Archives for Zeek Crazy Stuff

Zeek Rewards: Paul Burks Listed as Federal Inmate

Posted by ASDUpdates on May 3, 2017No Comments

In a February article, the Winston-Salem Journal reported the sentencing for Paul Burks, mastermind behind the $939 million dollar Ponzi scam known as Zeek Rewards. Burks is 70 years old and his sentence would amount to life in prison.

A federal judge Monday handed Paul Burks, founder of ZeekRewards.com, three concurrent prison sentences of 14 years and eight months for his lead role in the Lexington Ponzi scheme.

 

PAUL BURKS
Register Number: 29723-058
Age: 70
Race: White
Sex: Male
Located at: Lexington FMC
Release Date: 02/08/2030

Zeek Rewards: Paul Burks Will Spend His Sentence in Lexington

Posted by ASDUpdates on March 29, 2017No Comments

This comes from the Winston-Salem Journal, an article stating Paul Burks will be housed in Lexington to serve his prison term.

Paul Burks, the founder of ZeekRewards.com, will serve his federal prison term in Lexington, Ky., beginning no later than May 1.

Burks, 70, was sentenced March 8 to three concurrent prison sentences of 14 years and eight months for his lead role in the Lexington, N.C., Ponzi scheme.There is no parole in the federal system for defendants sentenced in the past few decades. Burks could have been sentenced to up to 59 years.

Here is a link to the full article.

 

 

Zeek Rewards: Keith Laggos Sued by SEC

Posted by ASDUpdates on March 25, 2017No Comments

Ah, finally. It looks like they are starting to go after the paid people who pontificate and speciously sanitize these online schemes; couldn’t happen to a more deserving ass-hat. He is described as a “consultant” in the press release; I would have chosen a different descriptor.


U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23787 / March 23, 2017

Securities and Exchange Commission v. Dr. Keith Laggos, No. 3:17-cv-00150 (W.D.N.C. filed Mar. 22, 2017)

SEC Charges former ZeekRewards Promoter and Consultant for Unlawfully Promoting the Scheme

On March 22, 2017, the Securities and Exchange Commission charged Keith Laggos, formerly the publisher of the Network Business Marketing Journal (NMBJ), for his involvement in and unlawful promotion of the ZeekRewards fraudulent scheme.

The SEC alleges that, from at least June 2011 through July 2012, Laggos, through NMBJ and while acting a paid consultant for ZeekRewards, was paid at least $64,000 for publishing several editorials providing crucial publicity to the ZeekRewards scheme. These publications promoted ZeekRewards as the “company of the month” and touted, among other things, the scheme’s supposed record earnings and opportunity to generate income for participants. Laggos failed to disclose the fact that he was paid for the favorable editorial coverage, the amount that he was paid, and that he was a paid consultant for ZeekRewards.

The SEC further alleges that Laggos’s favorable editorials of the scheme contained material misstatements and omissions. Laggos published theses misstatements despite being made aware of their inaccuracy and otherwise being in a position-as a paid consultant for ZeekRewards-to know of their falsity.

The Commission’s complaint, filed on March 22, 2017 in the U.S. District Court for the Western District of North Carolina, charges Laggos with violating Sections 17(a) and 17(b) of the Securities Act of 1933 (“Securities Act”). To settle the matter, Laggos, who previously consented to a permanent injunction against violating Securities Act Section 17(b) in a 2005 case, consented to the entry of a court order ordering: (i) Laggos to pay disgorgement, prejudgment interest, and a civil penalty totaling $79,190.68; and (ii) permanently enjoining Laggos from future violations of Sections 17(a) and 17(b) of the Securities Act, from participating in future securities offerings, and from providing paid publicity to securities.

The SEC’s investigation was conducted by Brian M. Privor, Alfred C. Tierney, John J. Bowers, and Joshua Braunstein. The case was supervised J. Lee Buck, II.

 

https://www.sec.gov/litigation/litreleases/2017/lr23787.htm

Zeek Rewards: Paul Burks Sentenced to Over 14 Years

Posted by ASDUpdates on February 13, 2017No Comments

Department of Justice
U.S. Attorney’s Office
Western District of North Carolina

FOR IMMEDIATE RELEASE
Monday, February 13, 2017

Former ZeekRewards CEO Sentenced To More Than 14 Years For Operating $900 Million Internet Ponzi Scheme

CHARLOTTE, N.C. – U.S. Attorney Jill Westmoreland Rose announced today that U.S. District Court Judge Max O. Cogburn, Jr. sentenced the former CEO of ZeekRewards to 176 months in prison for operating a $900 million Internet Ponzi scheme. Paul Burks, 70, of Lexington, N.C. was also ordered to serve three years of supervised release and to pay $244,000,000 as restitution. A federal jury convicted Burks in July 2016 of wire and mail fraud conspiracy, wire and mail fraud, and tax fraud conspiracy following a three-week trial.

Michael Rolin, 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 Rose in making today’s announcement.

According to filed court documents, evidence introduced at Burks’ trial and today’s sentencing hearing:

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”). Burks and his conspirators induced more than 900,000 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. Burks and his conspirators, including Zeek’s former Chief Operating Officer Dawn Wright Olivares and her step-son and Zeek’s Senior Technology Officer Daniel C. Olivares, claimed at one point that investors would be guaranteed a 125% return on their investment.

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. Burks and his conspirators did not keep books and records needed to calculate such daily figures. Instead, Burks simply made up the daily “profit” numbers. 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, Burks and his conspirators used a number of ways to promote Zeek to current and potential investors. For example, 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. Burks also organized and attended “Red Carpet Events,” where victim investors came to hear details of the scheme in person. During these events, Burks and his conspirators made false representations about the massive retail profits generated by Zeek. They 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.

As the Ponzi scheme grew in size and scope it became unsustainable and it eventually began to unravel as the outstanding liability resulting from the bogus 125% return on investment continued to rise beyond control. By August 2012, Burks and his conspirators fraudulently represented to the collective victims that their investments were worth nearly $3 billion, but had no accurate books and records to even determine how much cash on hand was available to pay such liability. Contrary to representations made to victim investors, at that time, Burks and his conspirators had only $340 million available to pay out investors. Over the course of the scheme, Burks diverted approximately $10.1 million to himself.

Burks also failed to file corporate tax returns or to make corporate tax payments for his companies, among other things. In addition, 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.

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.

Burks will be ordered to report to the Federal Bureau of Prisons to begin serving his sentence upon designation of a federal facility. All federal sentences are served without the possibility of parole.

Burks’ co-conspirators, Dawn Wright Olivares, Zeek’s Chief Operating Officer, and her step-son and Zeek’s Senior Technology Officer, Daniel C. Olivares, were previously sentenced to 90 and 24 months in prison and three years of supervised release, respectively, for their involvement in the scheme.

In making today’s announcement, U.S. Attorney Rose 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 and Corey Ellis 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: http://www.justice.gov/usao/ncw/ncwvwa.html.

Updated February 13, 2017

Zeek Rewards: Judge Enters Final Judgments Against 3 “Net Winners”

Posted by ASDUpdates on December 10, 2016One Comment

Judge Mullen has ordered Final Judgments against 3 of the “net winners”, with more likely to follow.

Kenneth Bell has also filed for Final Judgments against:

  • Defendant Rhonda Gates in the amount of $1,916,479.07
  • Defendants T. Lemont Silver, Sr., Karen Silver, and Global Internet Formula, Inc., jointly and severally, in the amount of $3,141,668.09
  • Defendant Durant Brockett in the amount of $2,312,129.25, and
  • Defendants David Kettner, Mary Kettner, Kettner & Associates, LLC and Desert Oasis International Marketing, LLC jointly and severally, in the amount of $1,259,114.65

As of today, only these Defendants have had Final Judgments ordered, as follows:

Final Judgment is hereby entered against Defendant Jerry Napier in the amount of $2,349,670.59, which is comprised of $1,749,550.73 in net winnings from the ZeekRewards scheme and $600,119.86 in prejudgment interest, calculated at the North Carolina statutory rate of 8% per annum from August 17, 2012, which is on or after the date of the last fraudulent transfer payment to each Defendant, to November 29, 2016, the date of the Summary Judgment Order in this action.

Final Judgment is hereby entered against Defendant Darren Miller in the amount of $2,198,738.44, which is comprised of $1,637,167.55 in net winnings from the ZeekRewards scheme and $561,570.89 in prejudgment interest, calculated at the North Carolina statutory rate of 8% per annum from August 17, 2012, which is on or after the date of the last fraudulent transfer payment to each Defendant, to November 29, 2016, the date of the Summary Judgment Order in this action.

Final Judgment is hereby entered against Defendants Aaron Andrews, Shara Andrews, and Innovation Marketing, LLC, (The Andrews Defendants) jointly and severally, in the amount of $1,359,897.50 which is comprised of $1,012,571.58 in net winnings from the ZeekRewards scheme and $347,325.92 in prejudgment interest, calculated at the North Carolina statutory rate of 8% per annum from August 17, 2012, which is on or after the date of the last fraudulent transfer payment to each Defendant, to November 29, 2016, the date of the Summary Judgment Order in this action.

Zeek Rewards: Dawn and Daniel Olivares Sentenced

Posted by ASDUpdates on September 13, 2016No Comments
Department of Justice
U.S. Attorney’s Office
Western District of North Carolina

FOR IMMEDIATE RELEASE
Tuesday, September 13, 2016

ZeekRewards’ Former Chief Operating Officer And Former Senior Technology Officer Sentenced In Federal Court

CHARLOTTE, N.C. – U.S. District Judge Max Cogburn, Jr., sentenced Dawn Wright Olivares, 48, and Daniel C. Olivares, 34, both of Clarksville, Ark., to 90 and 24 months in prison, respectively, for their involvement in an $850 million Internet Ponzi scheme that promised victims a bogus return on investments, announced Jill Westmoreland Rose, U.S. Attorney for the Western District of North Carolina.

The two Arkansas residents were associated with the Lexington, N.C. based Rex Venture Group, LLC (RVG), which owned and operated Zeekler and ZeekRewards.  In addition to the prison term imposed, Judge Cogburn also ordered each defendant to serve three years under court supervision.  The restitution amount will be set at a later date.

Michael Rolin, 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 Rose in making today’s announcement.

According to filed court documents and today’s sentencing hearings, from January 2010 through August 2012, Dawn Wright Olivares, her step-son, Daniel Olivares, and Paul Burks, the owner of RVG, conspired with each other and engaged in Ponzi scheme that raised more than $850 million through a sham internet-based penny auction company named “Zeekler” and its purported advertising division “ZeekRewards” (collectively “Zeek”).  According to court records, the conspirators induced more than 900,000 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.  Court documents indicate that, at one point, the conspirators claimed that investors would be guaranteed a 125% return on their investment.

Court records show that the co-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 co-conspirators did not keep books and records needed to calculate such daily figures.  Instead, Burks simply made up the daily “profit” numbers.  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 conspirators used a number of ways to promote Zeek to current and potential investors.  For example, the conspirators hosted weekly conference calls and leadership calls, where participants could call in and listen to Burks, Dawn Wright Olivares and others make false representations intended to encourage victim-investors to continue to invest money and to recruit others to invest in Zeek.  Burks and Dawn Wright Olivares also organized and attended “Red Carpet Events,” where victim investors came to hear details of the scheme in person.  During these events, Burks and his conspirators made false representations about the massive retail profits generated by Zeek.  They 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.

As the Ponzi scheme grew in size and scope it became unsustainable and it eventually began to unravel as the outstanding liability resulting from the bogus 125% return on investment continued to rise beyond control.  By August 2012, the conspirators fraudulently represented to the collective victims that their investments were worth nearly $3 billion, but had no accurate books and records to even determine how much cash on hand was available to pay such liability.  Contrary to representations made to victim investors, at that time, the conspirators had only $340 million available to pay out investors.

According to court records, Dawn Wright Olivares was closely involved in the strategic operations and ultimately served as the Chief Operations Officer of Zeek.  Dawn Wright Olivares also owned 95% of Wandering Phoenix, LLC, a company that she used, among other things, to receive payments from Zeek and RVG.  During the course of the conspiracy, Dawn Wright Olivares and Wandering Phoenix received approximately $7.2 million in victim funds.

Daniel Olivares was RVG’s senior technology officer and was responsible for, among other things, database design, management and operations for Zeek.  During the course of the conspiracy, Daniel Olivares personally enriched himself with victim funds totaling approximately $3.1 million.  Other unnamed co-conspirators also personally enriched themselves with millions of dollars of victim funds.

Dawn Wright Olivares and Dan Olivares previously pleaded guilty to one count of investment fraud conspiracy.  Dawn Wright Olivares also pleaded guilty to one count of tax fraud conspiracy.

In July 2016, a federal jury convicted Paul Burks of wire and mail fraud conspiracy, wire and mail fraud, and tax fraud conspiracy, following a three-week trial.  Burks is currently awaiting sentencing.

In making today’s announcement, U.S. Attorney Rose 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 and Corey Ellis 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: http://www.justice.gov/usao/ncw/ncwvwa.html.

Updated September 13, 2016

Zeek Rewards: “Net Winner Class” Defendants File Reply to Complaint

Posted by ASDUpdates on July 29, 20162 Comments

zeekrewardsIn case 14-cv-91, Bell v Disner ,et al, the “Defendant Class of Net Winners” by and through their Texas attorney, James Kevin Edmundson, have filed a “Defendants’ Answer to Complaint and Affirmative Defenses” in reply to the original complaint filed back on February 28, 2014.

The very first 2 sentences are this:

1. The statement that RVG operated as a Ponzi scheme is a legal conclusion to which no response is required. Defendants lack knowledge or information sufficient to form a belief as to the truth of the remaining allegations of paragraph 1.

2. Defendants deny the allegations of paragraph 2 because, among other reasons, they have no information leading them to believe that RVG was a “scheme” or that they or others were somehow “net winners” as opposed to individuals who worked diligently for the income they earned in connection with Zeek.

I suppose even though a legal decision has been made as to whether Zeek was a Ponzi or a “scheme”, following the conviction on all counts of Paul Burks in the criminal trial, one would surmise that these positions by the Net Winners would be somewhat untenable. But, it gets even better with their Affirmative Defenses: (Pay particular attention to “C”, emphasis added)

AFFIRMATIVE DEFENSES
A. Defendants devoted significant time and money working on behalf of RVG, which was performed pursuant to a contract between Defendants and RVG by which RVG agreed to pay Defendants for the work that they performed. Defendants performed as agreed and were owed the compensation that RVG promised to pay.
B. If RVG was a Ponzi scheme, Defendants had no knowledge of that fact. If RVG was a Ponzi scheme, then all of the other affiliates who participated in RVG have unclean hands as a result of their participation in a fraudulent scheme.
C. On information and belief, the SEC knew or should have known of the RVG Ponzi scheme, but delayed unreasonably in its prosecution of claims against RVG. Alternatively, the SEC knew for some time that RVG was operating as a Ponzi scheme but intentionally delayed disclosing that information to Affiliates and to the public. That unreasonable delay has prejudiced Defendants because t h e y h a v e paid taxes on the money they earned working on behalf of RVG and have incurred business expenses as a part of their work on behalf of RVG. The Receiver in this action stands in the SEC’s shoes and also delayed to Defendants’ detriment and now seeks return of all monies Defendants earned in connection with RVG, with no credit for the taxes or business expenses that Defendants legitimately paid, but that could have been avoided had the SEC or the Receiver timely advised Defendants of RVG’s true nature or acted in a more expeditious manner.
D. The Receiver’s claims in this case against Defendants are barred by the equitable doctrine of laches.
E. Defendants accepted compensation in connection with RVG in good faith, in exchange for reasonably equivalent value and in accordance with the terms of the contract between Defendants and RVG.
F. Defendants are entitled to a setoff for the amounts they paid to RVG for the purchase of bids and to otherwise participate in the Affiliate program, the amount of any and all expenses they incurred in operating their business for the benefit of RVG, for the amount of all taxes they paid and for the value of the funds the Receiver wrongfully misappropriated from Defendants’ e-wallet accounts. Defendants are also entitled to a setoff to the extent of any judgment on their counterclaims.
G. The Receiver has filed suit against two attorneys who provided legal advice to RVG and Affiliates, including Defendants. Defendants relied on that advice in concluding that RVG was a legitimate business and in committing significant personal resources to grow their now defunct business. Because Defendants’ damages were caused in part by the conduct of the two lawyers, Defendants are entitled in equity and at law to a credit for all money the Receiver recovers from the two attorneys as a result of their claims against them.
H. Plaintiff’s claims are time-barred pursuant to the express terms of the agreement between RVG/ZeekRewards and Defendants.

Zeek Rewards: Paul Burks Found Guilty on All 4 Counts!!

Posted by ASDUpdates on July 21, 2016No Comments

zeekrewards

Department of Justice
U.S. Attorney’s Office
Western District of North Carolina

FOR IMMEDIATE RELEASE
Thursday, July 21, 2016

Former ZeekRewards CEO Is Convicted Of Federal Charges For Operating $900 Million Internet Ponzi Scheme

CHARLOTTE, N.C. – U.S. Attorney Jill Westmoreland Rose announced that a federal jury sitting in Charlotte retuned a guilty verdict today against the former CEO of ZeekRewards for operating a $900 million Internet Ponzi scheme.  Following a three-week trial, the jury convicted Burks, 69, of Lexington, N.C., of wire and mail fraud conspiracy, wire and mail fraud, and tax fraud conspiracy.

Michael Rolin, 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 Rose in making today’s announcement.

“For nearly two years, Burks used deceit and dishonesty to engineer an extensive Ponzi scheme that amassed millions of dollars from thousands of victims, many in the Western District of North Carolina. This massive scam is one of the largest in breadth and scope ever prosecuted by this office.  I commend the United States Secret Service and the IRS agents who worked closely with our prosecutors to unravel Burk’s fraud and to obtain a conviction against the mastermind of a scheme that has left so many victims with substantial losses.  I want to remind the public to steer clear of ‘get rich’ schemes and to follow the old adage that if it looks too good to be true, it likely is,” said U.S. Attorney Rose.

“Today’s verdict is the result of a joint investigative effort and it is representative of the commitment the U.S. Secret Service and our partners have towards ensuring those intent on defrauding the citizens of North Carolina and the United States are held accountable,” said Special Agent in Charge Rolin.

According to filed court documents, court proceedings, evidence introduced at trial and witness testimony:

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”).   Burks and his conspirators induced more than 900,000 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. Burks and his conspirators, including Zeek’s former Chief Operating Officer Dawn Wright Olivares and her step-son and Zeek’s Senior Technology Officer Daniel C. Olivares, claimed at one point that investors would be guaranteed a 125% return on their investment.

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.  Burks and his conspirators did not keep books and records needed to calculate such daily figures.  Instead, Burks simply made up the daily “profit” numbers.  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, Burks and his conspirators used a number of ways to promote Zeek to current and potential investors.  For example, 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.  Burks also organized and attended “Red Carpet Events,” where victim investors came to hear details of the scheme in person.  During these events, Burks and his conspirators made false representations about the massive retail profits generated by Zeek.  They 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.

As the Ponzi scheme grew in size and scope it became unsustainable and it eventually began to unravel as the outstanding liability resulting from the bogus 125% return on investment continued to rise beyond control.  By August 2012, Burks and his conspirators fraudulently represented to the collective victims that their investments were worth nearly $3 billion, but had no accurate books and records to even determine how much cash on hand was available to pay such liability.  Contrary to representations made to victim investors, at that time, Burks and his conspirators had only $340 million available to pay out investors.  Over the course of the scheme, Burks diverted approximately $10.1 million to himself.

Burks also failed to file corporate tax returns or to make corporate tax payments for his companies, among other things.  In addition, 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.

Burks will remain free on bond.  A sentencing date for the defendant has not been set yet.  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.

Burks’ co-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 currently await sentencing.

In making today’s announcement, U.S. Attorney Rose 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 and Corey Ellis 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: http://www.justice.gov/usao/ncw/ncwvwa.html.

 

Zeek Rewards: Opening Statements in Burks Criminal Trial

Posted by ASDUpdates on July 6, 2016No Comments

Thanks to Julia Hudgins, a reporter from Lexington’s “The Dispatch”, we have some information (albeit NCWD sealbrief from Twitter) of the opening statements in the long-awaited trial of Paul Burks, alleged mastermind of RVG and Zeek Rewards.

Corey Ellis for prosecution: “This case is about the defendant telling lies in order to get money. It is as simple as that”

Of course, the defense paints Burks as wanting to help his fellow man, the problem is Burks helped himself to millions. I wonder when they will trot out his health issues, like they did with Andy Bowdoin in the ASD criminal trial. There are a lot of parallels between ASD and Zeek, even the top people in Zeek recognized it.

Noell Tin for the defense: “Paul Burks’ dream was that everyone wins…Everyone had things clearly explained and were not lied to”

The ones who “won” were the top promoters, not the regular folks; that’s how Ponzi scams work, after all. Even Burks didn’t understand how the scam worked, he has admitted as much in court filings.

Wow, this is gonna be a good trial, folks.

 

Zeek Rewards: Receiver Asks for Summary Judgment Against Class of “Net Winners”

Posted by ASDUpdates on July 3, 2016No Comments

Filed on the virtual eve of the Burks criminal trial which begins on July 5th, the Receiver has filed a ZeekMotion for Summary Judgment in Bell v Disner, et al, along with a supporting memorandum of Law and a group of Exhibits.  The Motion lists the “Named Defendants” like this:

The named defendants in this action are among the largest net winners of the ZeekRewards scheme, with winnings for each reaching as high as $1,875,000. The Court already has entered Judgments against several of these named defendants – who either failed to answer or cooperate in the action. See supra at n.1 and Doc. Nos. 76, 93, 95 and 119. Two defendants, Lori Jean Webber and P.A.W.S. Capital Management LLC, have reached a settlement with the Receiver.

 

 

The remaining named defendants are: Jerry Napier (Owosso, Michigan; a “net winner” of more than $1,745,000); Durant Brockett (Las Vegas, Nevada; a “net winner” of more than $1,720,000); Darren Miller (Coeur d’Alene, Idaho; a “net winner” of more than $1,635,000); Rhonda Gates (Nashville, Tennessee; a “net winner” of more than $1,425,000); T. Le Mont Silver Sr. (Orlando, Florida / Dominican Republic; a “net winner” of more than $773,000; Mr. Silver also used Global Internet Formula, Inc., which is, upon information and belief, incorporated in Florida, as a shell company through which he was a ZeekRewards “net winner” of more than $943,000); Karen Silver (T. Le Mont Silver’s wife; a “net winner” of more than $600,000); Aaron and Shara Andrews (Lake Worth, Florida; the Andrews used Innovation Marketing LLC, a Florida shell company to win more than $1,000,000) and David and Mary Kettner (Peoria, Arizona; “net winners” of more than $930,000 using the shell companies named Desert Oasis International Marketing, LLC and Kettner & Associates, LLC as nominal payees). See Exhibit C (Expert Report of David S. Turner) (hereinafter “Turner Report”)at Ex. F.

Default judgments have already been ordered against:

    • Michael Van Leeuwen – $1,617,444.99
    • Todd Disner – $2,079,757.88
    • David Sorrells – 1,197,241.12
    • Trudy Gilmond – $2,129,522.27

 

Also listed are the “net Winner Class” which was already certified by the Court.

On September 14, 2015, the Court appointed Kevin Edmundson as class counsel and subsequently the Court authorized the defendant class to engage an expert witness,
Berkeley Research Group (“BRG”), at the primary expense of the Receivership. See
Doc. Nos. 117, 125.

Their own expert witness, BRG concluded the following:

In its initial report dated January 18, 2016, BRG agreed that it was able to “replicate the exhibits in the Turner Report, within a reasonable margin of difference.” Then, in its “Phase II” report, BRG reached two conclusions (bolded in the report):
a) [B]ased upon a preliminary analysis, it does not appear that the magnitude
of profit from the auction business would materially impact the assessment of
whether or not the business, taken as a whole, operated as a Ponzi scheme.
b) As a result of our testing in Phase II, we have not found evidence that
definitively disproves that the business as a whole operated as a Ponzi scheme.

Addressing the Burks and his not so successful endeavors, the receiver had this to say:

Beginning at least as far back as 2000, Paul Burks operated a number of generally
unsuccessful multi-level marketing businesses through Rex Venture Group, LLC (and
related entities) with names such as Go-Go Hub, Free Store Club, My Bid Shack, New
Net Mail and Signed and Numbered International. See, e.g., Bell Aff. at Ex. 2, 3;
Douglas Dep. at pp. 50, 54-55, 71, 78; Exhibit D (Excerpt of Durant Brockett Deposition)
(hereinafter “Brockett Dep.”) at pp.18-19, 30. In 2010, RVG launched Zeekler.com, a
so-called “penny auction” website where items ranging from personal electronics to cash
were auctioned to bidders. See id.

 

However, bids bought through ZeekRewards rather than as retail bids were more valuable because purchasing those bids gave the affiliates “points” that supposedly entitled Affiliates to a portion of the profits from the business. This was the real (and only) reason Affiliates would pay $1 for auction bids they could buy for $.65. See Brockett Dep. at 77-78. As one Affiliate told Burks, “I know how the system works mathematically and you know I know. Whether you call the bids bids or hamburgers makes no difference. People are not joining Zeek to get hamburgers, orauction bids; they are joining Zeek to make money….” Bell Aff. at Ex. 6.

Also mentioned are the Wright-Olivares and how they knew what they were doing:

From the beginning, RVG intended to use “bids” in ZeekRewards not as a product but as a proxy for money deposited into the program. Dawn Wright-Olivares was very clear about the plan, telling Danny Olivares on January 21, 2011: “We’re just going to use bids as currency.” Bell Aff. at Ex. 9(a). On another occasion, Dawn Wright-Olivares referred to the compounding bids as “Monopoly money.” Bell Aff. at Ex. 9(b). Quickly, RVG’s focus changed from Zeekler to ZeekRewards, which was the source of nearly all the company’s income. Relative to ZeekRewards, little or no money was made in the Zeekler “penny auction” business.

Burks and the other Insiders were aware that the payouts to Affiliates would be funded by new participants rather than retail profits from the penny auctions. Dawn Wright-Olivares excitedly told Burks early in the scheme, “I think we can blow this OUT together- we’ve already attracted a great many big fishes.” Bell Aff. at Ex. 4.

As you go farther down the Memorandum, it details the “Compensation Plan”, the “Compounder” and how the money magically multiplied. And it seems everyone at the top knew all along that it was not exactly above board and could not really explain the voodoo behind the ROI and how it was calculated:

Burks deliberately evaded affiliate questions asking how the RPP was calculated. In a Skype chat with an affiliate, he said: “[a] proprietary system is used to determine the amount of profit sharing that is done each day. We do not divulge the details of how those numbers are determined. Our stated target of minimum of 1% weekdays (Mon-Thur) and .5% weekends (Fri-Sun) has always been met and exceeded. It is clearly not directly tied to the number of auctions in a particular day. It is the overall average that counts.” Bell Aff. at Ex. 9(d).

Behind the scenes, the Insiders were not even subtle about the fake earnings numbers. Often, the company simply used the previous week’s daily RPP percentages. For example, on one occasion, Danny Olivares sent a text message to multiple insiders stating, “Need a % for rpp when you can.” Dawn Wright-Olivares responded, “Do whatever was last Monday.” Bell Aff. at Ex. 40. Or, from Paul Burks: “Hey Dan. Sorry about last night. What percent did you use?” Danny Olivares: “Same as last Friday. 0.009.” Bell Aff. at Ex. 23.

There are a ton more revelations in this filing, too many to detail here. You can click here to look at the 139 page filing, including all of the Exhibits.