UPDATE: Great article on this at the Behind MLM site: http://behindmlm.com/companies/funky-shark-fined-40000-by-montana-csi/
From KXLF.com, Montana news:
Bozeman man fined $40K for pyramid scheme
Posted: Dec 20, 2012 9:11 AM by KBZK Media Center
HELENA – A Bozeman man has been fined $40,000 for illegally selling investment opportunities.
Scott Wacker, owner of the penny-auction website FunkyShark.com, was issued the fine by Commissioner of Securities and Insurance Monica J. Lindeen, according to a news release. He also agreed to pay back more than $834,000 to investors to resolve a restraining order Lindeen’s office filed against him, stopping him from soliciting new investors or spending any of the investment money he had already raised.
Last September, Wacker began recruiting investors and by the end of October, he had raised over $1 million from investors across the world, according to the release.
Investigators determined that Funky Shark was a pyramid scheme.
In the two months it operated, Funky Shark paid nearly $378,000 in commissions to participants who recruited new members. Those commission payments left Funky Shark unable to repay all of its participants in full, so Wacker agreed to pay $270,000 out-of-pocket to make investors whole.
“Mr. Wacker stepped up to the plate and repaid his investors,” said Lindeen. “Often when we handle these types of cases, there’s simply no money left to repay participants. But for a number of reasons, this case is unique. Mr. Wacker didn’t understand what he was getting into, and he has expressed his commitment to setting things right.”
Previously, a TRO and Order to Show Cause was issued on October 31st. You can find a copy of the here. This cannot be good news to those who are steadily promoting penny auctions, and can also spell problems for those believing in a restart of Zeek Rewards.
Here is a summary of the Craddock Zeek Update call :
- Wants to get rid of misinformation; says Receiver is trying to “hurt us”;
- Says attorneys said they have never seen a receiver act this way;
- Craddock wants proof that Zeek was a Ponzi;
- Says Bell has to show what he has on them (Discovery) before they show him anything in the way of documents
- Craddock thinks the government is doing this (not the receiver)
- He mentions Troy Dooly and how he could care less about him, says Dooly is posting false and misleading info; Craddock looked up laws on cyber harassment in Florida; going to file a police report on Troy Dooly, says he has contacts in Florida Department of Law Enforcement; wants to get rid of the “distractions”
- Said he will also file on others that cause distraction; will go after them; they are causing a lot of confusion for the “good people”
- Craddock apologizes for the “misinformation” (his definition of misinformation is apparently anything that is contrary to what he tells people)
- He says as American citizens, they have a right to open a business and earn a living without government regulating them out of business (ASD people made the same argument, it didn’t work then, either)
- Craddock mentions Burks, and say he cannot speak to what Burks did, but he believes that Zeek was not a Ponzi; he wants to see the proof that it was
- Craddock says he has already given info to the SEC/Receiver; says Bell is wasting money, time and effort; says info is readily available and that Bell is puffing up legal cost, going to hold Bell accountable
- Not a fan of Bell and his intimidation, “the world according to Kenneth Bell”; people are misleading, says Craddock and crew are accused trying to keep people from cooperating with the receiver; again, mentions proof of Ponzi
- Says they are entitled to discovery; says Bell doesn’t realize he has to provide it
Q & A starts with Craddock answering the questions:
- Should we wait to see what the receiver does later? Craddock says it is up to you as to what you do. Said he bought in with $200, had 3 accounts, with $200 each; says he bought bids to give away; made $14oo, add his expenses in, he had $1200 in Zeek. Made $1400 only a $200 profit. Again, Craddock mentions that they need to show him what they have, says he doesn’t think they have a right to his or other people’s information
- Question about Money moved out of NXPay, can you explain? Craddock brings up releases of money as related by Ken Phillips. His attorneys told him to provide info on website. Says how they were shocked that the money went to the receiver; mentions filing about emergency hearing and Exhibits showing the email between NXPay and FCU lawyers; says the US Government is doing this; mentions going to news networks, to show what government is doing; wants to shine media spotlight on it, feels comfortable that Judge Mullen will render a just opinion
- When will pending money withdrawal be released? Says he doesn’t know; again mentions Bell doesn’t want to prove his case, says Bell is like a guy screaming during an argument; Craddock says that he may be biased in his view of Bell; says MLM experts have told him that Zeek was not a Ponzi, says Bell is intimidating affiliates; mentions “MLM experts” are maligning what FCU is doing.
- Will Zeek come back? Said there was once hope that Burks would fight; says Burks is protecting himself; if FCU had not stood up to protect everyone, Bell would be aggressively going though the affiliates; Bell believes that Zeek is an evil Ponzi; Craddock mentions cashiers checks again; said there are no victims; Bells arguments don’t make any sense; doesn’t see Zeek coming back and he is sticking to that position; said he is sure the call is being recorded
- When can we get into back office for 1099’s? Said Bell said access to back offices was cost prohibitive; Bell spent more money on subpoenas than it would cost to reopen back offices. Says Bell is withholding access so people cannot get info to prove Zeek was not illegal (?) Said all info Bell needs is in the database and he has access to them now
- If I requested a check from e-wallet, when can I get it? Says that is being worked on now; has to get e-wallets back, says NXPay did illegal transfer, that Bell has to pay outstanding liabilities; no timeline on when that will get done
- In Bell’s call, he said he will have to prove Ponzi during clawbacks? Says they are working to force his hand; says Bell has to prove Ponzi before he can do anything else; says Dooly thinks he is so smart; what they are doing is to make Bell prove Zeek was a Ponzi; says all affiliates are law abiding affiliates, says he doesn’t believe proof of Ponzi exists
- Will my husband go to prison? Craddock says to give the guy his number and talk to attorneys; says he is sorry that Bell has ratcheted things up, has not proved anything illegal was done
- We are the victims of the NC DOJ? Craddock repeats they will have to go through news media; also, awareness campaign, picketing’ said he talked to ABC reporter, will be on ABC, said a group from Washington will be there to talk about government abuses, and that people need to recognize that the government is out of hand
- What do you think about Dooly video? Said Troy talked like it was a criminal action, says it is civil. Again says they need to prove Ponzi; doesn’t think there will be a criminal action; Bell shouldn’t spend millions to go after Craddock; says the court will reprimand Bell (?)
- When will motions be heard? Said the opposition has 20 days to respond, sais some motion have had responses; says court date will come soon; said people may report it before he does
Craddock says that questions are being repeated. He brings up the motions to court to have Bell prove his case, and says Bell thinks of it as a personal attack against them. Craddock also said that Bell will drag things out only so he can bill for more hours and brings up Quilling and how he would be a watchdog over Bell. He also says court will see something is not right with Receivership, and that they need Quilling. He then brings up “misinformation” and how some people doubt FCU intentions.
After Craddock left, Greg Baker fielded some more questions and said he did “very well” with Zeek Rewards. He mentions the “other organization” (meaning the NY bunch) of Trudy Gilmond and Kellie King. Baker said he talked to them today and will have to wait and see how their motion turns out. But the Pro Hac Vice request of ira Sorkin has to be granted before the Court will view his motion, as far as I can tell. Baker then mentions due process and how they are forcing Bell and the SEC to make that happen.
Several questions were asked about going after Kenneth Bell, both criminally and civilly, for what he is doing. At least Baker knows Bell has immunity in this venture, plus he has done nothing wrong, as far as reasonable people can see. As soon as there is anything new on the docket, I will certainly post the information, regardless of in whose favor it is.
Hot off the docket, the SEC has filed for a 9 day extension of time to respond to :
MOTION TO INTERVENE AND FOR AN ORDER DISSOLVING THE APPOINTMENT OF A TEMPORARY RECEIVER and
MOTION TO RELEASE FROZEN THIRD-PARTY ASSETS
The new documents are on the Files website.
There is a new articlewritten by Nash Dunn on The-Dispatch website (http://www.the-dispatch.com/article/20121220/NEWS/312209978/1005?Title=Some-affiliates-fight-for-Zeek&tc=ar)
In the article he interviewed Cynthia Basinger, a Zeek affiliate still holding out hope that Zeek will return. According to this article, Ms. Basinger described herself as an “advertising executive” for a global penny auction program. What the SEC and others believe and are willing to go to court over is that Zeek/Zeekler was a Pyramid/Ponzi scheme. The Receiver is adamant about this and says he is willing to prove it.
I have had several email exchanges with Ms. Basinger, the founder of the “Zeek Loyal Affiliates” page on Facebook. I believe her to be intelligent and that she wants the facts on the situation. This comes from working in legal firms for many years. However, when facts are given some people resort to their program based information, which is often counterintuitive and in direct contradiction to filed documents. But, we will see how things go once the claw back lawsuits begin.
Although Paul Burks consented to the Judgement back in mid August and neither admitted or denied the allegations made by the SEC, he did pay a fine of $4 million. During the receiver’s call it was stated that Mr. Burks may have additional Zeek money and may also be subjected to civil claw back actions. I have to say that having followed schemes for a while, Zeek Rewards will be referred to very often when other programs are closed or litigated, as a precedence.
Ms. Basinger is quoted as saying “Zeek Rewards wasn’t a Ponzi, I think this whole thing is a big misunderstanding”. Those same words were said when ASD was closed in August of 2008; the phrase was “it was all a misunderstanding that we will clear up in a week or so”. that proved to be highly inaccurate and ASD never came back. There were a few ASD offshoots, though, like AdViewGlobal, BizAdSplash, AdGateWorld and a few other “ad” placement schemes. They all say that by placing an ad and selling to others, you can make more than you ever put in. The math simply doesn’t work, and indicates that it is a probable Ponzi scheme.
In the ASD case, Judge Rosemary Collyer presided over the Civil Forfeiture case and several other ASD related cases. Her Honor said in her Memorandum Opinion (Doc 35) following a 2 day Hearing:
ASD has failed to demonstrate that its assets are not proceeds derived from unlawful activity.
I have the distinct feeling that this will also be determined during the many future claw back lawsuits, that no one can prove that Zeek/Zeekler was a lawful enterprise. I also doubt that Judge Mullen will grant the requested Evidentiary hearing for the Fun Club group, but it he does it will likely not go in their favor. If anything, it may harm them, as it did for Andy Bowdoin and ASD. His “expert witnesses” tanked him pretty bad.
If anyone would like to look over the old ASD Civil Forfeiture case documents, they are still up on the Files website, located here https://sites.google.com/a/asdupdates.com/files-website/home/asd-related-cases
Here’s the link to the recorded call for those who missed it.
The most recent filing is a Notice of Appearance by Matthew E. Orso. The biography for him on McGuireWoods says:
Matt focuses his practice on government, regulatory and criminal investigations. He has experience litigating business torts and contractual disputes, and has argued motions and drafted trial and appellate court briefs in state and federal courts.
Notice the Criminal Investigations part? That may mean nothing or it may mean something important, sorta like when the DOJ added a Criminal Prosecutor into the ASD case during the Civil proceedings. I have added this document to the Files website and will keep you advise on further filings.
We have 44 pages of new filings from the Receiver, asking the Court to compel Craddock, the Kettners and Sorrell to provide the documents requested by Subpoena back in October. I have included parts of each filing, the full documents are on the Files website.
RECEIVER’S MOTION TO COMPEL PRODUCTION OF DOCUMENTS FROM RECENT MOVANTS
Further, the Court specifically authorized the Receiver to issue subpoenas for documents and testimony in connection with his investigation and effort to recover money and pursue claims for RVG. Id. at ¶ 7.
Pursuant to that authority, the Receiver issued subpoenas in late October 2012 seeking documents from a number of individuals / entities that his initial investigation identified as the largest net winners from the Zeek scheme, including David Sorrells, David Kettner and Mary Kettner. In addition, documents were sought from Robert Craddock and his Fun Club USA, Inc. entity that appeared to have relevant information concerning RVG.
Despite the Receiver’s willingness to reduce the scope of the subpoena and grant additional time to respond, none of these individuals has produced a single document. Now, with the deadline for the Receiver to respond to various motions filed by these individuals approaching, the Receiver has no choice but to ask the Court to compel these individuals – who have voluntarily put their involvement in ZeekRewards at issue before the Court – to compel them to promptly produce the documents requested in the attached Exhibit A.
A few paragraphs later, it continues with:
WHEREFORE, the Receiver respectfully requests that this Court order Robert Craddock, David Sorrells, David Kettner and Mary Kettner to produce or make available to the Receiver the documents requested in Exhibit A.
Further, the Receiver respectfully requests that the Court decide this motion on an expedited basis, perhaps in a short telephone hearing, so that the documents can be timely produced in light of the Movants’ pending motions.
The Exhibit A mentioned is a “Subpoena to Produce Documents or Objects or to Permit Inspection of Premises in a Civil Action”. A copy of this document is on the Files website.
“Motion is a Memorandum in Support of Receiver’s Motion”
Pursuant to those duties and specific authority granted by the Court, the Receiver issued subpoenas in late October 2012 to numerous individuals who were large net winners in the ZeekRewards scheme and others whom the Receiver believes have documents relevant to his investigation. These subpoenas primarily seek documents concerning the net winners’ Zeek communications and activities. Robert Craddock, David Sorrells, David Kettner and Mary Kettner (the “Movants”) – former winning Zeek affiliates – have failed to produce any of the documents requested by the Receiver despite multiple requests. 1 Therefore, the Receiver has filed a motion to compel production of a portion of the documents originally requested by the Receiver. See Exhibit A.
1 At this point, there is little benefit in detailing all the Receiver’s efforts to obtain the documents without court intervention. Counsel for the Receiver and the movants exchanged letters and had follow up phone conversations and email communications extending until over a month and a half after the subpoenas were issued. See, e.g., Exhibits B – C . Suffice it to say that it became clear after those efforts that full and prompt compliance with even the Receiver’s reduced request for documents was not forthcoming, so the Receiver filed the motion to compel.
Further, the Receiver’s requests are consistent with (1) the requirement in the Agreed Order that those connected to the Receivership Defendant preserve and turn over to the Receiver all paper and electronic information relating to the Receivership Defendant, including “books, records, documents, accounts and other instruments and papers,” Agreed Order, Doc. 4 at ¶8, and (2) the Receiver’s duty to determine the amount of recoverable assets for the benefit of the scheme’s victims.
The Receiver requested these records because he has obtained information indicating that large sums of Receivership Assets may have been transferred by net winners to other entities in order to hide or shelter those assets. Without this information, the Receiver will be unable to locate and marshal certain Receivership Assets.
A bit farther down the page, it says:
Pursuant to 28 U.S.C. § 754, the Receiver has filed the Court’s Orders appointing and reappointing the Receiver in all federal judicial districts, so there is personal jurisdiction in this district over each of the “net winner” Movants as persons who may have Receivership Assets.
It’s just as many of us had thought, if people say the original Subpoena are defective, they would be reissued, as Nathaniel Woods found out. As to the questions over jurisdiction, that was just addressed by all of the District filings, which granted jurisdiction to the Receiver.
The document concludes with:
In summary, the Receiver respectfully requests that this Court order Robert Craddock, David Sorrells, David Kettner and Mary Kettner to produce or make available to the Receiver the documents requested in Exhibit A. In light of the pending motions in which Movants put their Zeek activities at issue, for which a response is currently due on January 2, 2012, 4 the Receiver requests that the documents be produced on the dates requested, with some being produced by December 31, 2012 and the remaining documents being produced by January 15, 2013.
4 Two days is plainly not sufficient time to review the documents prior to responding to Movants’ motion, and the Receiver expects to seek a short extension of the response date. However, even if the response dates are extended into January, the Receiver should be provided the documents (which were requested almost two months ago) by December 31, 2012 or at least 10 days prior to the due date of any extended response.
The last two documents are Exhibit B and Exhibit C (ZeekDoc92-3 and ZeekDoc92-4) which are the Objection sent in by Craddock’s attorney Rodney Alexander and the response from the Receiver’s attorney Irving Brenner. Here is an excerpt from the Receiver’s response:
All documents are on the Files website.
Someone sent this to me today, it gives the appearance that Fun Club and Craddock are running low on money and want more donations for their cause. I sincerely hope that no one sends them another dime.
Let them spend their own freaking money to keep their Zeek Ponzi profits. They know that claw backs are coming and that frightens them, a lot.
What many of you might not know is that in the ASD/Ad Cash Generator case, there were similar groups that formed and said they could get back your money, provided you donated to them to pay for the costs incurred. Not one of these 3 or 4 “advocate groups” actually did what they said they would do. Their only accomplishment was taking more money from the victims. When we consider that some of the promoters took out between a few hundred thousand dollars to almost $1 million from Zeek, they can well afford to pay their own legal fees.
Those of us who followed that case from the 2008 closure up to the Criminal sentencing of Andy Bowdoin, we remember how the case and the parties behaved. Many of the same behaviors, claims and ineffective group leaders are being repeated here. And as with ASD, the top leaders recruited former members into yet more scams, for their own enrichment.
One has to wonder that if Robert Craddock is certain that there are “people listening in” to what he says, why would he keep making statements that are bordering on defamation. This goes well beyond his usual posturing, pontificating and purveying of petulant platitudes. Have a read for yourselves, to see how far this guy will go, and the end is not in sight as far as what Craddock will say.
He did an update yesterday but it was just a rehashing of an email from mid November. This one from today is much more interesting and gives us a look into the mind of Robert Craddock, his group and their mission to protect only themselves. (Note, I did not correct the spelling or change any words, this comes straight from the horse’s, well, you know)
December 18, 2012
Greetings Good People,
We just want to see an end to this ongoing extortion of this group by Kenneth Bell, as do you. Rodney and Michael or attorneys are crystal clear, no one should in anyway hand over any funds to Kenneth Bell, and he knows and has acknowledged he does not have the ability to win in a crawl back action. Read the filings http://www.zteambiz.net/filings.zip
Attention needs to be brought to the court about Kenneth Bell’s ongoing intimidation tactics against this group.
It’s obvious to me as I’m sure it is to others, that Kenneth Bell is using his position not to protect a victim(s), as he clearly knows there was none, until He was appointed as receiver, and took millions of checks and cashed them. But to use the US government as his personal agency, to steal and extort good honest business people out of their hard earned money. I know these are hard words, but people just look at the facts.
Because I and others have stood up to say this is not right, Kenneth Bell has sent me and others requests for information, knowing full well, he has access to all the information he is seeking with the database that once belonged to Rex Venture Group.
Kenneth Bell has full knowledge that my involvement was minor and the net gain as he would say was just $200.00 so for Kenneth Bell to waste money for an amount that is a small percentage of what he is spending is criminal in my opinion. How can the court allow someone being so reckless, with the truth and the funds he is in trusted with to continue?
Kenneth Bell in my opinion is unwilling to listen to any evidence of how we all worked to build and promote a legal penny auction, every breath coming from Kenneth mouth is saying we invested and we all know we bought bids. And last when he discusses the case he uses statements like big winners and losers. This is all design to pit people against each other, that jointly worked together to build a future for their families and friends.
- Has anyone truly looked at Kenneth Bell’s Motivation for not wanting to allow the truth to come out about this case? Could it be that it would financially impact him and the law firm he is with, if he was simply honest, with the court about the true facts involving Rex Venture Group (Zeek Rewards).
Kenneth only hope is to scare and intimidate the people in hopes they would simply, give him their money, knowing once he received the funds, none of it will go to anyone in the Zeek Affiliated family, don’t allow him to confuse and mislead you.
What Craddock seems to forget is that the receiver had absolutely NOTHING to do with the SEC actions that closed Zeek Rewards. I repeat, NOTHING. Kenneth Bell was merely appointed by the Court. Mr. Bell said on the call yesterday that he is prepared to prove that Zeek Rewards is and always was a Ponzi/Pyramid scheme during any clawback suit. I doubt that he will have any difficulty doing that in a Civil proceeding. All he needs is a preponderance of the evidence,that it is a Ponzi, more likely than not. (yes, I watch too many TV Judge shows)
We had much of the same posturing in the ASD case, where people claimed the opposition admitted in private they know they have no case and were trying to “save face”. It was not true then, it is not true now. Besides, it make no freaking sense; repeating it will not make it come true.