Zeek Rewards Receiver destroys desperate net-winner arguments
Now that Paul Burks has been found guilty on all counts, you’d expect those who profited the most in Zeek Rewards to give up on the notion that they’re entitled to keep funds they stole.
Not so. Literally a week after the Burks verdict was handed down, Zeek Rewards net-winners continued to fight the Receiver in court.
In early July the Receiver filed for summary judgement against Zeek Rewards’ net-winners. It is this battle that is still playing out in court.
First and foremost, it is important to understand that despite spending over a year of time and considerable cost (to the Receivership) of engaging a defense expert to investigate the fundamental question of whether or not ZeekRewards operated as a Ponzi scheme, Defendants have conceded—without a single reference to their own expert—that ZeekRewards was a Ponzi scheme which intentionally defrauded hundreds of thousands of victims out of hundreds of millions of dollars.
The fact that ZeekRewards was a Ponzi scheme has now been established as a matter of undisputed facts and law.
Unable to argue that Zeek Rewards was not a Ponzi scheme, Zeek’s top thieves now insist
- Zeek Rewards’ Terms Of Service prohibit the Receiver from making claims against them and/or
- they are “internet marketing specialists” who are ‘entitled to be paid as employees rather than investors‘
The Receiver alleges both defenses are “pure fiction” and lack merit.
Zeek Rewards’ Terms Of Service
Zeek Rewards’ Terms Of Service any claims barred any claims not made within twelve months.
Zeek Rewards’ top investors are using this as a basis to argue the Receiver’s clawback claims against them should not be allowed.
As the Receiver points out, adopting this legally would give every Ponzi scammer a loophole clause that permitted them to keep stolen funds.
Adopting Defendants’ position would create a ready-made roadmap for fraudsters to protect anyone who won money in their scheme, thus further encouraging participation and enhancing the scheme.
A receiver ought not to be handcuffed from recovering assets based on the wrongdoing of the fraudster, as that would undermine the receiver’s very purpose.
“Limitations” periods of a few months or waivers of claims entirely would likely become commonplace if a company operating a Ponzi scheme could “contractually” limit the subsequent claims of a receiver through the terms of the scheme.
Whereas the Receiver has to address the preposterous argument within a legal context, for me the issue far more simpler.
By virtue of the fraudulent nature of the business model, Ponzi scheme “terms and conditions” are meaningless.
To accept otherwise would be to open the door on claims from investors who were promised (implied or otherwise) a fraudulent ROI.
That’s not going to happen, so likewise any legal defense based on a Ponzi scheme’s TOS should be struck down.
Zeek’s Net Winners were employees
Defendants claim that those Defendants who spent the most time successfully promoting the scheme and multiplying the number of its victims should be given the most credit against the Receiver’s claims to recover their fraudulently transferred winnings.
The above summation from the Receiver will likely only make sense to a Ponzi scammer desperate to keep funds they’ve stolen.
Put more directly, Defendants claim that they should be allowed to keep the victims’ money that they “won” in ZeekRewards because they spent time recruiting those same victims to the program (as well as a few minutes a day posting an internet ad).
The notion that Zeek Rewards affiliates’ provided value to the scheme is laughable.
I mean really, what are we arguing here… that promotion of a fraudulent Ponzi scheme actually constitutes legitimate work?
Please.
Other than promote Zeek Rewards in order to collect referral commissions, all Zeek Rewards affiliates had to do to collect a ROI was dump bids on fake Zeekler accounts.
That’s not value-creating work, even if Zeek Rewards wasn’t an $850 million dollar Ponzi scheme.
Contrary to Defendants’ arguments, the Receiver has not asked the Court to rule—and the Court need not rule—that no one providing “services” to a Ponzi scheme can keep the money they were paid for their services.
Instead, the Receiver asks the Court to rule, as numerous courts have done for many years, that actual participants and investors in the scheme cannot establish that they gave “reasonably equivalent value” for their profits through their efforts participating in and recruiting others to the scheme.
Nearly all of the courts to have considered this issue have applied what has come to be known as a “Ponzi scheme presumption.”
“In the case of Ponzi schemes, the general rule is that a defrauded investor gives ‘value’ to the Debtor in exchange for a return of the principal amount of the investment, but not as to any payments in excess of principal.”
Despite Defendants’ suggestion, there is no recent “trend” away from this rule.
Courts still apply the Ponzi scheme presumption with regularity.
Further, Defendants’ specific claim that they could have provided “reasonably equivalent value” by recruiting victims to ZeekRewards ignores the overwhelming weight of contrary case law.
Courts have routinely held that there is no value in recruiting new investors to a fraudulent scheme.
As to whether Zeek’s net-winners were employees;
Defendants’ effort to portray themselves as employees of RVG fails.
They ask the Court to compare them to “internet marketing specialists” valued at $50,000-$80,000 per year.
This characterization of their “work” is, however, directly contradicted by the undisputed facts.
RVG Insiders specifically advertised the program as a passive opportunity.
The Receiver goes on to claim the posting of ads by Zeek affiliates
was just an attempt to manufacture a cover for the investment of money by Affiliates with the expectation of receiving daily “profit” distributions.
The placing of ads cannot supply the required “reasonably equivalent value” for the transfers made to Defendants.
And, if some people may have spent considerably more time recruiting downline investors to enhance their share of the imaginary “profits” that does not change the fact that the “work” RVG asked Defendants to do was, to put it mildly, minimal and of no real value.
One of the more comical arguments Zeek’s net-winners raised was that
entering summary judgment in favor of the Receiver would allow him to sue the utility company that provided electricity to RVG or the janitor who cleaned its offices.
Yeah, right.
The utility company and the janitor are also easily distinguishable from Defendants here.
First, the utility company and the janitor were not investors or participants in the scheme like Defendants.
Second, providing electricity and cleaning facilities were the regular trade duties of the utility company and the janitor that each presumably provided to many other clients as well.
Third, the utility company and the janitor each have regular prices that are charged for their services, unlike Defendants, who expected to receive an undetermined (but unreasonably high) payout from the profits of the business which was unrelated to the specific amount of services they provided.
Therefore, the utility company and other innocent trade creditors are not comparable to Defendants and have no relevance to this action.
And with that, the last-ditch attempt to justify Zeek’s net-winners’ profiting in a Ponzi scheme are dead and buried.
Following the Receiver’s filing yesterday, Judge Mullen has yet to make a decision on the Receiver’s Motion For Summary Judgement.
Stay tuned…
Footnote: Our thanks to Don@ASDUpdates for providing a copy of the Receiver’s “Reply Brief In Support of Receiver’s Motion For Summary Judgement” (filed August 16th).
I assume that Summary Judgment will be rendered in favor of the Receivership which will sting, hard, but if the net winners become subject to a constructive trust as Bell requests they will need morphine because that’s going to really burn.
It means the judgments should be much more collectible. Its a much harsher outcome.
receiver bell in his ‘REPLY BRIEF IN SUPPORT OF RECEIVER’S MOTION FOR SUMMARY JUDGMENT AGAINST REMAINING NAMED DEFENDANTS AND PARTIAL SUMMARY JUDGMENT AGAINST THE NET WINNER CLASS’ makes the following statement:
this statement is factually incorrect.
paul burks was not charged with running a ponzi scheme or of securities fraud. so, it follows he could not have possibly been found ‘guilty’ of the same.
the criminal trial found burks guilty of mail/wire/tax ‘fraud’.
in fact, at the criminal trial, the DOJ argued that since they had not charged burks with either ponzi/securities fraud, they did not need to prove the same.
according to robert fitzpatrick who attended the trial, the judge ordered the word ‘ponzi’ to be removed from the copy of the indictment provided to the jury for their deliberations.
as such, i wonder how bell has concluded that burks was found guilty of ‘securities fraud’??
When the Summary Judgement is rendered in favor of the Receiver, will round 3 of the clawbacks begin? And can we expect a 3rd refund check to go out soon after that?
@Mike
If and when the Summary Judgement is rendered in favor of the Receiver, then yes the clawbacks will begin.
I could be wrong and if so those with more knowledge than me will correct me. I believe what will happen is basically everyone who made money and has not settled will have a judgement filed against them.
How that judgement is collected I do not know. But there will be some sort of collection process. It could be in the form of a collection agency or perhaps a lien or even the seizure of some assets.
Keep in mind there are about 9000 or so people and it could take a while.
And yes at some point there will be another payment. I imagine it will just depend on how the collection process goes.
On top of that I am sure the receiver wants to get the money back to those of us were scammed out of it but they also probably want to keep the number of payouts to a minimum as I am sure it is costly to send out that many checks.
We have already got back 60% of our money. I believe when it is all said and done we will be at 80% to 90%.
I really look forward to hoping this Summary Judgement is granted and those judgments are filed. I know 3 or 4 people who are going to be impacted by this.
A couple years ago I asked all of them personally how they felt about having to return the money some day. All of them basically blew it off and I don’t think they really believe they will come for that money.
I certainly do not want to see anyone thrown out on the street homeless because of this, but a little bit of a bumpy ride certainly would be ok.
I won’t laugh in their face but inwardly I will be smiling. However more than anything I hope they learn their lesson.
the receiver has asked for a PARTIAL summary judgement against the net winner class.
a short recap: the receiver had filed a clawback suit against the net winners based on fraudulent transfers etc.
the netwinners had replied to this suit questioning whether the receiver had any locus to demand clawbacks, as the receiver had been appointed under SEC vs burks/RGV, and the SEC had no jurisdiction in this case as zeek was not selling ‘securities’ [as in investment contracts].
the netwinners had also argued against the receivers claims of fraudulent transfers etc.
if the court awards this ‘partial’ summary judgement to the receiver, it will mean that the issue of fraudulent transfers is settled and the net winners are liable to return their ‘winnings’ to the receiver.
however [IMO] the issue of whether zeek was selling securities still stands, and will be addressed at trial.
this ‘partial’ summary judgement will simplify the trial, and the question of ‘fraudulent transfers’ will not have to decided on ‘merits’.
according to the legal dictionary:
i think there will still be a trial as the jurisdiction debate has not yet been resolved.
after trial when all the claims and issues have been resolved, the receiver will be able to ‘enforce’ the summary judgements against the named defendants and the defendant class.
so, the rendering of the ‘partial’ summary judgement in favor of the receiver will not mean that clawbacks will ensue. there is still ways to go for that, ie trial and then a possible appeal.
Not seeing it this way since the Defendant’s did not raise jurisdiction and securities issues in their reply to Bell’s Motion for Summary Judgment.
It seems to me that they have abandoned those arguments and are now relying on contract law and the equivalent value argument.
Maybe not, After all Burks never contested the SEC’s assertion that Zeek was offereing investment contracts at the same time he stipulated that the Court had jurisdiction over the matter.
That Burks violated securies law no longer required proof. He admitted as much in his settlement with the SEC. What he did not admit was mail, wire, conspiracy and tax fraud.
I believe Bell’s characterization is justified as well as factually correct.
From a copy of the old terms I found online, this is factually wrong. The terms state that the members have 1 year after ending the membership to dispute anything with Zeek. It does not apply in reverse like these Zeekheads claim.
I can’t verify this is the most complete copy, but I have no reason to doubt this is not.
NOLINK://blog.sina.com.cn/s/blog_a5a66c9c01014wte.html
Right. Its very possible that Bell will sell and assign the claims to a distressed debt buyer. Its a quickest way for the Receiver to monetize the judgments (albeit at a discount).
From a creditor’s point of view Bell is doing a spectacular job.
Consider that pre and post judgement interest (which he should get) is going to increase the judgment amounts considerably.
Additionally, if the judge approves the contruictive trust it means that anything purchased with the net winnings is subject to recovery by the estate as well..
For example, if a net winner spent his winnings on something that went up in value the increase in value is due to the Receivership. This should increases the value of the debt if Bell assigns and sells it off.
This dynamic has the potential to really hit some net winners hard if the judgments are sold off to a collection company… who will by and large be relentless in their efforts to collect.
I’m not sure how this is effected but its also possible that the judgments could be made non-dischargeable in bankruptcy making them even more valuable to the estate.
The long term deterrent effect of this clawback action is a positive good in my opinion, even if the estate does not gain as much from the effort as hoped. I think they are really going after these ponzi players here. At least I hope so.
I hope that Tracy Davison will finally be held accountable.
There does not appear to be any dispute over material facts.
i need to revise my post#5.
there are two types of ‘partial’ summary judgements.
– one that seeks partial summary judgement on one claim in a suit, out of many claims. this simplifies the trial as there is one less claim to be proved.
– a partial summary judgement of ‘liability’. here the court rules that the defendant is ‘liable’, with the ‘amount’ of the liability to be affixed at a later date.
in the case of the receiver vs net winners, it is obvious the receiver is asking for the second type of partial summary judgement.
experts from both the prosecution and defense have affirmed that zeek’s fund flows show it was a ponzi.
under UFTA [uniform fraudulent transfers act], many state and federal courts use a tool called the ‘ponzi presumption’ to aid receivers in clawback actions.
once a ponzi is proved to exist, all fund transfers made which helped perpetuate the ponzi are deemed fraudulent and have to be returned to the receiver. any ‘work’ [excluding pure service and utility providers] done which helped perpetuate the ponzi, is not considered to have any equitable value.
thus the recruitment work of zeek affiliates, which made zeek grow to a $900 mil ponzi has no equitable value and is ‘worthless’.
some state supreme courts and circuit courts have rejected the ‘ponzi presumption’ argument that the work performed in a ponzi does not have any equitable value, when it is performed in good faith.
the zeek case is in the fourth circuit, which it seems [not 100% sure] has no federal precedent in using the ponzi presumption, so if the district court runs with the ponzi presumption [which i think it will], the net winners may appeal.
so, after this partial summary judgement is awarded to the receiver, there will be No Trial, but an appeal may delay the clawbacks from the net winner class.
the receiver is funding the defense of the net winner class so they may choose to appeal.
IMO burks settlement with the SEC, with no admission or denial of guilt, does not mean he ‘admitted’ anything. agreeing to the jurisdiction of the SEC, does not mean he ‘admitted’ zeek was selling securities.
at the most, burks settlement with the SEC points to the ‘probability’ of securities being involved, but does not ‘definitely’ prove the presence of securities.
i’m just alarmed that the civil case and the criminal case have both avoided the question of whether zeek sold securities, yet it can be declared that zeek sold ‘securities’.
also alarming is this fact – if zeek was tested for securities under the howey test, then the ‘work’ of the affiliates would be considered valuable and the court would test ‘how much’ work the affiliates did in furtherance of the scheme [DTBG, koscot]
but proving ‘ponzi’ on the basis of fund flows, without testing for ‘securities’ has the opposite effect. the same work of the affiliates becomes worthless under the ponzi presumption, as it helped in furtherance of the scheme.
i see a contradiction here^^.
ponzi schemes generally have investors who don’t do any work, and in this case the ponzi presumption would fit.
zeek was a multi level marketing system [according to court documents] and not a ‘classic’ ponzi scheme, it should have been tested under howey’s test to definitely find securities.
the conclusion that zeek sold securities with everyone in court shying away from addressing ‘securities’, seems illogical to me. this is not settling well with my sense of fair play, so i’ll just say it.
Perhaps so. No procedure for challenging the reciever’s calculations has yet been approved. Reconciliation has to be done before an amount can be affixed. That could take awhile.
What’s the total dollar amount the receiver is attempting to claw back anyway?
Its tantamount to admitting it. Lets not be coy. He agreed to pay $11 Milion in fines. Why would he agree to pay fines to an agency that regulates securities unless his activities involved securities?
At some point we have to drop the pretense and just say a duck is a duck. That’s certainly what Bell has done, and I don’t doubt the judge is on the same page.
The defendant class argued that there were no securities in their Motion to Dismiss and the judge denied the motion (explaining why).
The defendant class has not renewed that argument in their response to the Motion for Summary Judgment therefore its no longer a question before the court. Its moot.
It was a losing argument anyway as its clearly contrary to publlc policy.
Wrapping a ponzi inside of an MLM creates certain logical conflicts which when subjected to the Howey Test require the judge to apply common sense to the question of “is this a security offering.”
Mullen’s preliminary conclusion was yes so I don’t think the court shied away from giving an answer. The defense attorneys certainly understood the answer because they dropped the argument entirely.
a settlement with no admission or denial of guilt does not prove anything. its not ‘tantamount’ to anything. if inferences could be made from settlements with no admission/no denial what would be the point of such a policy at all?
how can you find a defendant guilty of ‘non’ securities related counts, and conflate it with a civil settlement in which he has not admitted to selling securities but only settled with the SEC, and somehow deduce that he is guilty of securities fraud? he has not admitted to securities fraud and neither has this been ‘found’ in either the criminal matter or the civil matter.
people settle for all kinds of reasons and this is not a definitive ‘proof’ of guilt.
the olivaries have pleaded guilty to securities fraud conspiracy, does this ‘prove’ zeek sold securities? who knows what deal they were offered to plead guilty?
andy bowdoin did not plead guilty to the securities count against him, does this ‘prove’ ASD was not selling securities?
and if we want to play the ‘tantamount’ game, then bowdoin not pleading guilty to securities fraud is tantamount to the prosecution admitting that ASD did not sell securities, which is tantamount to saying zeek did not sell securities since it was so similar to ASD.
so, making inferences from settlements and plea deals and drawing legal conclusions from them, does not necessarily lead to logical results.
IIRC over $200 million.
This broke AdSurfDaily’s back. From Judge Collyer on Nov. 19, 2008, in the ASD civil-forfeiture case brought by federal prosecutors and the U.S. Secret Service:
PPBlog
In the grand scheme of things he was not innocent and the whole scam is shut down.
Quibbling over the fraud at length means very little.
As lives were damaged in the process so who fixes that?
He was promising a roi on invested funds so call a duck a duck is correct.
He and we know the truth. Dragging it thru the court system is another.
Nobody drew a legal conclusion, but only a practical one. There is no need to keep prancing around the obvious. Bell is cutting to the chase and his assertion conveyed the sense of it and that’s all that really matters at this point. The defense can object if they think it matters.
Lots of accruing interest.
That hits the spot Bell was aiming at.
Right, once you advertise 125% ROIs the rest is just frantic recruitment and coverup.
Maybe Bell just made a mistake. Things like that happen.
it seems to me that the judge made an ‘observation’, he did not ‘rule’ that all ponzi schemes are securities frauds.
by virtue of funds flows alone, all pyramid schemes are ponzi schemes and hence should be classified as ‘securities’.
but, the SEC does not go after pyramid schemes for selling securities, unless they can prove that the affiliates were not making recruitment sales independently [koscot, DTBG].
in the fourth circuit itself [zeek case circuit] the scheme ‘sell america’ was found to be a pyramid but not a ponzi, because of the recruitment work of the affiliates.
is there clawback in pyramid schemes? i don’t think so? inspite of being ponzi schemes, there is no clawback because the affiliates were paid recruitment commissions for the sales work they provided to the company.
the zeek RPP paid an ROI, no doubt, but it had recruitment too and all the participants of the RPP were investing because they had been recruited into it. the money collected via efforts of the investors was shared in the form of ROI’s and recruitment commissions. without the efforts of these investors there was no way zeek could grow into a $900 mil monster.
because zeek is an interesting hybrid of ponzi/pyramid i was looking forward to thrashing out of the securities issue in court and the arguments for finding of securities.
without going into ‘moral’ arguments, i think clawback of any ROI’s received from the RPP is right, but recruitment commissions earned by affiliates for their ‘sales’ work is an actual reward for ‘work’ which they can keep. like in other pyramid scheme litigation the topmost affiliates who worked ‘closely’ with management can be made to disgorge their commissions.
in the same Motion to Dismiss, the judge also denied the defendant class’ arguments against fraudulent transfers and constructive trust, this did not mean the receiver won and the case was over.
it just meant that the defendant class had not convinced the court that the case was worth dismissing, and the court decided the arguments had to be tested at trial on merits.
hmm, good point. maybe the defendants have limited their arguments against the receivers motion for partial summary judgement, to why he should not be awarded ‘summary’ judgement.
monetary judgments have been awarded to the receiver against some named defendants previously. but these judgments are not ‘enforceable’ till the outcome of the clawback case against the defendant net winners class.
is the awarding of summary judgement against the net winner class the end of this matter? maybe the ‘securities’ issue still remains to be decided at trial? let’s see what happens.
I believe that If partial summary judgment is granted all prayers for relief in the original Complaint are granted.
Its a “partial” summary judgement only because the dollar amount of the money judgments need to be determined by a process to be approved by the court.
Otherwise, nothing else would remain at issue.
No defendant has followed through on the arguments made by Sorkin. Accordingly, there will be no trial on the merits.
How would you determine if the money “earned” by this “work” was performed in good faith? Would you individually try each recruiter?
Many if not most of these recruiters are perpetrating and perpetuating a fraud everytime they pitch one of these programs. Many recruiters know it (or should know it)… and Some don’t … and yet you want to reward them all.
Better, I say that we reward none.
Fortunately for the sake of civilization the courts generally reward none.
seems so, but i’m just going to ‘hope’ judge mullen will say- let’s have that securities discussion now for anjali! 🙂
participants of ponzi/pyramid schemes are considered ‘victims’.
receiver bell hasn’t implied anywhere in his suit that zeek investors participated in bad faith [except probably the ‘named’ defendants].
pyramid schemes generally do not have clawback. participants are allowed to keep their recruitment commissions, as these were payments made for sales work even though the business was fraudulent.
when other pyramid scheme participants are allowed to keep their recruitment commissions, why not zeek investors? do we hate them especially or something?
the fact that ponzi/pyramid scum go from scheme to scheme ripping off people, is not an excuse for us to rip off innocent participants of zeek.
we have to protect the rights of the innocent and not punish them for the criminals in their midst.
Well we are speaking here of Zeek not some other situation you may have heard about.
It makes utterly no sense from a public policy perspective to permit criminals and the ignorant alike to profit by selling ponzi points. Doing so only induces them to continue the practice and pyramid/ponzis will only proliferate as a result. That’s not smart.
Everybody has a right to earn a living but nobody has a right to earn a living promoting and selling what is illegal.
If the innocent waste their time and effort doing so then too bad. Hopefully they will learn from the experience and be more prudent the next time someone tries blows smoke up their ass.
Regardless of what has been done before the treatment accorded the Zeek affiliates HAS to be the paradigm going forward, because doing it any other way actually promotes and perpetuates the evil that ponzis represent.
Big Net Winners too?
Of course not. It would be a gross over generalization to suggest that. What he has said is that net winners are not entitled to retain even one penny above and beyond their initial investment.
Even at that the net winners are still coming out well ahead of the net losers who may lose up to half of their investment… and you would make it even more lopsided by allowing the net winners to retain commissions they received for bringing these late arriving net losers in to be slaughtered?
That’s not going to happen in North Carolina and its not going to happen on Bell’s watch because it is a terrible idea. Not only does it increases the inequity but it rewards avarice, stupidity and criminality.
why does zeek deserve special treatment? it’s a fraud like many other fraud schemes and the same public policy should apply to it too.
as things stand, the policy seems to be that ponzi ROI’s are liable for clawback as the investors gain these returns with little or no effort. thus ponzi schemes see clawback action and this makes logical sense too.
as things stand, the policy seems to be that pyramid recruitment commissions are not liable for clawback as the participants have put in sales efforts even though the underlying business was fraudulent. thus pyramid schemes don’t see clawback action [except for top netwinners close to the management] and this makes logical sense too.
the idea that recruitment commissions may not be clawbacked is not my idea, it is the idea Currently in Practise.
you want to change the public policy? no problem. as long as this new policy applies to all recruitment commissions moving forward and is not special treatment meted out to zeek participants, because mr hoss wants to teach zeek participants a lesson.
you feel that innocent participants should give up their recruitment [sales] commissions, so that career pyramid fraudsters don’t get to keep their commissions.
but, punishing innocent people is WORSE than rewarding some fraudsters.
if it is unfair for netwinners to lose money to a fraud, then it is also unfair to take away rewards from netwinners ‘for work’.
IF the court is satisfied that ALL the recruitment in the zeek RPP and the matrix required no/minimal effort, and ALL of zeek was a ponzi scheme, then let there be full clawback.
it will set a new standard and many more pyramid schemes with a recruitment structure like zeek [binary plan?] will be liable for SEC action and clawback.
Clawbacks by whom ???
The ponzi schemes under discussion have had receivers appointed by a court and it is they who have instituted clawback proceedings.
While that is true, you are forgetting something. The vast numbers of those in Zeek were not innocent victims. They regularly take part in such things and know there is risk of losing, as they have done in the past. Of course, they will be all too happy to get their money back from the receiver.
The real victims are those who were the general public or those coerced by a family member, possibly for the first time. These deserve a full refund and will no doubt have learned a lesson.
A ponzi is not a pyramid and cannot be treated the same.
A ponzi, by it’s very nature is a fiction, a complete fraud.
No part of it is legitimate, which is why every participant is judged to be “equal” when it comes to repaying victims.
No. I am saying that ALL commission earners promoted and sold investment contracts and by law they may not receive compensation for doing that.
One need not, and you in particular should not insert irrelevant and prejudicial references to “innocent” versus criminal participants in this context because whomever promotes the sale of securities without a license is ineligible to receive compensations. All are treated alike.
Now…please do not renew your “was Zeek selling securities speculations .” The aswer is, yes it was. Its not even an appealable issue since the defense abandoned the issue as a defense.
If you want the satisfaction of knowing how the court would have ruled after a hearing “on the merits” you need enquire no further than the explanation given by the judge in his Denial of the Defendant’s Motion to Dismiss.
Should the Motion for Summary Judgment be approved it will be safe to say that:
The affiliates were promoting securities without permit or license and therefore have no entitlement to a commission regardless of how hard they worked or how pure their motives.
In essence this is exactly right.
excellent point!
though you have arrived at this ^^ conclusion by ‘inference’ as nowhere has the receiver [or the SEC], accused zeek netwinners of being unregistered brokers who are liable for rescission [paying back commissions earned for selling securities].
the receiver is purely relying on fraudulent transfers in a combined ponzi and pyramid scheme which under UFTA are voidable.
but since your argument is very good, i feel obliged to TRY to deflate it 🙂
a court considers several factors in deciding whether a defendant has acted [knowingly or unknowingly] as a unregistered securities broker.
important factors include the the number of securities transactions completed by the defendant, whether he had access to materials that would alert him to the fact that he was selling securities, whether he had some role to play in the designing or promotion of the scheme etc.
if a defendant has unknowingly made say very few transactions [like say 1 or 2] of securities, it may be a ‘stretch’ to categorize them as unregistered brokers.
in the zeek RPP [two levels deep recruitment] it is possible that an investor recruited just one new investor under him. in this scenario it is possible for the first investor to have earned commissions for ‘selling’ securities [investments in the RPP gave an ROI almost passively]. can this first investor be categorized as an unregistered broker?
on the other hand there will be many investors in the RPP who would have recruited many new investors below them, and they ‘may’ be categorized as unregistered brokers.
is it possible to declare that ALL recruiters in the RPP were unregistered brokers? it seems to be an Over Generalization because the court usually conducts a fact intensive study to find that a person has acted as an unregistered broker.
the SEC has also alleged that the zeek ‘matrix’ was selling ‘securities’ in the form of memberships and monthly subscriptions.
the matrix was a pyramid scheme with no ‘pure’ ponzi element like the RPP [where an ROI was paid on investments].
the matrix had only recruitment commissions and used a binary plan [recruit two who will recruit two and so on].
the SEC’s argument is that matrix participants were not really doing a lot of work in the binary plan, and so it was a ponzi scheme.
if you allege that matrix participants barely did much work for their commissions, then is it possible to categorize them as unregistered brokers? some may have recruited hundreds and some may have recruited just two [and then enjoyed the ‘spillover’ of the binary plan for free].
is it possible to categorize All matrix recruiting participants as unregistered brokers? it seems like an Over Generalization.
the SEC has separately sued top zeek net winner trudy gilmond for selling securities as an unregistered broker. they have cited her ‘extensive’ work in selling securities and her participation in management events and her access to certain inside data of the company.
the argument against trudy gilmond is strong, but your over generalization that ALL net winners in zeek were acting as unregistered brokers ‘may’ not stand the scrutiny of the court.
but, since this is not an argument before the zeek court, and nobody wants to discuss security related issues [grrrr!], we will probably never know if zeek net winner participants ‘as a whole group’ were unregistered brokers.
thanks for your excellent point mr hoss!
They don’t have to. There is a second part to the statutory scheme that needs to be mentioned. It provides that an issuer of a security (Zeek in this case) MAY NOT PAY a commission to an unlicensed individual. This attacks the commission issue from the payors end.
Thus, the receiver would be in breach of his fiduciary duty to the estate and its creditors if he did not attempt to recover commissions PAID to unlicensed individuals.
Bell apparently felt that a separate action was not required for this purpose and consolidated his efforts.
We can see that the recovery of commissions paid are embedded in the net winning calculations which is how he is recovering them for the estate.
I expect the SEC and judge are well aware of this even though it has not been highlighted in the filings, and the net winners of course haven’t contested anything….so we move on.
Lastly, I assume that illegal commissions paid in furtherance of a ponzi scheme are considered fraudulent transfers for these purposes and covered under the UFTA.
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Maybe pyramid schemes, which often rely on overpriced but tangible products and recruiting to perpetuate themselves, but may not meet the definition of a security offering can legally pay commissions. ? Its a thought. FTC actions – commissions ok, SEC actions – commissions not ok??
yes, the FTC regulates pyramid schemes where affiliates are paid for sales [recruitment] work, and so these commissions are not clawbacked.
the SEC regulates ponzi schemes, where the ‘investors’ have barely done any work, so their ROI’s or commissions are clawbacked.
what is strange is that with the zeek case Not discussing securities, yet Concluding that zeek sold securities, makes the zeek matrix with its binary plan a ponzi scheme.
the saving grace is that the SEC case arises from a ‘settlement’ with burks/zeek, and so this case will not set any precedent.
I didn’t read anything that stated that Zeek was issuing securities. What I read, in so many ways and words, was that the SEC intervention was lawful until and unless proved otherwise.
The implication of that is that the appointment of the Receiver was also lawful (until proven otherwise.)
So, in spite of only needing a preponderance of evidence to prove the SEC intervention was unlawful the defendants failed to do so.
When Bell asserted, as he did, in the Motion for Summary Judgment that:
the defendants (if they want to prove that Zeek was not issuing securities) have got to refute Bell’s assertion. ..but they didn’t….instead they argued that they are not subject to clawback based on the TOS and contract law… which if you stop to consider it, amounts to a concession that the SEC intervention was lawful etc.
I suppose that amounts to a concession that Zeek was issuing securities doesn’t it.
the SEC complaint against burks/RGV on the basis of which the receiver was appointed, clearly stated that the zeek RPP and matrix were securities.
the receiver has not addressed securities, because he clarified at the initial stages itself [SEC vs burks/RGV hearing transcripts in which netwinners tried to intervene], that he would be arguing fraudulent transfers under UFTA.
this ^^ is what i find strange. it seems like the defendants ‘zeek was not selling securities’ argument just got up and left the table without a murmur.
it was not a question without ‘any’ merit. so i cant understand why.
I recall Trudy Gilmond made a plea to the affiliates to contribute to a legal fund after she paid Sorkin to file the intervention (I assume she would have continued on with Sorkin) but the affiliates didn’t support her.
It rankled as you might imagine, because the other net winners were so damn cheap, and what may have been a good strategy withered.
I always felt that if thousands of net winners had pooled a lousy 10% of their winnings they could have made a hell of a show out of this and at least gotten a good settlement for themselves but for reasons I only partially understand they went off in a different direction.
announcement from the zeek receiver kenneth bell on aug 29, 2016:
both the olivaries pleaded guilty on all counts they were charged with under a plea bargain deal with the prosecution.
as such, the length of their sentencing must have already been discussed and agreed upon between the parties.
the judge usually signs off on these deals and concurs with the sentencing suggested by the prosecution.
First of all many people joined this venture out of their own free will.
When we recruited members we told them it’ll be a lot of work but the payoff could be huge, and not to “risk losing more than they are willing to lose” if something goes South. Nobody was forced with a gun pointed to their head. Everyone who joined knew what they were getting into.
This is no different than any other “Network marketing” company whether selling snacks, weight loss shakes, or auction bids. Of course nobody said Zeekler was a Ponzi otherwise nobody would join, but it was only established after the fact.
(Ozedit: Offtopic derail attempts removed)
Irrelevant to the fact that Zeek Rewards was a Ponzi scheme and those who profited in it scammers.
Whatever you told them doesn’t negate the fact that Zeek Rewards was a Ponzi scheme and those who profited in it scammers.
Whether you forced people to join or not doesn’t negate the fact that Zeek Rewards was a Ponzi scheme and those who profited in it scammers.
You can’t speak for everyone, so you’re full of shit.
Sure it is, there’s plenty of network marketing companis out there that aren’t $850 million dollar Ponzi schemes.
Zeekler was attached to a Ponzi scheme, don’t confuse the issue.
All of these arguments and more have already been destroyed in court. Cry more tears and pay back the victims you stole from.
Someone can’t be in denial this long. Must be a troll.
I want to be clear… All Net Losers have no duties. They are free, correct? The receivers aren’t after them and no one is after them right? They can claim for the loss if they want to, and if they don’t claim, it’s over with them right? They are free to go?
The receiver are only after the net winners, right?
As per the Zeek Rewards affiliate database and transaction history, correct.
The sob stories people come up with, for the most part, don’t matter.