Archives on February, 2017

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

BehindMLM: Brazil indicts twenty-two TelexFree scammers

Posted by ASDUpdates on February 6, 2017No Comments

Here is a link to an article on BehindMLM.  http://behindmlm.com/companies/telexfree/brazil-indicts-twenty-two-telexfree-scammers/

Mentioned in the indictments are Carlos Wanzeler and Carlos Costa (and their family members) for their roles in TelexFree Brazil.

Thanks Oz for another great article.

Zeek Rewards: Receiver’s Announcement for February 2

Posted by ASDUpdates on February 3, 2017No Comments

ANNOUNCEMENT FROM THE RECEIVER – February 2, 2017

As I previously announced, I continue to pursue Final Judgments requiring each member of the Net Winner Class of those who won at least $1000 in ZeekRewards to repay their net winnings to the Receivership for distribution to victims of the scheme. On January 27, 2017, United States District Judge Graham Mullen entered an Order on Process for Determining the Amount of Final Judgments Against Net Winner Class Members, which sets forth the process for determining the amount of the net winnings received by each member of the Net Winner Class. That amount plus prejudgment interest will then become the amount of the Final Judgment to be entered against the net winner. I intend to pursue collection of these judgments vigorously, and expect the ultimate amount collected, while uncertain, will be a substantial sum.

The Court’s Order, which describes the process in detail, may be viewed by following this link. The first step in the process – notifying each Net Winner of the amount of their net winnings – is expected to begin next week. After notification, each Net Winner is required to provide a response stating whether he or she accepts or disagrees with that amount within 60 days of the notification using a website Net Winnings Determination Response Portal. More information and links to the Response Portal will be sent to the Net Winner Class members in the notification email. If a Net Winner does not receive their notification by February 13, 2017 then he or she should email netwinningsresponse@zeeknetwinnerclass.com to receive instructions on how to obtain the notification.

Throughout the Receivership, the Receiver has expressed a willingness to consider voluntary final settlements with ZeekRewards’ Net Winners to efficiently resolve the claims against them. Hundreds of settlements have been negotiated with Net Winners and approved by the Court. If a Net Winner wants to discuss a settlement of the Receiver’s claims prior to Final Judgment being entered, please communicate with the Receiver at zeeksettlement@mcguirewoods.com.

Zeek: Order Issued on Final Judgement Process for “Net Winner Class”

Posted by ASDUpdates on February 1, 2017No Comments

In the case entitled “Bell v Disner, et al”, we have the Judge’s Order on a Motion to set up a process for determining Final Judgments against Zeek “Net Winners”. Here are a few highlights, there are 25 sections within the Order:

  • The amount of net winnings shall be calculated in the same manner as the Final Judgments entered against the named Net Winners in this action. “Specifically, Net Winnings shall be calculated as total cash paid-out by RVG less outside cash (excluding reinvested funds generated as part of the ZeekRewards Program) used to purchase VIP bids, retail bids, and subscriptions (VIP bids + Retail bids + Subscriptions)”
  • On or before January 31, 2017, the Receiver shall notify each Net Winner Class member of the amount of their ZeekRewards Net Winnings as reflected in the available books and records of the RVG Receivership.
  • The Receiver shall notify each member of the Net Winner Class of the amount of their Net Winnings by email to the email address provided by the net winner in connection with any account included in determining the amount of Net Winnings as well as any other email address that has been provided by the net winner following the appointment of the Receiver. The Receiver shall also post a link on the Receivership website that allows class members to receive notification of the amount of their Net Winnings. In the event that the notice cannot be delivered to any email address provided by the Net Winner, the Receiver shall send a letter to the last known physical address of the Net Winner informing the Net Winner of the proceedings and the availability of the amount of his or her Net Winnings on the Receivership website.
  • Class Counsel for the Net Winner Class shall (i) post a notice on the Net Winner Class website describing the process set forth herein and (ii) communicate to the Net Winner Class the availability from the Receiver of the Net Winnings amount for each class member.
  • On or before March 31, 2017 (or at least 60 days following the initial email transmittal of the Net Winning amounts to class members if the Receiver’s email notice occurs after January 31, 2017), each class member shall, if they choose to do so, respond to the calculation of their Net Winnings from the RVG records.
  • Final Judgment shall be entered against any Net Winner Class member who does not respond to the Receiver’s calculation of their Net Winnings on or before the response deadline in the amount of their Net Winnings as calculated by the Receiver plus 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.

I have uploaded the complete Order here.