When the SEC busted the $600M Ponzi scheme Zeek Rewards, one of the myths busted was that the daily ROI Zeek paid out was based on ‘up to 50% of (the) daily net profits‘ the company brought in.
This was a key component of Zeek’s affiliate’s marketing efforts, with many investors brought into the scheme on the impression that what the ROI they were being paid daily was generated via legitimate sales to actual customers.
Of course those customers didn’t exist (or those that did weren’t buying anything with their own money), and after going over “hundreds of thousands” of Zeek Rewards documents, the SEC revealed that
In fact, the dividend bears no relation to the company’s net profits.
Instead, Burks unilaterally and arbitrarily determines the daily dividend rate so that it averages approximately 1.5% per day, giving investors the false impression that the business is profitable.
In essence, Paul Burks sat in his office and manually entered in a daily ROI percentage, that had nothing to do with sales revenue and everything to do with keeping his investors happy.
And by happy, we of course mean ensuring they were paid enough over 90 days to sustain their Ponzi point balances.
It is this disconnect from Zeek Rewards’ net profits (which was 98% affiliate funded), that resulted in Zeek Rewards paying out $162M and only receiving $160M in during its last month of operation (July 2012).
Given a few more months no doubt the money out would have eclipsed new investment money coming in and the scheme would have collapsed organically – most likely why Zeek’s CEO, Paul Burks, chose to settle with the SEC rather than deny he was running a blatant Ponzi scheme.
For those of us analysing Zeek Rewards for months prior to the SEC shutdown, it was evidently apparent that the daily ROI had nothing to do with the company’s revenues.
Time and time again it was observed that during time of outages (of both Zeek Rewards and their penny auction Zeekler), the daily ROI paid out to affiliates never wavered.
Logically, if Zeekler and Zeek Rewards were down for over 24 hours, no revenue (bid sales or otherwise) would enter the company. Yet miraculously, the daily ROI paid out to affiliates never missed a beat and remained relatively consistent (within a few decimal percentage points).
On other occasions it was observed that the daily ROI paid out to affiliates was literally double of what should have been paid, strongly indicating that manual-entry of the daily ROI percentage was occurring, as opposed to it being tied algorithmically into Zeek’s daily profits, as claimed by the company.
This was an ongoing observation, with any mention of it to Zeek Rewards management returning the familiar claim that how they generated the daily ROI was a “proprietary secret”.
As such when the SEC revealed Zeek’s daily ROI was just Paul Burks sitting in a room punching a slightly different percentage to pay affiliates each day (in an attempt to make the daily ROI percentage appear random), it came as no big surprise.
Perhaps also not so surprising comes the observation that JubiRev, touted by management as “the standard-bearer” of the MLM revenue-sharing niche in wake of the Zeek Rewards Ponzi aftermath, is now also experiencing abnormalities with the daily ROI it pays out affiliates. [Read the rest of this entry...]