filing appeared in the Kansas City Star. Here is a copy of Long’s rambling narrative in which he purportedly changed his name to “Cosmo Ausar Setepenra.”

    CBS News reported Long, a Kansas City native, claimed to have been in Dallas after the July 7 ambush murders of five police officers there by Micah Xavier Johnson.

    “Sovereign citizens” form an irrational belief that laws to not apply to them. African Americans who may self-identify as “sovereigns” sometimes express an affiliation with Moors or Moorishness. Long, killed after reportedly ambushing police, was African American.

    Published reports have described Long as a self-identified “nutritionist, life coach, dietitian, personal trainer, author and spiritual adviser.” Three law-enforcement officers died in Baton Rouge yesterday. Three others were injured.

    Some “sovereigns” have participated in HYIP schemes such as AdSurfDaily, Zeek Rewards, JustBeenPaid/JSS Tripler and DFRF Enterprises.

    Visit the PP Blog’s tag archive on references to “sovereign citizens.”




  • BURKS TRIAL: Government Has Rested, Docket Says

    Prosecutors have rested their case against Paul Burks of Zeek Rewards, according to the July 13 court docket.

    Lawyers for Burks asked for an acquittal, but U.S. District Judge Max O. Cogburn Jr. denied the motion.

    It appears Burks now will proceed with his defense.

    The trial got under way July 5. Burks, 69, is charged with wire fraud, mail fraud, conspiracy to commit both and tax-fraud conspiracy.

    Details of the trial to date have been sketchy. Local news outlets in the Charlotte area have not been reporting on a daily basis.

    NOTE: Our thanks to the ASD Updates Blog.




  • ZEEK: Key Figures — And Paul Burks’ Defense

    EDITOR’S NOTE: Prosecutors and Paul Burks are clashing over expert witnesses and the admissibility of certain evidence. The article below reproduces the anticipated core of Burks’ trial defense, as advanced by his lawyers. This article is not intended to be all-encompassing. Prosecutors, of course, have an altogether different take. They have posted the indictment against Burks here.

    paulburkszeekUPDATED 10 A.M. EDT JULY 5 U.S.A. The Ponzi-related criminal trial of Paul Burks of Zeek Rewards is scheduled to begin tomorrow (July 5) in federal court in Charlotte, N.C. Burks is 69. He is charged with wire fraud, mail fraud, conspiracy to commit both and tax-fraud conspiracy. Prosecutors say he fabricated numbers, sent bogus tax forms and duped Zeek members into believing he was at the helm of an enormously profitable enterprise.

    If convicted of the charges, Burks potentially could face decades in prison — effectively a life sentence.

    His defense is led by Noell P. Tin, C. Melissa Owen and Jacob H. Sussman of Tin Fulton Walker & Owen of Charlotte. The firm has carded some notable wins for clients.

    The office of U.S. Attorney Jill Westmoreland Rose is handling the prosecution. Among those on the prosecution team are Jenny Grus Sugar and Corey Ellis, both Assistant U.S. Attorneys. The judge’s calendar also shows Assistant U.S. Attorney Benjamin Bain-Creed as a member of the prosecution team.

    Rose is well-known as the lead prosecutor in the classified-leaks case against Gen. David Petraeus, who pleaded guilty. Some Zeekers bizarrely have tried to portray the Tin Fulton firm as country bumpkins. Here we’ll point out that Sussman, one of Burks’ lawyers, was on the Petraeus defense team. The general was sentenced to probation.

    U.S. District Judge Max O. Cogburn Jr. is presiding over the Burks’ case. He has presided over other Ponzi cases. The judge complimented the Burks’ defense team last year.

    What follows are snippets from June 28 trial brief by the Burks defense team (italics added/light editing performed):

    **________________________**

    INTRODUCTION The defense anticipates presenting lay and expert testimony, and numerous exhibits, in support of a defense that goes to the heart of the charges against Mr. Burks. The defense will dispute, among other things: (1) that Mr. Burks made material misrepresentations regarding the ZeekRewards program; (2) that Mr. Burks’ company, Rex Ventures Group, had no books and records; (3) that ZeekRewards was a Ponzi or pyramid scheme; and (4) that Mr. Burks ever intended to mislead ZeekRewards affiliates.

    STATEMENT OF ANTICIPATED FACTS Mr. Burks was previously the owner of Rex Ventures Group (“RVG”), a single member L.L.C. that began in 1997. During the time frame alleged in the indictment, RVG was comprised of two divisions: (1) Zeekler, a penny auction website; and (2) ZeekRewards, a multilevel marketing program RVG conceived and promoted as the marketing arm of Zeekler. RVG’s product was bids which were sold in the form of retail bids for the Zeekler penny auction or VIP sample bids for ZeekRewards affiliates.

    Affiliates who purchased sample bids gave them away to promote the Zeekler penny auction, which in turn entitled the affiliates to participate in RVG’s Retail Profit Pool.

    A. Paying what he promised. As set out on the ZeekRewards website, affiliates who met certain qualifying criteria (e.g., paying a subscription fee, giving away sample bids, and placing ads to promote the Zeekler penny auction) were promised up to 50 percent of RVG’s net daily profits. Evidence at trial will show the company performed as promised. From January 1, 2011, when the program began, until August 16, 2012, when the doors closed, RVG took in $938.8 million in cash from affiliates and auction customers.

    During the same period RVG paid $499.5 million . . .  to affiliates in cash as the RPP Award. In other words, RVG made good on the core of its promise by paying out 53.2 percent of its revenues to affiliates. The government has repeatedly asserted, and will continue to assert, that Mr. Burks kept no books or records. Acceptance of this argument will require the jury to find that RVG’s SQL database contained no records.

    In fact, the SQL database contained terabytes of data consisting of approximately 589 tables with hundreds of millions of rows. The SQL database was accessed daily by Mr. Burks, the company’s technology personnel, as well as over 2 million ZeekRewards affiliates who relied on it to keep contemporaneous track of their accounts. Through the SQL database affiliates accessed their respective back-offices to monitor their VIP Point balances, to place ads, to select the percentage of RPP Award they wanted as VIP bid repurchases versus cash award, to check their available cash balances, to request cash payments, and so on.

    Similarly, the SQL database was at all times available to Mr. Burks and provided him the information he needed to run RVG, including the information he needed to determine each day’s Retail Profit Pool percentage.

    B. Bid sales were final. VIP sample bids were not, as the government suggests, “represented as functioning like shares of Zeekler stock.” . . .  To the contrary, before participating in ZeekRewards, affiliates were required to sign a statement acknowledging the following: Submitting this payment confirms that you understand you are purchasing VIP Bids to use as samples to give to potential retail customers. You also understand that this purchase is non-refundable and is not a “deposit” or “investment” and cannot be “withdrawn” later. You affirm that you have read and understand the ZeekRewards Policies and Procedure and agree to all of their terms. NO REFUNDS CAN BE MADE AFTER PAYMENT IS PROCESSED.

    Completed and submitted bid purchase forms, of which there are thousands in number, will be presented to the jury.

    C. Mr. Burks made changes to the program in good faith based on the advice of experts. During the life of the ZeekRewards program, Mr. Burks retained a number of experts to advise him on complying with the myriad of laws governing the multi-level marketing industry. Many of these experts (including accountants, attorneys, and others) had combined decades of experience in the industry and were regarded as leaders in their respective fields. Many programmatic changes the government will claim were “cosmetic” . . .  were initiated not by Mr. Burks, but by those he had hired to advise him on how to run ZeekRewards.

    Equally important, many of the changes Mr. Burks made did nothing to disguise how the ZeekRewards program operated. Some of these changes Mr. Burks made included the following:

    • Adding the requirement of giving away sample bids
    • Instituting compliance courses for affiliates
    • Upgrading the internal accounting system
    • Eliminating lead generation programs
    • Hiring a call center in Atlanta to respond to affiliate inquiries and complaints.

    The defense expects to call many of these experts as trial witnesses.

    D. Dealing with the challenges of explosive growth.

    Nobody could have foreseen how much the ZeekRewards program would grow in such a short period of time, approximately 18 months. As witness Kevin Walker has stated, the company “took off like a rocket ship.” Indeed, the growth in numbers of affiliates was staggering. As of December 31, 2011—12 months into the life of ZeekRewards—the program had 57,597 distinct active usernames. This figure increased to 208,601 by March 31, 2012 and 1.25 million by August 15, 2012.

    In terms of revenue, average daily revenue went from $5,905 in the first quarter of 2011 to $8,429,626 in the third quarter of 2012. By August 16, 2012, Zeekler.com was the 890th most visited website in the world and ZeekRewards.com ranked 130th globally.

    Growth of this magnitude was overwhelming. Despite Mr. Burks’ efforts to bring in additional personnel to address the problems that came with growth at this level, many of the problems RVG encountered—with banks, payment processors, and customer service—were attributable to growth at an unforeseeable rate.

    E. The issuance of Forms 1099 was based on sound legal advice—and was anything but evidence of “lulling.” Mr. Burks was advised that it was appropriate—indeed, necessary—to issue 1099s to affiliates. This created all manner of complaints and criticisms. The reality for affiliates that they would have to pay taxes for money earned through ZeekRewards, even if they had chosen to repurchase bids in lieu of a cash payment, was a difficult one for some to accept. But it was the law according to Howard Kaplan, a tax attorney who had previously worked for the IRS and who was retained to advise RVG.

    Mr. Kaplan’s advice was unambiguous. As he stated in an email, “I have also given this some thought and I concur that because of the way your plan is structured, there is constructive receipt because of the choice your affiliates have.” Mr. Kaplan repeated the same in conference calls with affiliates. Mr. Burks is not a tax attorney. He relied on the assurances of the people he paid and hired.

    NOTE: See the PP Blog’s Zeek Rewards Cloud Tag here.

    NOTE: Our thanks to the ASD Updates Blog.




  • URGENT >> BULLETIN >> MOVING: Zeek Receiver Moves For Summary Judgment Against Class-Action Clawback Defendants; Kenneth Bell Says Defense Expert Witness Has Found No Evidence That ‘Disproves That The Business As A Whole Operated As A Ponzi Scheme’

    Berkeley Research Group, an expert working for the defense in Zeek clawback litigation,has not been able to disprove the presence of a Ponzi scheme. Source: Screen shot of a Berkeley report to Senior U.S. District Judge Graham C. Mullen Jr. The report is dated May 26, 2016.
    Berkeley Research Group, an expert working for the defense in Zeek clawback litigation, has not been able to disprove the presence of a Ponzi scheme. Source: Screen shot of a Berkeley report to Senior U.S. District Judge Graham C. Mullen Jr. The report is dated May 26, 2016.

    URGENT >> BULLETIN >> MOVING: (3RD UPDATE 6:11 P.M. EDT U.S.A.) On virtually the eve of the criminal trial of Paul Burks, receiver Kenneth D. Bell has asked the court presiding over a huge class-action lawsuit against 9,400 alleged Zeek “winners” for a finding the MLM program was a Ponzi scheme.

    Such a finding would mandate winners to return nearly $300 million. Bell contended that “[o]f the over $900 million that was paid in to Zeek, only approximately $10 million (1.1%) came from actual retail purchases.”

    Retail sales are crucial to the determination of whether an MLM program is legitimate. Bell contends Zeek, which offered a penny auction, was both a Ponzi scheme and a pyramid scheme. Zeek affiliates allegedly believed enormously profitable auctions made Zeek sustainable.

    “Two of the primary creators and operators of the ZeekRewards scheme have already admitted it was a Ponzi scheme and pleaded guilty to criminal conduct in connection with the scheme,” Bell argued to Senior U.S. District Judge Graham C. Mullen in a June 30 motion. “In sum, the evidence that ZeekRewards was a Ponzi scheme is overwhelming. Even the Defendant class’ expert has acknowledged finding no evidence that ‘disproves that the business as a whole operated as a Ponzi scheme.’

    “Because Zeek’s net winners ‘won’ (the victims’) money in an unlawful Ponzi scheme, under long settled law those winners are not permitted to keep their winnings and must return the fraudulently transferred funds back to the Receiver for distribution to Zeek’s victims,” Bell argued.

    At stake in the civil clawback case is more than $282 million allegedly paid to winners by Zeek. Berkeley Research Group is the expert for the defense. Bell used FTI Consulting Inc. as his expert.

    Burks’ criminal trial is scheduled to begin Tuesday (July 5).

    What kind of financial environment did Zeek create?

    According to FTI, only about 8 percent (75,000 usernames) were winners, while 90 percent (841,000 usernames) were losers. Meanwhile, only 0.3 percent (2,778 usernames) were net neutral, with only 1.6 percent (14,500 usernames) classified as auction bidders only.

    Bell sued 9,400 alleged winners who’d received more than $1,000 each. FTI asserted that the net losers lost more than $822 million and the net winners hauled away more than $282 million. The small number of auction bidders suggests that Zeekers by and large joined for the purported money-making venture.

    But Zeek, Bell alleged, was insolvent even while paying out large sums of money.

    Cocaine Allegation Made By Alleged Insider

    During a deposition conducted in April 2016 by an attorney for the receivership, alleged Zeek insider Darryle Douglas made a claim that former Zeek COO Dawn Wright-Olivares was a user of “crack cocaine” who was “asked to leave” Free Store Club, a Zeek predecessor, according to a partial transcript included in Bell’s June 30 motion.

    Wright-Olivares also is an alleged Zeek insider and one of two Zeek figures to plead guilty to Ponzi-related criminal charges. (The other is Daniel Olivares, her stepson.) Wright-Olivares and Olivares both are expected to testify against Burks at his criminal trial.

    Whether Burks intended to use the cocaine allegation against Wright-Olivares to impeach her credibility as a witness was not immediately clear. But Wright-Olivares and Olivares both lived with Douglas at one time in Lexington, N.C., according to the transcript.

    Zeek, as part of Rex Venture Group, was based in Lexington.

    While living in Lexington, a “separation” developed between Douglas and Wright-Olivares and a once-strong business relationship between Douglas and Burks became “fractured,” according to the transcript.

    “And that’s where our separation began,” Douglas said, according to the transcript. “Dawn was a crack cocaine user . . .  Dawn used cocaine and was asked to leave the company eventually . . . This was FreeStore Club. She left but came back with the idea for a penny auction, which no one had ever heard of. Because we had a fractured relationship, we created MyBidShack, they created Zeekler. Eventually Paul decided to get rid of MyBidShack and that the company would only go under Zeekler, which made our rift expand. It set up a war that we — that’s when I was no longer allowed to have access codes or key information from accessing the system . . .”

    The receiver’s motion, memo and exhibits are available at the receivership website.

    Also see “ANNOUNCEMENT FROM THE RECEIVER – July, 1, 2016” at the receivership site.




  • Grand Jury Was Meeting When Some Zeekers Waged Misinformation Campaign; Prosecutors Question Veracity Of Burks’ ‘Handwritten Notebooks’

    Paul Burks
    Paul Burks

    New filings by federal prosecutors in the criminal case against Zeek’s Paul Burks reveal that a grand-jury investigation was under way within days of the SEC’s Aug. 17, 2012, shutdown of the “program” and confirmation by the U.S. Secret Service that it also was investigating Zeek.

    Burks was subpoenaed by the grand jury on Aug. 24, 2012, and testified before the panel less than a month later, on Sept. 20, 2012, according to prosecutors. He ultimately was indicted by the grand jury in October 2014, more than two years after the August 2012 subpoena and his subsequent appearance the following month.

    Whether others within Zeek also had been subpoenaed or had knowledge of Burks’ appearance is unclear. What is known is that a group of Zeek members — during the same 2012 time period — embarked on a fundraising campaign while accusing the SEC of misleading a federal judge and admitting it had a weak case.

    One of the members of the group was Todd Disner, a former winner in the AdSurfDaily Ponzi scheme later identified as a major winner in the Zeek scheme. Zeek receiver Kenneth D. Bell has raised the issue of serial promoters moving from one fraud scheme to another.

    Bell specifically has referenced ASD. Federal prosecutors have, too.

    Given that ASD operator Andy Bowdoin is in federal prison for running a Ponzi scheme and Zeek’s “program” was similar to ASD in key ways, events at ASD could be problematic for Burks. How did Disner, for example, end up at Zeek?

    Despite knowing about ASD in 2011, Burks nevertheless moved forward with Zeek, prosecutors contend.

    The government is arguing that the ASD fraud put Burks on notice of his own fraud and that evidence pertaining to ASD should be admissible.

    Precisely what the government intends to introduce about ASD is unknown. But as part of his defense, Burks is asking U.S. District Judge Max O. Cogburn Jr. to exclude evidence about ASD.

    “This case is about Paul Burks, Rex Venture Group, Zeekler.com, and ZeekRewards.com,” Burks advised Cogburn in a June 28 trial brief. “It is not a referendum on direct selling or multi-level marketing programs. The trial of this case is not the time, or the place, for a jury to render a verdict on these types of companies or programs, which are perfectly legal yet regularly criticized.

    “It is also not about corporate malfeasance or wrongdoing by others, which is precisely what the Government seeks to convey to the jury by referencing ASD. Accordingly, the Government should be barred from any reference ASD, or any other entity whose conduct is completely irrelevant to the facts of this case. Even if there is some limited relevance to ASD (it is mentioned in government witness interviews), the Court should bar any mention of ASD since the limited probative value of such evidence is substantially outweighed by a danger of unfair prejudice, confusion, being grossly misleading, and inviting a trial-within-a-trial.”

    Burks’ trial on charges of wire fraud, mail fraud, conspiracy to commit both and conspiracy to commit tax fraud is scheduled to get under way July 5.

    We’re working on a story that will cover other elements of his defense.

    In a development yesterday, the government contended Burks withheld “purported” handwritten notebooks from the grand jury during his September 2012 appearance and didn’t turn them over until April 2016.

    Burks now wants to use the “unauthenticated” notebooks as a trial exhibit and as the basis for the opinions of expert witnesses he intends to call, prosecutors argued.

    “Defendant’s failure to produce these documents in response to the Grand Jury testimony, his testimony that he had produced all responsive documents, and the production of these Handwritten Notebooks on the eve of trial, without explanation, all raise serious concerns about the legitimacy of the Handwritten Notebooks,” prosecutors argued to Cogburn.

    NOTE: Thanks to the ASD Updates Blog.




  • FEDS: Having Pocketed $11 Million In 2011, Burks Plowed Forward With Zeek, Despite Knowledge Of AdSurfDaily Ponzi Case

    “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

    EDITOR’S NOTE: Prior to the Aug. 17, 2012 fall of Zeek Rewards, the PP Blog reported on a number of similarities between Zeek and AdSurfDaily. (See June 10, 2012, editorial, “A Friday Evening In MLM Radio La-La Land.” Also see Aug. 12, 2012, editorial, “Karl Wallenda Wouldn’t Do Zeek.”)

    **______________________**

    From a Zeek promo.
    From a Zeek promo.

    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.

    NOTE: Our thanks to the ASD Updates Blog.




  • BULLETIN: FEDS: Burks Ran Scam Prior To ZeekRewards

    breakingnews725BULLETIN: (4th Update 9:13 p.m. EDT U.S.A.) Accused Ponzi schemer Paul Burks ran a “pyramid scheme” known as FollowMe1X2 that was a precursor to ZeekRewards, federal prosecutors say.

    A quote about FollowMe1X2 that appears in a prosecution filing today also appears verbatim in a post on the MoneyMakerGroup Ponzi forum dated Sept. 4, 2010, by “charlieone.”

    From the quote: FollowMe1X2 is “a fast-paced network advertising program that was designed to maximize your ad budget, increase your businesses exposure and your bank account exponentially!”

    FollowMe1X2 collapsed and participants were ported into ZeekRewards, prosecutors said.

    Zeek also had a presence on MoneyMakerGroup and other boards referenced in federal court filings as places from which Ponzi schemes are promoted.

    Today’s prosecution filings against Burks, who faces trial next month on charges of wire fraud, mail fraud. conspiracy to commit both and conspiracy to commit tax fraud, come in the form of a “Notice of Intent to Introduce Evidence and Memorandum of Law in Support of its Admissibility.”

    The document is similar to filings against now-convicted Ponzi schemer Andy Bowdoin of AdSurfDaily, another Ponzi board “program.” In the ASD cases, prosecutors tied Bowdoin to scams both before ASD (DailyProSurf) and after (AdViewGlobal and OneX).

    ASD, another Ponzi-board “program,” collapsed in 2008. Like Zeek, ASD used vendors such as SolidTrustPay and AlertPay and purported to have an “advertising” function.

    Like Burks, Bowdoin was accused of porting participants from one scam to another.

    BehindMLM.com reported today that Burks is seeking to have the tax-fraud conspiracy charge against him dismissed prior to trial, scheduled to begin July 5. Prosecutors have not yet responded to his argument.

    But in their notice today, prosecutors argued that the jury should be able to hear evidence that Zeek parent Rex Venture Group LLC had not filed corporate tax returns between 2003 and 2011.

    It also should be able to hear evidence about the FollowMe1X2 scheme, prosecutors contended.

    NOTE: Our thanks to the ASD Updates Blog.

  • Alleged TelexFree Winner Tries To Sue Trustee For ‘Emotional Distress’; Separately, U.S. Judge Asks Dominican Court For Assistance

    breakingnews725It may be a first in MLM clawback cases.

    Dwayne Jones, an alleged winner of more than $561,000 in the judicially declared TelexFree Ponzi- and pyramid scheme, is trying to sue Trustee Stephen B. Darr for “Emotional Distress and Anticipated Attorney & Court Costs.”

    In a proposed defendant class-action, Darr sued Jones and dozens of other alleged winners earlier this year for return of their gains. Jones was sued at a New York address. Acting pro se, he appears to have responded to Darr’s adversary complaint filed in Massachusetts federal bankruptcy court with a kit pleading from Maryland federal bankruptcy court in which he denied he was a TelexFree winner, raised jurisdictional claims and asserted the emotional-distress counterclaim against Darr.

    Darr responded on June 6, saying he “denies in full the sole allegation in the defendant’s Counterclaim, that the defendant is entitled to unspecified damages for emotional distress and anticipated attorney and court costs arising out of this litigation.”

    The trustee also entered affirmative defenses.

    Class-action cases filed by Darr against alleged TelexFree winners potentially affect nearly 100,000 participants globally who gained more from TelexFree than they paid in. The scheme allegedly created hundreds and hundreds of thousands of losers.

    Chief U.S. Bankruptcy Judge Melvin S. Hoffman of Massachusetts is presiding over the cross-border TelexFree case and adversary proceedings.

    On May 24, Hoffman asked judicial authorities in the Dominican Republic for assistance in serving process on more than a dozen clawback defendants located there.

    Darr contends TelexFree generated more than $3 billion in illicit business worldwide and that winners must return their gains.

    Kenneth D. Bell, the receiver in the Zeek Rewards case, also has brought clawback claims against alleged domestic and international winners in that scheme. Zeek is alleged to have gathered on the order of $897 million.




  • Stephen L. Cohen, SEC Official Who Introduced World To Zeek Case, Leaving Agency After Nearly 12 Years

    “The obligations to investors drastically exceed the company’s cash on hand, which is why we need to step in quickly, salvage whatever funds remain and ensure an orderly and fair payout to investors. ZeekRewards misused the power of the Internet and lured investors by making them believe they were getting an opportunity to cash in on the next big thing. In reality, their cash was just going to the earlier investor.” — Stephen L. Cohen, Associate Director, SEC Division of Enforcement, Aug. 17, 2012

    Our best wishes to Stephen L. Cohen, who delivered the words above nearly four years ago. Cohen is leaving the U. S. Securities and Exchange Commission after nearly 12 years of service.

    “Throughout his career at the SEC, Steve has made substantial and long-lasting contributions to the Commission’s mission,” said Andrew J. Ceresney, director of the SEC’s Enforcement Division.  “He has supervised significant cases involving a wide variety of misconduct and has been closely involved in the implementation of various enhancements to the enforcement program.  His keen intellect and enthusiasm will be missed.”

    One of the cases he supervised — as the SEC noted today — was Zeek Rewards.

    The PP Blog’s lede in the story reporting the SEC’s Zeek action on Aug. 17, 2012 (italics added):

    The SEC has filed an emergency action in federal court in Charlotte, N.C., that alleges Zeek Rewards is a $600 million Ponzi and pyramid scheme.