Tag Archives: Paul

Zeek Rewards: Paul Burks Sentenced to Over 14 Years

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: Receiver Asks For Victims to Write Sentencing Hearing Letters

 


ANNOUNCEMENT FROM THE RECEIVER – January 19, 2017

On February 13, 2013, Paul Burks will be sentenced in United States District Court for the Western District of North Carolina for his role in the ZeekRewards Ponzi and pyramid scheme. The sentencing hearing is open to the public and will be held at the Federal Courthouse at 401 W. Trade Street, Charlotte, NC.

Victims of these offenses are entitled to be heard at sentencing. If a victim would like to have a letter describing the impact that ZeekRewards had on them submitted to the Court please send an email to HearingLetter@zeekrewardsreceivership.com. In particular, the Court would like to hear about any of the below circumstances:

  • Becoming insolvent;
  • Filing for bankruptcy under the Bankruptcy Code;
  • Suffering substantial loss of a retirement, education, or other savings or investment fund;
  • Making substantial changes to his or her employment, such as postponing his or her retirement plans;
  • Making substantial changes to his or her living arrangements, such as relocating to a less expensive home; and
  • Suffering substantial harm to his or her ability to obtain credit.

I will be attending the hearings on behalf of all ZeekRewards victims and will present your letters to the Court.

Zeek Rewards: Paul Burks Sentencing Set For Mid-February

Judge Cogburn has issued the following Order:

THIS MATTER is before the court on the parties’ Joint Motion to Continue Sentencing (#119). Having considered the motion and reviewed the pleadings, the court enters the following Order. The court notes that the parties have requested that the court continue the sentencing hearing to or after January 30, 2017 and have reported that February 9th, 2017 is a known conflict for the counsels’ schedules.

ORDER
IT IS, THEREFORE, ORDERED that the parties’ Joint Motion to Continue Sentencing (#119) is GRANTED, and the Clerk of Court is instructed to place this matter on the next appropriate sentencing calendar.

The case docket sets a tentative date:

Sentencing set for 2/13/2017 09:30 AM in Courtroom, 401 W Trade St, Charlotte, NC 28202 before District Judge Max O. Cogburn Jr.

Zeek Rewards: Paul Burks Asks For Delay in Start of Criminal Trial

NOW COMES defendant Paul Burks, through counsel, and moves to continue this matter from the January trial term. In support of this motion, the defense shows the Court:

1. Assistant U. S. Attorney Jenny Sugar has been consulted and does not object to this motion.

2. The defense requires additional time to prepare. The government is still in the process of providing discovery to the defense. Discovery is being produced on a rolling basis because of the large amount of information involved , which includes several terabytes of data and millions of pages of documents.

3. A continuance is in the interest of justice. 18 U.S.C. §3161 (h) (7) (B) (ii).

WHEREFORE, the defense moves to continue this matter from the January term until a later date.
This the 12th day of January, 2015.

Say it isn’t so: Thompson-Burton Law Firm Announces Hiring Kevin Grimes, Former Zeek Compliance Guy

This is something that can truly be described as “What the F**K were you thinking?” Thompson-Burton, an MLM law firm, has hired Kevin Grimes, the former “Compliance Officer” of Zeek Rewards. As with other “compliance officers”, such as Robert Garner of ASD infamy, he promised one thing while something else was going on. Grimes and Zeek also sold these “Compliance” courses to Zeek affiliates; I am not sure with what they were complying but it doesn’t seem to have been being compliant as a legitimate business that wasn’t selling a HYIP ROI scam.

I have personally spoken several times with Kevin Thompson on the phone and he seems to me to be a straight-forward, level-headed kind of guy;  I like him. But I cannot say I would want to be an MLM attorney, as Thompson is, and even if I was (or played one on TV) I probably wouldn’t ask someone with a Federal Civil Suit alleging “Legal Malpractice” filed against him to join my imaginary law firm.

Apparently, Grimes’ former partnership (Grimes and Reese) decided to distance themselves after the Lipstickpigcivil suit was filed and the firm became R&R Law Group. Most information is sketchy about this, the name changed rather abruptly without much in the way of fanfare. Honestly, I don’t know any more about Mr. Grimes or his legal skills, knowledge of “compliance’ issues or his ability to spot a pig wearing lipstick (right) beyond the information contained within federal court documents and what I have read on the interwebs.

 

A part of the Thompson Burton announcement today says this:

Speaking of the compliance training….yes, it landed him in hot water. And he’s dealing with it. For the uninitiated, Kevin Grimes was sued by the Receiver in Zeek Rewards for, among other reasons, improperly providing Zeek Rewards with compliance training. The gist of the complaint: KG allegedly improperly sold compliance training to a company that he should’ve known was unfixable (Zeek Rewards paid for his compliance training). It’s one of the reasons why he’s no longer with Grimes & Reese, now R&R Law Group. With that being said, he’s gone close to 29 years without a bar complaint filed by a disgruntled client (it happens to the best of us, eventually). But Kevin…he’s got a great record and I know with 100% certainty that Kevin’s skill is unmatched by anybody else in the country. So regarding those challenges he’s facing, he’s going to make his positions clear soon. It’s a shame that the public doesn’t know him better, but that’ll change over time.

Maybe Mr. Thompson is right; maybe Grimes was caught up in a lost cause and started the compliance program way too late. Or maybe, it’s exactly as it appears to most of us, that he might have been partly in on things at RVG and profited from it. Time and the court case will tell us which it is.

Yes, Zeek was “unfixable”; even Stevie Wonder could have seen that.

Zeek Rewards: Criminal Case, 14-CR-208, USA v. Burks

There have been some additions to the docket in USA v Burks recently and they have been added to the Files website and these are:

  • Motion to Continue – The Defense needs more time to prepare
  • ORDER – Granting Motion to continue; case is moved to the January 2015 Calendar
  • Motion to Appoint Special Master – appoint Special Master with powers of federal Receiver
  • ORDER Appointing Special Master –
    • IT IS, THEREFORE, ORDERED that the government’s Motion to Appoint Special Master (#12) is GRANTED, and Kenneth D. Bell is appointed as Special Master in accordance with 18 U.S.C. §§ 1956(b)(4) and 3664(d)(6), and shall accomplish the following tasks: (1) identify victims; (2) provide notification to such victims pursuant to 18 U.S.C. §§ 3771(b)(1) and 3771(c)(1); (3) fashion a proposed restitution order; and (4) receive restitution payments for appropriate distribution to victims in accordance with the court’s restitution order.

 

Zeek Rewards: Judge Mullen Orders TRO Against Preferred Merchants Solutions, LLC

Judge Mullen had this to say regarding the Motion for TRO to protect monies transferred “minutes” after the Asset Freeze was put into place.

 

The Receiver has satisfied the requirements of Federal Rule of Civil Procedure 65(b) and established that an order is appropriate in this case to avoid irreparable injury, loss, or damage to the Receivership Estate of Rex Venture Group, LLC, including the further waste and dissipation of Receivership Property. Notably, the Court finds that the large amount of money at stake, the liquidity of the funds which could be transferred overseas or hidden, and Preferred Merchants’ and Meyer’s apparent pattern of misconduct present a likelihood of irreparable harm and necessitate this order being entered without notice.

IT IS, THEREFORE, ORDERED, ADJUDGED, AND DECREED that:

1. This Order is entered at 11 a.m. on October 31, 2014.
2. The Receiver’s Motion for Temporary Restraining Order is GRANTED;
3. Preferred Merchants Solutions, LLC (“Preferred Merchants”) and Jaymes Meyer (“Meyer”) are directed to immediately deposit with the Receivership $4,854,010.40, which is the amount they transferred from RVG’s trust account after the SEC notified them of the asset freeze and requested that they freeze all RVG accounts and assets;
4. The Receiver is directed to deposit and maintain these funds in a segregated account;
5. This injunction shall expire no later than fourteen (14) days from the entry of this Order or sooner upon further order of the Court.
6. The Court will conduct a hearing on this matter on Wednesday, November 12, 2014 at 2 p.m. in Courtroom 3 at the Charles R. Jonas Federal Building, 401 W. Trade Street, Charlotte, NC 28202. The Receiver is directed to use all reasonable efforts to notify Meyer and Preferred Merchants of the date, time, and location of the hearing.

Zeek Rewards: US Attorney Press Release, Paul Burks Indicted!!!

ZeekRewards President Indicted On Federal

Charges For Operating $850 Million Internet

Ponzi Scheme

FOR IMMEDIATE RELEASE
October 24, 2014
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.

Zeek Rewards: Announcement from Receiver, Paul Burks Indicted!!!

PaulBurksToday, a federal grand jury returned a criminal indictment against Paul Burks. The indictment alleges four felony counts, including conspiracy to commit wire and mail fraud, wire fraud, mail fraud, and conspiracy to commit tax fraud.

The press release is available here.

The bill of indictment is available here.

Zeek Rewards: Judge Mullen Orders Interim Distribution

ORDER APPROVING MOTION TO AUTHORIZE
FIRST INTERIM DISTRIBUTION, ESTABLISH RECORD DATES
AND SET FIRST INTERIM DISTRIBUTION DATE

This matter is before the Court upon the Receiver’s Motion for an Order Approving his motion to (i) authorize an interim distribution on account of allowed class 3 claims, (ii) establish a record date for eligibility to receive the First Interim Distribution on the First Interim Distribution Date, (iii) set the First Interim Distribution Date, and (iv) establish Subsequent Record Dates and Subsequent Distribution Dates for making the First Interim Distribution to Class 3 Claimants whose claims are allowed prior to a Subsequent Record Date (the “Motion”).1 Non-party Plastic Cash International, LLC (“PCI”) filed a response objecting to the Receiver’s motion.

1 Capitalized terms used, but not defined herein, shall have the meanings ascribed them in the Motion.

This Court, having reviewed and considered the Motion, and upon all of the proceedings had before this Court, and after due deliberation and sufficient cause having been shown, the Court hereby GRANTS the Motion in all respects. The Court specifically notes that this Order does not purport to determine the validity or priority of PCI’s claim. The PCI Claim will be addressed through the Claim Determination process and separate litigation.

IT IS HEREBY FOUND, DETERMINED, ORDERED, ADJUDGED, AND DECREED, AS FOLLOWS:
1. The notice of the Motion sent via electronic mail to all entities that fully submitted claims on the Claims Portal via the electronic mail address provided in the Claim submission process by such entity constitutes good and sufficient notice of the Motion and all the relief sought therein.

2. The Receiver is authorized, but not directed, to make the First Interim Distribution directly to the Claimants who hold Allowed Claims in Class 3 pursuant to the Distribution Plan.

3. The First Interim Distribution Record Date shall be August 15, 2014.

4. The First Interim Distribution Date shall be September 30, 2014.

5. The first Subsequent Record Date for the First Interim Distribution shall be December 31, 2014.

6. Additional Subsequent Record Dates for the First Interim Distribution shall occur on each of the last business days of each calendar quarter subsequent to the first Subsequent Record Date.

7. The first Subsequent Distribution Date for the First Interim Distribution shall be January 30, 2015.

8. Additional Subsequent Distribution Dates for the First Interim Distribution shall occur on the last business day of the calendar month that directly follows a Subsequent Record Date.

9. The methodology for determining the amount of reserves to be held by the Receiver for the holders of Class 3 Claims that are not allowed by the First Distribution Record Date, but have not been disallowed, is proper. The amount to be reserved by the Receiver for the holders of Class 3 Claims that are not allowed as of the First Distribution Record Date shall be determined and held in the manner set forth in the Motion.

10. The Receiver shall establish a reserve on account of Class 3 Claims that are not allowed as of the First Distribution Record Date in the aggregate amount of the First Interim Distribution Amount that would be necessary to pay such Class 3 Claimant based on the amount that such Class 3 Claimant asserted in the Claim Process, after applying Rising Tide to the First Interim Distribution Amount in accordance with the Distribution Plan.

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