Zeek Rewards affiliates can now claim Ponzi losses
I never told anyone to invest more money than they could afford, I didn’t tell them to do that. Never.
It’s their fault. Not mine. Don’t blame me.
– Paul Burks, CEO of Zeek Rewards
Amidst several ongoing challenges by Zeek Rewards affiliates who profited from the massive $600M Ponzi scheme, the court-appointed Receivership went live today with the long awaited affiliate claim form.
Affiliates who suffered losses as a result of participation in the Zeek Rewards Ponzi scheme, which if the SEC did not shut down was poised to collapse within months, have until September 5, 2013 to file their claims.
Failure to timely submit a Claim Form, submitting an incomplete Claim Form or submitting a Claim Form without supporting documentation may result in the complete disallowance of your Claim.
The Claim submitted on the Claim Form remains subject to a determination of the allowable amount, if any, of the asserted Claim. The requests for information on this Claim Form do not constitute and shall not be considered the basis for the determination of any Claim or distribution.
Note that, as previously discussed, Zeek Rewards affiliates will not be compensated on their Ponzi points balances.
Regardless of what an affiliate’s upline might have told them, the entire points system was simply monopoly money that didn’t exist.
Money invested by new Zeek Rewards affiliates was simply passed up and paid out to previous investors, on the assumption that new investors would continue to invest in the scheme to pay out those who invested before them.
The amount that will be paid out to affiliates is still uncertain, with the Receiver now looking to get an idea of how much was invested (and likely whether or not it matches Zeek Rewards’ haphazardly kept financials.
In a recently filed “Application for fees and expenses” by the Receiver, he writes
The Receiver continues to investigate the financial information of the Receivership Defendant and to marshal, identify, and secure potential assets of the Receivership Estate.
FTI Consulting (“FTI”) completed the preliminary validation of the information in the RVG databases. FTI also worked to reconcile the financial instruments the Receivership Estate deposited against the RVG databases in order to determine the total amount invested in ZeekRewards and the net winners and losers.
The Receiver continues to work with various financial institutions to obtain the necessary information for the analysis and reconstruction of the Receivership Defendant’s records and a determination of the funds of the Receivership Estate.
In addition, the Receiver continues to investigate and analyze accounts of, and payments and transfers to and from, key insiders, thirdparty advisors, and companies affiliated with RVG and/or its principals and key insiders.
Part of this process involves the investigation of transfers made to RVG accounts through various payment processors and e-wallets.
Additional or supplemental document requests, subpoenas for documents and/or testimony, witness interviews, and other means of discovery will be used to determine whether there are any additional outstanding assets that can be seized for the Receivership Estate.
Finally, the Receiver is working to locate additional Receivership Assets that were not previously seized by the United States Secret Service (“USSS”).
These potential assets are primarily held by institutions that previously turned over assets to the USSS, but which may not have released all Receivership Assets in their possession.
To give you an idea of just how hard those affiliates who profited in the scheme are fighting to keep the money they received from new investors,
The Receiver now maintains four interest-bearing bank accounts on behalf of the Receivership Estate.
One account has been used to deposit Affiliate-Investor payments (the “Affiliate Account”). Another account is reserved for the funds seized from financial institutions and payment processors by the United States Secret Service (“USSS”) on behalf of the Receivership Estate (the “Seized Asset Account”).
A third account is used as an operating account with funds primarily held or controlled by the Receivership Defendant pre-Initial Receiver Order (the “Pre-Filing Account”).
On March 22, 2013, the Receiver opened a fourth interest-bearing account on behalf of the Receivership Estate, which is being used to deposit the proceeds of settlements with net winners (the “Settlement Account”).
As of March 31, 2013, the Receivership Estate held approximately $85.1 million in the Affiliate Account, approximately $221.4 million in the Seized Asset Account, approximately $2.2 million in the Pre-Filing Account, and approximately $36,000 in the Settlement Account.
The Receivership has calculated that the top earners in Zeek Rewards walked away with approximately $291.6 million USD.
The Receiver currently estimates that net winner Affiliate-Investors received approximately $291.6 million in fraudulent transfers from the Receivership Defendant.
The Receiver Team intends to recoup as much of this money as possible for the Receivership Estate, but it is unable to estimate the portion of this amount that may be reduced to judgment and eventually collected.
The Receiver’s litigation team continues to evaluate the most efficient and cost-effective method for pursuing fraudulent transfer claims.
A deadline has been set for “net winners” in Zeek Rewards to settle with the Receivership by May 31st, 2013. In the months that follow, it is expected that the Receiver will ramp up efforts to secure funds from Zeek Rewards affiliates who profited from the scheme and refused to hand over their Ponzi earnings.
The Receiver’s clawback litigation is likely to be a combination of individual actions, group actions, defendant class actions, and other alternative dispute resolutions as approved by the Court.
Such proceedings will establish the key findings applicable to most, if not all, recipients of fraudulently transferred funds (findings such as the existence of a Ponzi and/or pyramid scheme).
They will also separately provide a forum for the efficient determination of the proper amount of each net winner’s repayment obligation.
This follows months of delays and stuffing around by Zeek Rewards’ top earners, not happy about having to return their earnings to those investors who lost money:
During the first quarter, the Receiver opposed the efforts by some of the largest net winners to have an “Examiner” appointed to represent all Affiliate-Investors.
As the Court is aware, on February 7, 2013, the Court denied the motion and declined to appoint an “Examiner.”
In addition, the Receiver filed a response in opposition to the Motion to Intervene and for an Order Dissolving the Appointment of a Temporary Receiver filed by two large net winners.
Furthermore, the Receiver filed a response in opposition to the Motion for an Order Requiring Release of Frozen Third-Party Assets, filed by the same net winners who had previously filed the “Examiner” motion.
These efforts by a small group of non-party net winners have continued to delay the Receiver’s efforts and increase the costs in marshaling the Receivership Assets for distribution to victims of the Scheme.
Finally, the Receiver has been engaged in a number of discovery disputes with various net winner Affiliate-Investors.
These disputes also delay the Receiver and increase the costs to the Receivership Estate.
Many of the top earners in Zeek Rewards have gone on to invest in reload “revenue-sharing” Ponzi schemes similar to Zeek, and are now actively recruiting new investors into them.
One such marketing spiel used is the promise that if a company or affiliate is not based in the US, that authorities there cannot take action against similar revenue sharing Ponzi schemes to Zeek.
AddWallet, who replaced Zeek Rewards’ penny auction bids with “advertising units” and runs a near identical compensation plan, even went so far as to hold an affiliate conference earlier this year advising
They (Zeek Rewards) were incorporated in the southern United States, they were incorporated in North Carolina and they were sitting ducks.
Y’know, once you have so much advertising people know you, you become global and they became a target.
So we saw all the way what happened here. So we incorporated in Ecuador, spoke to the lawyers in Ecuador. They said “this business model is fine”. So by doing that, we are offshore.
The Ecuadorian government loves us, welcomes us. We feel that, besides having our server in Tampa (Florida) right now, getting it, the servers are already in Ecuador, flipping the switch to speak, that’s the only thing left to do.
Shattering this increasingly implemented “offshore safeguard” to ease concerns amongst affiliate investors in MLM revenue-sharing schemes, the Zeek Rewards Receiver writes
The group of net winners identified to date includes numerous individuals residing outside of the United States, with the largest foreign winners living mainly in countries with established legal systems which are signatories to the Hague Convention for international service of process.
While the pursuit of “clawback” claims against these foreign net winners raises various challenges, the Receiver intends to include these winners as parties to domestic litigation based on their contacts with the ZeekRewards Program in the United States so long as doing so will not delay the litigation against domestic winners.
The Receiver will also pursue costeffective foreign litigation to establish the repayment obligation and/or to collect judgments where necessary and appropriate.
In the case of AddWallet, Ecuador is a signatory to the Hague Convention. It seems the idea that being based offshore permits an MLM company to run and market a Ponzi scheme in the US perhaps isn’t as bulletproof as these companies believe.
Zeek’s CEO Paul Burks (right) is also causing headaches for the Receiver, attempting to hamper the Receiver’s ongoing investigations into the company:
Paul Burks has asserted attorney-client privilege and work product protection over communications and electronic documents in the Receiver’s possession and/or control on the grounds of a joint representation by counsel of Mr. Burks and the Receivership Defendant.
As previously reported, the Receiver Team has delayed a significant portion of its document review until the privilege dispute has been resolved in order to save costs.
As I understand it, Burks is objecting to the Receiver using certain (incriminating?) information they uncover, because he and Zeek Rewards briefly shared the same legal representation.
The Receivership are having none of it though, having ‘waived RVG’s attorney-client privilege and work product protection for RVG’s pre-receivership records’ and intending ‘to waive such privileged as to corporate communications over which the Court determines Burks has no right to object‘.
One can only wonder what Burks is trying to stop the Receivership from finding and using. Meanwhile Burks’ objections are currently legally unresolved.
Most welcome is the news that the Receivership is considering going after ‘employees, contractors, or other RVG agents who played an active role in furthering the Scheme’ and
third-party advisors of the Receivership Defendant, vendors, or other service providers that knew or should have known of the inappropriate nature of RVG’s activities and yet facilitated those activities for their own gain.
MLM Attorneys, Executive Board members of the DSA, merchants and vendors supplying services to Zeek Rewards, these people knew exactly what was going on and should have definitely known better.
Many of those involved have since kept a low-profile in the industry with others appearing to have disappeared completely. Perhaps the Receiver taking action against them will be the wakeup call so many in the MLM industry appear to need.
If you professionally sign off on, put your name to, allow a company and its affiliates to market on your name or openly promote these revenue-sharing Ponzi schemes yourself, you are accountable when they inevitably blow up.
Even if you weren’t actively investing in the scheme yourself.
Those affiliates thinking of or who are currently investing in and marketing the various revenue sharing Ponzi reload scams currently doing the rounds would do well to pause and take stock.
Carefully read and re-read the above to absorb it in. You now have the advantageous position of watching the future unfold right infront of you, and we haven’t even gotten to the SEC launching criminal proceedings against Zeek Rewards and those involved yet.
JubiRev, AddWallet, Bidify, Blue Bird Bids, Offer Hubb to name just a few…
How do you think the all these affiliate-funded revenue-sharing companies that have sprung up and use Ponzi points are going to end?
Good luck to those that file claims against Zeek Rewards with the Receivership. New to the Ponzi scheme investment world or not, I trust you’ve learnt something from all of this.
Super Article.
Thank you.
The top half of the pyramid made the lions share, no doubt:
Settlements as reported here in other comments are slim to none to date:
So again, my position remains that not “all net-winners” will face legal action. The question is what is the threshold? For those who were net-winners this is a game theory on probability, risk & reward.
Hoss disagrees with me, but there simply is so much for the Receiver to go after including foreign accounts and legal battles against the top winners, it seems the theory of diminishing returns is at play for the net-winners at the bottom of the winners pyramid.
http://www.zeekrewardsreceivership.com/pdf/Final%20Liquidation%20Plan.pdf
“likely to be a combination of individual actions, group actions, defendant class actions, and other alternative dispute resolutions as approved by the Court”
Kite flying or is the receiver signalling a much tougher approach to clawbacks ??
Have you received an e-mail from the Receiver, i.e. were you among the 16,000 net winners?
In case you did, you’re obviously on a “to do list”, e.g. under the point “upcoming clawback claims against net winners that will have to be tested in court”.
WHERE at that list the point is positioned will tell you how serious he is about it. It’s pretty serious if the clawback point is following immediately after “get up at 6.30 in the morning, shave, eat breakfast, drive to the office, do someting with the upcoming clawback claims”. 🙂
The Average Cost Per Judgement and the incremental cost of adding additional persons to the Class Action will be exceptionally low.
The Law of Diminishing Returns applies everywhere, all the time, top to bottom, but the law will have little practical effect as Bell acquires hundreds of thousands of judgments via Class Action.
The practical application of diminishing returns will come when someone attempts to enforce and collect on the judgments Bell will so easily obtain….and this is where the steep slope of diminishing returns really exists…not in acquiring the judgments themselves.
For this reason, I contend that Bell will easily and cheaply obtain the judgments and then auction them off to the highest bidder…letting a commercial debt collector deal with the Law of Diminishing Returns.
To the judgment debtor it makes no difference if it is Bell pursuing collection or if ABC Debt Aquisition Company of America is doing it.
Obtaining Judgments VS. Collecting on Judgments. Different dynamics due to Class Action considerations.
He won’t get any individual judgments that way, only the general judgment about whether or not Zeek was a Ponzi / pyramid hybrid, whether or not the transactions were fraudulent when Zeek paid MORE THAN their principal investments to net winners.
He will still need to handle each and every individual claim on an individual basis, specifying the amounts involved in each individual case.
You seems to have the idea that he won’t need to handle the claims individually, that he can get a judgment against all net winners as a group and start collecting the money?
See footnote 6 at bottom of Page 17 of the receiver’s May 15 application for expenses and fees:
“As of the filing date of this Fee Application, the Receiver has agreed to approximately $530,000 in settlements with third parties.”
Footnote 6 points to Paragraph 4 of Section IV: “RECEIPTS AND DISBURSEMENTS.”
From Paragraph 4: “Received funds in the amount of $36,000 in income from third-party litigation settlements.”
Based on this info, it seems likely to me that the receiver already has negotiated hundreds of thousands of dollars in settlements and has officially posted $36,000 in receipts from those settlements — and that other sums will be posted in the next quarterly report after they are received.
I’d expect that number to grow.
On a side note, the footnotes — despite their brevity — sometimes provide clues to the bigger picture. In the ASD case, I wrote about a footnote — and it proved to be a footnote that caused a cheerleader more or less to have a public meltdown because the footnote married a reload scam to the alleged racketeering scheme of ASD. Among his arguments was that footnotes are meaningless.
The footnote was authored by plaintiffs’ lawyers suing ASD’s Andy Bowdoin under the federal RICO statute while ASD and Bowdoin were in the process of rolling out a reload scam known as AdViewGlobal:
“[AdViewGlobal] is the next iteration of the Ponzi scheme auto-surf programs, which staffed with former ASD executives and Bowdoin disciples . . .”
As is the case in the Zeek universe, some of the AdViewGlobal hucksters pretended the ASD Ponzi case never happened and pushed one reload scam after another.
PPBlog
You do not understand the difference between a finding, a ruling and a judgment. A judge 1.) FINDS that the facts (evidence) supports a 2.) RULING of a pyramid scheme.
This is not a “general judgment” as you term it. ITS a RULING and it is specific. Of course the judge uses his personal judgment to rule, but this is not the same as 3.) Bell obtaining a JUDGMENT against a net winner. NO.
Understand the differnce and maybe you can understand what we have been talking about for the last six weeks.
No this is your idea not mine, and it tangles all the parts together into a muddy mess.
1. Bell will first prove, and the Judge will RULE that Zeek was a pyramid.
2. Bell will then ask the Judge to approve a Defendant Class of net winners (objections to formation of the Class will be heard.) Once that Class is formed Bell will
3. Demand from each class member a specific dollar amount. Each Class member will be able to contest the dollar amount but he will not be able to contest any longer that he is IN the class and that he owes money (it is only a matter of how much at this point….not whether) Most will not contest the amount or it will be resolved in the arbitration/reconciliation process Bell envisions, but eventually the
4.Judge will RULE that each non resolved net winner owes a specific dollar amount and
5. A money JUDGEMENT will be entered against the individual Class Member.
The trouble is that there is no way to distribute IOUs to creditors of the estate.
@Hoss
My post was about the COSTS. An inexpensive Class Action will have to be about general findings rather than individual ones, e.g. whether or not Zeek was a Ponzi / pyramid hybrid, and about fraudulent transactions in general.
It won’t be inexpensive anymore if they will have to handle each and every individual claim in court. The individual net winners can have valid arguments about the amounts involved, and about their own involvments (e.g. about retail bids sold).
You won’t find many of them, but a net winner can hypothetically have made his net winnings from the sale of retail bids to external customers (the 20% commission), while he had a loss on his own investment in the Ponzi scheme. You can meet other types of defense systems too.
Defense arguments will typically be individual arguments if the claims are made specific against each individual investor. That’s not inexpensive to handle in court.
I’d agree this could be trouble if no actual cash comes in from settlements. But I suspect that actual cash will come in, as opposed to IOUs.
Meanwhile, the receiver is not necessarily limited to one distribution to defrauded creditors. For example, he could authorize an initial distribution and, later, as more money comes in, authorize a second distribution.
Among the receiverships being operated in that fashion is the Cook/Kiley et al Ponzi receivership in Minnesota.
And although the AdSurfDaily action did not include a receivership because the Ponzi case was brought as a forfeiture in rem and not a complaint in equity, the Feds appointed a remissions administrator to handle claims. A second round of remissions followed for individuals who did not get a disbursement in the first round because ASD’s records were so screwed up.
I’m thinking that some of the Zeekers may settle with the receiver for no other reason than to create a defense in case their downlines (or other attorneys) come after them.
It’ll be the “I already paid the receiver” defense.
Of course — and as you suggest — some of the folks either won’t settle at all or perhaps will run to the bankruptcy court either in bids to discharge their IOUs or to get a stay.
At least three ASD members had a history of playing games with the bankruptcy court, including one who was soliciting funds in a BIZARRE bid to make an end-run around the remissions administrator.
Wanna know how strange the ASD case got, Hoss? It got so strange that the end-runner referenced above hatched an unsucccessful scheme to get his own attorney appointed receiver.
AFTER that, the guy got arrested in Arizona for trying to intimidate the operator of a SECOND scheme — and, for good measure, he ended up being named a defendant in a RICO action.
Some of the Zeekers are trying similar end-runs.
The amazing thing is that the MLM industry largely stays silent about these preposterous schemes and the litigation nightmares they invite.
Look at the JubiMax/GoFunPlaces situation. It’s basically two MLMs trying to sue each other back to the Stone Age while advancing an ROI scheme that isn’t much different than Zeek or ASD.
T. LeMont has been in at least three of the four schemes — and, if he was in ASD, it will be a perfect four-for-four.
PPBlog
If memory serves, ASD has 3 distributions, while Madoff trustee did at least two (so far).
So there’s no need to distribute IOUs. Once claim has been established and the receiver knows what is the total “liability” the assets can be paid out later.
EVERYTHING in a court document is meaningful.
Did you know that the commonly held idea, that “if you’re born in the US, even if your parents are not legally here, you’re still a US citizen”, was NEVER STATED in ANY court case, or in ANY law passed by congress? (And it’s NOT covered by the emancipation amendment either). It’s mentioned in passing, i.e. “dicta”, and NEVER CHALLENGED, even by the INS.
As this is not an immigration debate, I’ll stop right here, but EVERYTHING in a court document is important.
Please do not take this IOU thing literally. Of course Bell is not going to issue IOUs to the creditors. The point is that if the Receiver takes a promise to pay (generically an IOU) or agrees to a payment plan then he does not have immediately distributable cash. He has a receivable.
As PPBlog points out it is possible that people will make good on their promises to pay, in which case Receiver should have subsequent disbursements. Bell could also sell the receivables for cash and distribute rather than have everyone wait around for years while money dribbles in.
I never said the procedure was inexpensive. The general flow that Bell is contemplating is just the least expensive.
The reconciliation of objections that people raise over Bell’s calculations should create a real circus for awhile, but if the forensic accountants have done a good job and the data is pretty good then vast numbers of affiliates will simply accept the reciever’s number as “close enough” and move on. They will not expend the time, energy and money it would require to fight over a few nominal bucks.
If there is a gross mistake then it will be rectified way before a hearing is ever required. That is why the information is being submitted on the internet. If both sides numbers are pretty close then why would would Bell or the counter party spend the time and money arguing over it. They wouldn’t and they won’t.
The position of the parties or the variance in amounts would have to be quite large for either party to ever go to court over it. That is why there will be a reconciliation process and some facility for mediation or arbitration.
Most people will simply acquiesce to Bell’s calculations if they are reasonably close. That in itself will eliminate the need for many thousands of billable hours.
Are you talking about the approved claims procedure here? I thought that was designed for different types of CREDITORS (net losers, other creditors).
I didn’t know he had a similar procedure for DEBTORS (e.g. net winners).
In a worst case scenario, he will have 16,000 people asking for full documentation for his claims, e.g. transcripts from the backoffice and eWallet transactions, studying each and every detail with magnifying glasses.
“That is why the information is being submitted on the internet.” I apologize for this statement. It was a brain fade mistake. The only way I know that a net winner can find out what Bell has calculated for an individual is for them to contact them.
Maybe you are right, but in interest of the administration of the estate and justice, I do not believe the Judge will allow that to happen.
It seems far more likely that FTI (the Forensic Accountant company who is recognized by everyone in the industry) will provide expert testimony or a Declaration recounting the method of data extraction and the reliability of account reconstructions. Who could refute their assertions? Robert Craddock?
It would take another forensic accounting team of expert(s)with no first hand knowledge of the condition of the records to critique the methods that FTI used and then a net winner’s attorney would need to persuade the Judge that the FTI reconstructed data is so unreliable it can not be used as proof. This is not likely to happen.
Bell will almost certainly point out to the Judge that his data is independently derived using the best technology available with the assistance of ooperative data storage companies and that his information is accurate, consistent, and inherently more reliable and less biased than anything a net winner can assert.
The Judge could, with just cause, rule that Bell has met his burden of proof subject only to documentary evidence provided by a net winner that creates significant doubt of proves otherwise. An independent arbitrator may be empowered to decide best evidence in cases where there is conflicting documentation.
A method like this seems far more likely to be used than to permit every Tom Dick and Harry to subpoena their individual records.
The other thing the Court can do is set the location for document review and arbitration in a specific location, in Charlotte for example.
How many people are going to travel to Charlotte or hire a North Carolina attorney to review documents the Receiver claims to say X if they do not have documentation the clearly proves Y. They may as well go fishing for real.
Unless there is something so inaccurate and far out with the Receiver’s calculations and demands it would be folly to travel to North Carolina in hopes of finding the Receiver made a mistake in a net winners favor. If they do not have the documentation already, they may as well stay at home
This is a net winner’s hyper-fantasy and frankly, sounds like something a pyramid pumper would spin out to reassure himself and his dwindling team that there is no way they can be held accountable.
Maybe you are right.
This is the email I just received although I never put a cent into Zeek, backed out early since I smell something fishy.
If your e-mail address was used to communicate with the Receivership you would have received this notification.
Notice the receivers’ communication clearly says “MAY” hold a claim and its’ receipt does NOT mean you hold a claim.
Given the fact Zeeks’ record keeping was less than accurate, who knows what the records show or don’t show WRT to your involvement ??
It’s an unfortunate fact the fallout from the collapse of a fraud of this size will extend a lot further than “just” losing money for a lot of members
I wasn’t concerned since I’m not even in the States and I never contributed, just did the ads for a while till it got boring then when the site kept going down I smelled a rat and backed out. Just thought to let you know that even us Canadians are getting the letter. (I never saw anyone post the actual email they received though) Can’t even remember the email addy I used in Zeek, it must have been this one. LOL
Good nose aye?
A fishy rat? LOL
I am not clear on this. What satisfaction is provided to the dentist by paying the doctor?
Hi, have any of you who are net winners heard anything from the receiver lately?
@Denise
I don’t think you’ll be hearing publicly from net winners the Receiver is specifically targeting (the top players). They’re too busy trying to cover their tracks and recoup their investments in similar schemes post Zeek Rewards.
Nothing lately. There is a motion to remove the Receiver that was suppposed to already be heard but it was delayed until mid July. If the motion is denied (as expected) the Reciever should shortly thereafter start up his litigation machine. Everyone’s had a chance to settle.
The Motion to Intervene and Dissolve the Receivership filed by net winners, Gilmond and King, was recently denied. The Court affirmed SEC jurisdiction and the Receiver’s authority to act on behalf of the estate.
Not much of a surprise there. It was however a substantive motion needing disposition and now that it has been decided in favor of the SEC and the Receivership, Bell’s implementation of clawback actions should begin in earnest.
Additionally Bell sought, and has this week received, approval for voluntary settlements made prior to the expiration of his deadline.
By the look of things he should be able to obtain judgments against everyone else.
I just received an update from ASDUpdates today, with the judge granting Bell permission to go after net winners who haven’t paid up yet.
I have no idea if a list will be made public but it would certainly be interesting to see who’s still trying to hold onto their Ponzi winnings (and once identified see if they’ve bandwagon jumped into any of the new schemes going around).