United States Attorney Anne M. Tompkins Western District of North Carolina CHARLOTTE, N.C. – The president of ZeekRewards, Paul Burks, has been indicted on federal charges for operating an Internet Ponzi scheme that took in more than $850 million dollars, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina. The criminal indictment was returned today by a federal grand jury sitting in Charlotte, charging Burks, 67, of Lexington, N.C., with wire and mail fraud conspiracy, wire and mail fraud, and tax fraud conspiracy. Russell F. Nelson, Special Agent in Charge of the United States Secret Service, Charlotte Field Division and Thomas J. Holloman III, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation Division (IRS-CI) join U.S. Attorney Tompkins in making today’s announcement. According to allegations contained in the indictment, from January 2010 through August 2012, Paul Burks was the owner of Rex Venture Group, LLC (RVG), through which he owned and operated Zeekler, a sham Internet-based penny auction company, and its purported advertising division, ZeekRewards (collectively “Zeek”). The indictment alleges that Burks and his conspirators induced victims – including over 1,500 victims in the Charlotte area – to invest in their fraudulent scheme, by falsely representing that Zeekler was generating massive retail profits from its penny auctions, and that the public could share in such profits through investment in ZeekRewards. Indeed, the indictment alleges that Burks and others claimed, at one point, that investors would be guaranteed a 125% return on their investment. The indictment alleges that Burks and his conspirators represented that victim-investors in ZeekRewards could participate in the Retail Profit Pool (RPP), which supposedly allowed victims collectively to share 50% of Zeek’s daily net profits. The indictment alleges that Burks and his conspirators did not keep books and records needed to calculate such daily figures, and that Burks simply made up the daily “profit” numbers. The indictment further alleges that, contrary to the conspirators’ claims, the true revenue from the scheme did not come from the penny auction’s “massive profits.” Instead, approximately 98% of all incoming funds came from victim-investors, which were then used to make Ponzi-style payments to earlier victim investors. In addition to promising massive returns on investments, the indictment alleges that the conspirators also used a number of ways to promote Zeek to current and potential investors. For example, according to the indictment, the conspirators hosted weekly conference calls and leadership calls, where participants could call in listen to Burks and others make false representations intended to encourage victim-investors to continue to invest money and to recruit others to invest in Zeek. The indictment further alleges that Burks also organized and attended “Red Carpet Events,” where victim investors came to hear details of the scheme in person. During these events, according to the indictment, Burks and his conspirators made false representations about the massive retail profits generated by Zeek. The conspirators also used electronic and print media, including websites, emails and journals, to make false and misleading statements about the success of Zeekler to recruit victim investors. The indictment alleges that as the Ponzi scheme grew in size and scope, it began to unravel as the outstanding liability resulting from the bogus 125% return on investment continued to rise beyond control. According to the indictment, by August 2012, the conspirators fraudulently represented to the collective victims that their investments were worth approximately $2.8 billion, but had no accurate books and records to even determine how much cash on hand was available to pay such liability. According to the indictment, by August 17, 2012, Burks and his conspirators had only $320 million (or approximately 11% of $2.8 billion) available to pay out investors. The indictment alleges that over the course of the scheme, Burks diverted approximately $10.1 million to himself. Burks is also charged with tax fraud conspiracy for failing to file corporate tax returns or to make corporate tax payments for his companies, among other things. In addition, the indictment alleges, for tax year 2011, Burks issued fraudulent IRS Forms 1099s, causing victim-investors to file inaccurate tax returns for phantom income they never actually received. The court has issued a summons against Burks and he is expected to appear in federal court for his initial appearance in the coming days. The wire and mail fraud conspiracy charge, the mail fraud charge and wire fraud charge each carry a maximum prison term of 20 years and a $250,000 fine. The tax fraud conspiracy charge carries a maximum prison term of five years and a $250,000 fine. The details contained in this indictment are allegations. The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law. Two of Burks’ conspirators, Dawn Wright Olivares, Zeek’s Chief Operating Officer, and her step-son and Zeek’s Senior Technology Officer, Daniel C. Olivares, pleaded guilty in December 2013 to investment fraud conspiracy. Dawn Wright Olivares also pleaded guilty to tax fraud conspiracy. Both defendants await sentencing. In making today’s announcement, U.S. Attorney Tompkins thanked the U.S. Secret Service and IRS-CI for investigating the case, and the U.S. Securities & Exchange Commission, Division of Enforcement for its assistance with the investigation. The prosecution is handled by Assistant United States Attorneys Jenny Grus Sugar, Corey Ellis and Mark T. Odulio of the U.S. Attorney’s Office in Charlotte. Additional information and updated court filings about this and related cases filings can be accessed at the district’s website: www.justice.gov/usao/ncw/ncwvwa.html.

United States Attorney Anne M. Tompkins Western District of North Carolina
CHARLOTTE, N.C. – The president of ZeekRewards, Paul Burks, has been indicted on federal charges for operating an Internet Ponzi scheme that took in more than $850 million dollars, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina. The criminal indictment was returned today by a federal grand jury sitting in Charlotte, charging Burks, 67, of Lexington, N.C., with wire and mail fraud conspiracy, wire and mail fraud, and tax fraud conspiracy.

Russell F. Nelson, Special Agent in Charge of the United States Secret Service, Charlotte Field Division and Thomas J. Holloman III, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation Division (IRS-CI) join U.S. Attorney Tompkins in making today’s announcement.

Angle Of Justice

According to allegations contained in the indictment, from January 2010 through August 2012, Paul Burks was the owner of Rex Venture Group, LLC (RVG), through which he owned and operated Zeekler, a sham Internet-based penny auction company, and its purported advertising division, ZeekRewards (collectively “Zeek”). The indictment alleges that Burks and his conspirators induced victims – including over 1,500 victims in the Charlotte area – to invest in their fraudulent scheme, by falsely representing that Zeekler was generating massive retail profits from its penny auctions, and that the public could share in such profits through investment in ZeekRewards. Indeed, the indictment alleges that Burks and others claimed, at one point, that investors would be guaranteed a 125% return on their investment.

The indictment alleges that Burks and his conspirators represented that victim-investors in ZeekRewards could participate in the Retail Profit Pool (RPP), which supposedly allowed victims collectively to share 50% of Zeek’s daily net profits. The indictment alleges that Burks and his conspirators did not keep books and records needed to calculate such daily figures, and that Burks simply made up the daily “profit” numbers. The indictment further alleges that, contrary to the conspirators’ claims, the true revenue from the scheme did not come from the penny auction’s “massive profits.” Instead, approximately 98% of all incoming funds came from victim-investors, which were then used to make Ponzi-style payments to earlier victim investors.

Troy Dooly

Troy Dooly is recognized internationally as an influencer in the areas of personal branding, leadership development, marketing campaigns, organizational expansion, and corporate launch strategies. Dooly is a speaker, results coach, and radio host. He is a founding member, show host (Beachside CEO) and News Director of the Home Business Radio Network. He is a founding member, and currently serves on the Board of the Association of Network Marketing Professionals

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Ponzi Tracker Reports: Zeek Receiver Seeks Approval For 40% Distribution

Nearly two years after his appointment, the court-appointed receiver for the $600 million Zeek Rewards Ponzi scheme has asked a North Carolina federal court for approval to make an initial 40% distribution to over 100,000 victims.  The Receiver, Kenneth D. Bell, filed his Motion to Authorize First Interim Distribution, Establish Record Dates, and Set First Interim Distribution Date (the “Distribution Motion”) yesterday.  In the Distribution Motion, the Receiver seeks to begin making distributions to victims as soon as September 30, 2014.

The Securities and Exchange Commission filed an emergency enforcement action against Zeek Rewards in August 2012, alleging that the wildly popular online penny-auction site was, in reality, a massive pyramid and Ponzi scheme that was on the verge of collapse.  After a claims process was initiated last year, Bell ultimately received approximately 175,000 claims asserting cumulative losses of over $650 million. 

Jordan D. Maglich

Troy Dooly is recognized internationally as an influencer in the areas of personal branding, leadership development, marketing campaigns, organizational expansion, and corporate launch strategies. Dooly is a speaker, results coach, and radio host. He is a founding member, show host (Beachside CEO) and News Director of the Home Business Radio Network. He is a founding member, and currently serves on the Board of the Association of Network Marketing Professionals

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Behind MLM Reports: Update on Zeek Rewards net-winner clawbacks

Last we checked in with the ongoing battle between Zeek Rewards’ top Ponzi pimps and the court-appointed Receiver, they were arguing about the particulars of discovery. Looking to bog down the Receivership in both time and costs (so they can no doubt bitch about it later), Zeek Ponzi royalty were collectively asking for ‘what amounts [Continue reading...]

Source: Update on Zeek Rewards net-winner clawbacks

Read the full article and join in the discussion over at BehindMLM.

Oz

Troy Dooly is recognized internationally as an influencer in the areas of personal branding, leadership development, marketing campaigns, organizational expansion, and corporate launch strategies. Dooly is a speaker, results coach, and radio host. He is a founding member, show host (Beachside CEO) and News Director of the Home Business Radio Network. He is a founding member, and currently serves on the Board of the Association of Network Marketing Professionals

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Patrick Pretty WANTING MORE: From Zeek To TelexFree

(UPDATED 11:54 A.M. EDT U.S.A.) Back in October 2012, two California members of the collapsed Zeek Rewards MLM “program” filed a self-written pleading with the federal judge presiding over the Zeek Ponzi- and pyramid case in North Carolina. Just two months earlier — in August 2012 — the U.S. Securities and Exchange Commission had filed […]

PatrickPretty.com

Troy Dooly is recognized internationally as an influencer in the areas of personal branding, leadership development, marketing campaigns, organizational expansion, and corporate launch strategies. Dooly is a speaker, results coach, and radio host. He is a founding member, show host (Beachside CEO) and News Director of the Home Business Radio Network. He is a founding member, and currently serves on the Board of the Association of Network Marketing Professionals

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Ponzi Tracker Reports: Zeek Receiver Slams Lawyers’ Efforts To Redirect Claim Distributions

The court-appointed receiver overseeing efforts to recover funds for victims of the $600 million ZeekRewards Ponzi scheme has again reserved strong words for efforts by certain victims’ lawyers to have distributions sent to their law offices, rather than directly to victims, saying that it “ought not to be the responsibility of the Receiver to act as the Movants’ attorneys’ collection agent.”  The Receiver, Kenneth D. Bell, filed his Reply in Opposition to a Motion for Clarification And/or Reconsideration filed by a group of several hundred scheme victims.  While Bell initially characterized the efforts to compel the mailing of distribution checks to victims’ attorneys as “at least questionable” back in January, he used stronger words in his Reply, arguing that the victims’ attorneys were simply “unable to let go of their pecuniary interests.”

The dispute arose in December 2013, after the Receiver filed his Motion for an Order Approving Distribution Procedures and Certain Other Related Relief (“Motion”).  The Motion sought court approval for distribution procedures that included, among other things, a provision that payments would be made directly to victims.  Of the nearly-200,000 individuals that submitted claims for the Receiver’s determination, an objection was filed by a small subset of approximately 740 victims which had previously entered into a contingency agreement with a Louisiana law firm (the “Louisiana Firm”) for the purpose of filing a class action lawsuit – a lawsuit that was later halted by a federal court and deemed “ill-timed.”  In his response to that objection, the Receiver observed that

whether or not the fee agreement would permit Movants’ counsel to claim a large contingent fee (as much as 25%) for simply providing administrative assistance in filing a claim through the Receiver’s claim portal is uncertain.

There are substantial potential fees at stake.  Considering that the average claim amount was approximately $3,100, and the fact that the Louisiana Firm claimed 740 clients, this would represent an average per-claim fee of $775, and a cumulative total fee of over half a million dollars for simply assisting victims in filling out a claim form.  (Obviously, the number could fluctuate based on the actual dollar amounts of the claims of the 740 victims.)

On April 1, 2014, the Court approved the Receiver’s Motion in all aspects.  Several days later, the Louisiana Firm filed a Motion for Clarification and/or Reconsideration, which, in the Receiver’s words, “again challeng[es] the Court’s decision by seeking to change the approved distribution process to require the Receiver to aid the Movants’ attorneys in collecting their attorneys’ fees from the Movants.”  Characterizing the reason for the motion as the Louisiana Law Firm’s inability “to let go of their pecuniary interests,” the Receiver explained that he sought to make payments directly to victims to prevent duplicative payments, to ensure aggregate net winners do not receive distributions by using multiple addresses, and even ensuring that the Receiver does not unwittingly violate the Department of Treasury’s Office of Foreign Assets Control’s (OFAC) regulations.  While observing that his plan “may not assist Movants’ attorneys’ efforts to collect their fees,” he argued that no clarification of the Order was necessary.  

A copy of the Receiver’s Reply is below (h/t ASDUpdates ):

 

Zeek Doc 202

 

 

Jordan D. Maglich

Troy Dooly is recognized internationally as an influencer in the areas of personal branding, leadership development, marketing campaigns, organizational expansion, and corporate launch strategies. Dooly is a speaker, results coach, and radio host. He is a founding member, show host (Beachside CEO) and News Director of the Home Business Radio Network. He is a founding member, and currently serves on the Board of the Association of Network Marketing Professionals

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Behind MLM Reports: Zeek’s top Ponzi pimps “delaying” victim payouts

Someone I don’t ever see myself envying on a professional level is the Zeek Rewards Receiver. Charged with wading through the haphazard mess of records and accounting that Paul Burks and his crew kept, Kenneth Bell is now working on recovering Ponzi funds from some of the MLM underbelly’s worst serial offenders. And true to their [Continue reading...]

Source: Zeek’s top Ponzi pimps “delaying” victim payouts

Read the full article and join in the discussion over at BehindMLM.

Oz

Troy Dooly is recognized internationally as an influencer in the areas of personal branding, leadership development, marketing campaigns, organizational expansion, and corporate launch strategies. Dooly is a speaker, results coach, and radio host. He is a founding member, show host (Beachside CEO) and News Director of the Home Business Radio Network. He is a founding member, and currently serves on the Board of the Association of Network Marketing Professionals

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Ponzi Tracker Reports: Judge Approves ZeekRewards Claims Procedures, Denies Objection

A North Carolina federal judge issued an order approving the claims procedures proposed by the court-appointed receiver to, among other things, begin making distributions to victims of the $600 million Zeek Rewards Ponzi scheme.  In an Order entered March 26, 2014, United States District Judge Graham C. Mullen granted receiver Kenneth D. Bell’s Motion for an Order Approving Distribution Procedures and Certain Other Related Relief (“Motion”).   Notably, the Order also specifically rejected the objection lodged by a subset of ZeekRewards victims seeking to allow third parties – namely, their lawyers – to “process” any distributions (and presumably apply a 25% contingency fee pursuant to their retainer agreements).

The Receiver sought Court approval for a claims process in March 2013, approximately seven months after the Securities and Exchange Commission alleged that ZeekRewards was a massive $600 million Ponzi scheme.  After the Court approved commencement of a claims process in May 2013, victims were given a September 2013 deadline to submit claims.  Ultimately, over 174,000 claims were received asserting total losses of nearly $600 million.

Claim Objection Procedures

Following close of the claims process, the Receiver proposed certain procedures to efficiently and effectively deal with claim determinations, methodology, delivery, and objections.  For example, of the approximately 174,000 claims received, a portion of those claims will inevitably be denied and/or result in a different claim determination by the Receiver  When those determinations result in an objection by the claim holder, the Receiver proposed the appointment of a special master, retired Federal Judge Frank W. Bullock, Jr., to decide disputed claims through a hearing process.  In evaluating the request, the Court found that an exceptional condition existed warranting the appointment of a special master.  The Order also approved the priority procedures proposed by the Receiver, which included priority afforded to claims submitted by the receiver and holders of secured claims, followed by pro-rata distributions to investors to be paid out of the Receivership Estate.

Claim Determination Procedures

The Order also approved the Receiver’s request to use a rising tide methodology to make claim determinations.  The request to use a rising tide method is notable, as another method, the net investment method, is typically the predominant method used to determine and calculate claims in Ponzi scheme proceedings.  The differences between the two methods are significant: while the net investment method uses a pro rata distribution tied to the ratio of each victim’s net losses to their total investment, the rising tide method factors withdrawals made by the investor in an attempt to equalize distributions.  Essentially, under the rising tide method, withdrawals made by an investor during the course of the scheme are considered as distributions, and are therefore deducted from the amount distributed by the receiver or bankruptcy trustee. Only when the distributions equal the pro rata amount withdrawn by the investor does that investor become entitled to participate in the distribution process. The rationale behind the rising tide method is that, due to the Ponzi nature of the scheme, those withdrawals made by investors were nothing more than fictitious profits comprised of other investor’s funds.  

In his last update, the Receiver indicated that he was continuing to make claim determinations.  While the next step would typically be the filing of a motion seeking approval of claim determinations, the Order includes a portion allowing the Receiver to stipulate to allowance of a claim without Court approval as long as the approved claim did not exceed the amount originally maintained in the ZeekRewards database by $10,000.  Additionally, the Order allows the Receiver discretion to make interim distributions.

Other Ponzitracker coverage of ZeekRewards is here .

The Order is below:

 

Zeek Doc 199

 

 

Jordan D. Maglich

Troy Dooly is recognized internationally as an influencer in the areas of personal branding, leadership development, marketing campaigns, organizational expansion, and corporate launch strategies. Dooly is a speaker, results coach, and radio host. He is a founding member, show host (Beachside CEO) and News Director of the Home Business Radio Network. He is a founding member, and currently serves on the Board of the Association of Network Marketing Professionals

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