Zeek Rewards Ponzi points officially worth $0
One of the key factors in the perpetuation of the $600M Zeek Rewards Ponzi scheme was the company’s affiliates being able to deceptively advertise their accumulated Ponzi points as actual revenue.
Despite the rhetoric about retail customers, publishing spam on the internet counting as “work”, the mythical success of the Zeekler penny auction and what not, at the end of the day Zeek Rewards affiliates pumped money into the scheme and were paid new investor money – based directly on how much money they put in themselves.
How?
For each dollar an affiliate invested, they were given a “VIP point” (after dumping some auction bids on fake customer accounts and publishing spam ads for the company). Each VIP point paid out a share of newly invested money daily, for a total of 90 days before expiring.
The problem lay with affiliates re-investing their daily ROI back into new points and simultaneously claiming that the money was actually paid to them first, before they re-invested it into the scheme.
The reality is that this money never existed. All that happened was a virtual transaction and the creation of new Ponzi points.
Analysis of Zeek Reward’s financials following the SEC bust revealed affiliates had generated roughly 3 billion VIP points through initial and continued re-investment.
If affiliates set their cash out at 100% and Zeek Rewards paid enough to ensure that no affiliates lost money over 90 days on their investment, this equated to a daily payout of $45 million.
How much money did Zeek Rewards have in their accounts?
$225 million dollars.
Taking in on average $5 million dollars a day for the month of July 2012 (the month before the SEC stepped in), it’s easy to see just how fragile the daily ROI house of cards was. And with ever-growing VIP point balances affiliates were generating, how ultimately it was destined to collapse under its own weight.
Despite all the points Zeek’s affiliates were generating, the money just wasn’t there to back it.
That of course didn’t stop affiliates from marketing their imaginary returns as actual earnings, despite never actually seeing the money (because it didn’t exist).
It’s sort of catch-22 if you think about it. Affiliates didn’t need to see the money because they believed they were re-investing it. This worked for Zeek Rewards because they didn’t have the money and played into re-investment to generate ever-increasing returns being a key component in the scheme.
Now, almost a year after the closure of the scheme and amidst a battle between initial investors who withdrew actual money and claim there were “no victims” in the scheme, those who invested later and lost their money and those who believe they lost money because the scheme was shutdown, despite the fact Zeek Rewards didn’t have the money to pay them, Receiver Kenneth Bell announced yesterday that affiliates will not be able to claim imaginary earnings or claim VIP point balances as actual money.
Why?
In a March 29th Motion filed by the Zeek Rewards Receiver, Kenneth Bell, he writes:
The Receiver omitted and is not requesting any information regarding “Retail Profit Points” that may have been accumulated by an affiliate.
Affiliates generated and accumulated by perpetuating the scheme that was created by (Zeek Rewards).
The vast majority of funds used to pay for an affiliate’s cash reward , which was based on the affiliate’s VIP point balance, were funds invested in (Zeek Rewards) by other affiliates.
There was little, if any, legitimate business revenue of (Zeek Rewards) that was used to pay any amount due or alleged to be due to a creditor or an affiliate of (Zeek Rewards).
Instead of funding distributions from the multi level marketing program with funds generated through actual business operations, the multi level marketing program merely redistributed payments made by one affiliate to another.
In examining these facts, the receiver has determined that because the VIP points aspect of the multi level marketing program did nothing more than redistribute funds between affiliates in Ponzi-scheme fashion, points generated by/or accumulated by affiliates will not be an includable part of an affiliate’s claim for purposes of receiving a distribution from the Receivership Estate.
So there you have it, on the record that Zeek Rewards’ Ponzi points are and always were worth dick.
The real value an affiliate contributed to the scheme was not publishing spam, creating or purchasing fake penny auction customers, it was directly tied into how much of their own money they invested into the scheme (and indirectly how much money they convinced other affiliates to invest).
These personally invested amounts will be all that is claimable to affiliates who participated in the scheme and did not receive a positive ROI. Those that did of course will be required to pay it back (despite running around trying to convince everyone nobody lost money in the scheme).
Having professed that VIP points were nothing more than a virtual currency that was completely worthless outside of the attached Ponzi scheme, the Receiver’s comments above come of course as no surprise.
So why am I sitting here writing about it?
Following the closure of Zeek Rewards a plethora of MLM companies have popped up, all using identical or slight variations to the Ponzi points model Zeek Rewards took mainstream.
- JubiRev accepts investments from affiliates in the form of “JubiBucks” and ultimately rewards them with “JubiPoints”. Each JubiPoint pays out a daily ROI for 80-105 days (determined by how much money an affiliate invests).
- GoFunRewards accepts investments from affiliates in the form of “Lifestyle Dollars” and ultimately rewards them with “Reward Credits”. Each Reward Credit pays out a daily ROI for 100 days.
- Vicesus accepts investments from affiliates in the form of penny auction bid purchases and ultimately rewards them with points. Each Vicesus point generates a daily ROI for “up to 90 days”.
- OurGV accepts investments from affiliates in the form of monthly membership fees and ultimately rewards them with “shares”. Each OurGV share generates a daily ROI (non-expiring).
- Bidify has undergone several revisions to its compensation plan following Zeek Rewards’ collapse, currently accepting investments from affiliates in the form of purchased bids and ultimately rewarding them with Customer Acquisition Bonus points (CABs). Each CAB point generates a daily ROI for 60 days.
- Blue Bird Bids accepts investments from affiliates in the form of monthly membership fees and ultimately rewards them with “shares”. Each Blue Bird Bids “share” generates a daily ROI (non-expiring).
As you can see, there’s no shortage of “revenue sharing” Ponzi points MLM companies with business models similar or identical to Zeek Rewards that have launched since August last year.
Why affiliates and the large factions of the MLM industry continue to believe that minor tweaks to the Ponzi scheme revenue sharing model will somehow negate the basic underlying Ponzi scheme fundamentals of the model (affiliates invest money in one way or another and are paid a daily ROI from newly invested money) however, is beyond me.
With those who earnt money in the Zeek Rewards Ponzi scheme facing clawbacks forcing them to return anything they earnt over their initial investment into the scheme, those who lost money waiting almost a year and counting for a return of their money and now the confirmation that big “point” balances on a screen are just that and not worth anything, it doesn’t seem like the smartest of moves.
This comment was left by Kasey in another article (AdWallet), I’m republishing it here for relevancy reasons:
No mention of KT’s warning against “revenue-sharing” opportunities? 😀 (Yes, it’s self-serving)
A technical correction to the article:
I striked out “points”. You should probably replace it with “earnings”, “money” or other similar expressions indicating money rather than points. People were talking about all the MONEY they made in Zeek, not all the POINTS. 🙂
@Kasey
Wanted to keep the focus on the opportunities mimicing Zeek Rewards. KT’s article and involvement in Bidify is a seperate issue altogether :).
Dunno what’s going to happen to Bidify, it appears to be in steady decline even with the latest comp plan changes.
Agreed, think I slipped the wrong word there. Thanks for the correction.
An easy way to analyse MLM Ponzi schemes is to completely separate money and points from each other.
A: Money coming IN from investors
B: Point generator
C: Money being paid OUT to investors
If a program has a type of point generator as a significant part of the program then it probably is a Ponzi scheme (or pyramid scheme, or a hybrid).
B can be completely separated from A and C in some cases, e.g. when it only involves virtual currencies (e.g. “Cash available” is used to buy “sample bids”, which in turn will generate “profit points”, which in turn is used to calculate daily profit share in “RPP”, which is added to “Cash available”, which can be used to buy “sample bids”, and so on).
The logic used here is far from bulletproof, it will only work for a specific type of schemes.
The easiest way is probably to analyse whether or not the program has some streams of money coming in from “the outside”, rather than from the investors themselves.
Here’s an article about the town that ZeekRewards was located:
http://www.usatoday.com/story/money/business/2013/03/30/authorities-600m-scheme-incubated-nc-town/2037975/
The article in USAtoday was interesting. NC Attorney General’s office received the first complaint in November 2011.
“Jurisdiction issues” is a very common problem when dealing with authorities. I solved a similar issue in Norway in 2009 by clearly identifying what the case was about, sending it to one agency that clearly didn’t have the correct jurisdiction (and I told them about it, too).
Within a week it had been sent to 3 different agencies that all had correct jurisdiction in different parts of the case.
ANMP’s endorsement was rather funny. They were SO serious about it, seeing the profit sharing model as a new “industry standard” that would revolusionize the industry. 🙂
“A model that will revolusionize this industry, where EVERYONE will make money, it doesn’t even require customers to work”.
The sadest part is Burks is now using the oldest excuse in the scammer’s handbook: the victims deserved it.
Just for that, he should get jail for life.
Burks is no different than any other hyipster. Just older and too senile to keep quiet.
The points were never worth money there were just a basis for the ROI. If everyone took there profits out one day and there were no profits from the auctions then there would be 0 ROI and no morpay outs after that day.
My question is, was there enough money to pay the one day profit?
You have to look at it as a rolling 90 day ROI.
Due to the compounding of virtual money (creating points out of a ROI that was never paid out, whilst paying that actual money out to other affiliates creating a deficit within the system), if Zeek had enough reserves to pay everyone out for five days (3 billion VIP points) on the day the SEC shut them down.
This is based on the average new investment of $5M a day in July 2012. In that same month, it’s also worth noting Zeek Rewards paid out 160 million but only took in 162 million.
Due to the compounding nature of the scheme, it was clearly on the verge of collapse whether or not the SEC stepped in when they did.
But you have to PAY MONEY (“buy bids”) to get points.
So the overall effect was still put in money, get it back out little bit at a time, hopefully eventually get back more than you put in.
Remember, the daily profit rate was something they made up as they go along. It was NEVER calculated, but manually entered. They said so many times. They made it up day by day to make it LOOK legit. It was a FRAUD.
The point grows at an outrageous rate that cannot be matched by reality. Only the hype by the HYIPsters and “word of mouth” about easy money kept it going as long as it did.
People just *want* to believe there really is a path to “easy money”.
Of course there was enough MONEY to pay out one days’ profit.
That’s how a HYIP ponzi fraud works.
Let’s assume a ponzi receives $100, on which on pays a supposed “1% per day” ROI.
This means it would take 100 days @1% per day “ROI” before the original amount was used up and the user realized he/she was being ripped off and there was no more “ROI”
Make that figure 100 X $100 and it’s easy to see how a simple computer script could make it look like those 100 people are receiving 1% per day ROI, ESPECIALLY if none of them attempt to withdraw their “ROI” instead of leaving them as numbers in their account
If nobody withdraws cash, at the end of 100 days, the HYIP ponzi operator is left with 100 X $100 cash in his hand, while all the members have is a pretty “back office” telling them they are now in profit.
After a HYIP ponzi fraud publicizes the fact it has 100 happy campers out there, all of whom will testify their ACCOUNT has been growing at 1% per day, it’s not hard to see that one member dropping $1000 into the HYIP could extend the fraud for months.
$1000 will pay a heck of a lot of $10 members 1% a day for a bloody long time.
It’s not until the number of new members and new money start to decline, the operators run away or the authorities step in the real state of the accounts is revealed.
Which is exactly what has happened with Zeek
@Littleroundman
Thanks for the explanation.
What is the role of the founding members?
I can’t find the particular receivers’ document ATM, but, in it he reveals that many/most of the “founding members” had invested very little actual cash of their own, but had withdrawn a million plus dollars in some cases.
IOW, “founding members” are usually the legitimate appearing “ordinary” people used to con others into joining.
IM(very)HO, one good “true believer” is worth 100 paid pimps or shills to a HYIP ponzi when it comes to bringing in “newbies”
Many/most consumers are now semi aware of obvious ‘net fraud and on the lookout for the stereotypical smart talking car salesmen types.
Throw a few “true believers” into a HYIP, and defenses come down for many people, ESPECIALLY if the person can sneak in some religious connection.
They setup the scam, be the initial shills, and dragged people they know (from previous ventures probably, their “existing leads”) into it.
They are often “judas goats”.
You have 2 or 3 types of founding members:
1. Friends or business friends of the main organizer.
2. People with experience and connections
3. People investing, eager to get a position high up in the system, to kickstart the project.
They can’t be clearly separated, but I divided them into 3 groups anyway. Some of them will usually be offered more profitable conditions than the rest of them.
One of the experienced pyramid scheme organizers in Norway even wrote a “How to” book about it, with different rules you should follow when running a pyramid scheme, from the beginning to the collapse and restart.
Littleroundman and Chang offered two explanations, and mine is the third. You can combine all of them or use them one by one.
For what it is worth…I wish someone would research the influence Dani Johnson had on the massive scale this thing reached.
I was first introduced to Zeek by a person firmly entrenched in the Dani Johnson training and community. Because of my initial trust in Dani Johnson and the people from that community who were involved in Zeek, I let my guard down and shushed the voice of reason that tried to get through to me.
This person Dani Johnson, she has set herself up to be pretty well protected from any blame put on her by stating that she does’t endorse any “MLM”. But once you are drawn in, you quickly start to absorb the culture and mindset that goes hand in hand with the MLM universe and all its categories and sub categories.
One of those mindsets is “Shut up and Follow Directions”. This is strongly strongly pushed and if you are caught asking critical questions, you are ridiculed, even shunned.
It also does not help that she was a guest on Oprah Winfrey, and was featured on ABC Secret Millionaire, all of which lends her much credibility.
I am not saying she is at fault for Zeek, of course she isn’t, but I do believe her influence and teachings of blindly following, was a major contributing factor in the sheer numbers of people who were taken in by it.
Being in a cult of personality can seriously affect your financial outlook (usually negative). Steven Hassan’s cult deprogramming guide will often help.
http://www.amazon.com/Steven-Hassan/e/B000APQYV4
That idea is plain stupid to follow, unless the idea is to get OTHERS to follow it (and YOU are the one making money on it). But I can’t identify it out of context with the rest of her ideas. I don’t have TIME to do it, either.
Zeek was able to manage that on its own, without her help. Her ideas might have contributed in some cases, but they didn’t play any major role. No one has mentioned her before you did.
Paul Burks (Zeek’s owner) was a former magician in the 1980-ies and 90-ies. So he was relatively skilled in how to direct people’s attention towards or away from something, using very simple methods. He was able to fool most people.
So it wasn’t about whether or not people blindly followed instructions, it was about how people were willing to mislead themselves by using their own ideas (e.g. what they SEE and how they’re interpreting it).
But I never paid any attention to anything Paul Burkes said or did. He was non existent when I joined. I never saw him nor heard him.
It would not have mattered because I was being told that if I wanted to succeed and be in the 2% of the population and not in the 98% population, then I had to just Shut Up and Follow Directions.
Since these things spread mostly by word of mouth, recruiting, etc., then I am assuming that many more joined Zeek on blind trust because someone they knew in the Dani community told them about it or asked them to join.
Just my thoughts from my own personal experience. I didn’t know that I was going to be addressing my comment to someone as profoundly knowledgable and full of wisdom about the Zeek situation and ins/ outs and fine points. Lol, sorry about that.
Also, there are currently MANY people in the Dani Johnson community who are currently involved (not me) in Enpower Network, and Destination Travel, as well as another similar type travel business that Dani is somehow involved with, although I have never been able to figure out just exactly how.
Even if she is not directly involved in it, she makes no secret that she approves of it, and tends to favor the people in that business, both at her seminars and in her personal life.
@Incognito, I think what you are saying is Dani Johnson tapped into the “vulnerable population” who are more receptive to the message and advice she was offering, which made them even MORE vulnerable to the various get-rich-quick schemes out there.
Or to offer a very broad and probably bad analogy, you all had a little bit of a thirst (for money), but managed to control it so far as you want to pick to right source to drink from, or at least learn to pick the safe ones.
Then she came along and plainly told you “if you want to actually find water, you have to actually go out there and look for them!”. And some of you ended up picking sources that are… not so good for you.
Motivational speakers can be like that. Their call to action were not accompanied by solid how-to that came with true experience.
@K. Chang, yes, you put it about right. Thank you. And she did so without making any attempts to draw clear distinctions between good water and bad water.
In fact, the teaching leads you to think that whatever pops up in front of you, DO WHAT IS IN FRONT OF YOU, God must have surely put it there, after all the person sitting next to you is happily involved in Zeek.
Do I want to be in the 98% of the population that is dead or dead broke by the age of 65, or do I want to be in the top 2% ? Should I look more closely at the blaring fact that if this Zeek thing is true blue, then hell, I will be able to buy the Hawaiian Islands after awhile?
Nope, SHUT UP AND FOLLOW DIReCTIONS. Yes mam.
I take full responsibility for joining Zeek, no one held a gun to my head. Paul Burkes was a magician, but really, all it took was a person with their blinders off to see the impossibility of it.
I was vulnerable yes, more like desperate to improve my situation, so I just shut it out by assuming that someone up at the top had to know what they were doing, else it would not have been “compliant” as they claimed they were.
Exactly. We don’t need to SAY anything in order to make people believe in something. Paul Burks was rather anonymous, but the SYSTEM he had set up was designed to mislead people.
You accepted several ideas before you joined, e.g. about how profitable penny auctions could be. You accepted several ideas when you were an affiliate, e.g. the idea that “Cash available” and “RPP” was about real money.
He didn’t have to tell you “Cash available = money” to make you believe in it. You ASSUMED it was real.
Here’s James Randi about assumptions:
That’s the dangerous part about “law of attraction”. Those people actually believe that if you become more “receptive” to what you want, then what you want will “come” to you.
The problem is when you become more receptive to “money”, what you attract is a bunch of scumbags that actually want to TAKE money away from you.
I think the announcement that Zeek Rewards points are officially worth $0 is pretty funny when I remember how Zeekheads were constantly telling me about how much “money” they were making after looking at a lot of pretty numbers on a computer screen.
Oh I wonder how many ex-Zeekers are keeping track of their point balances from the day it was shut down in vain hope that someone will start Zeek back up? Or is anyone still hanging on to that pipe dream any more?
I saw a printout of my cousin’s account activity sheet and it certainly appeared like she was in the money. On her own part, she was absolutely sure her initial investment had grown by 70% in two months…and then the SEC stepped in.
If I had to generalize I would say that people are more likely to believe something is real when they see it in writing, even though the only thing that is real is the paper and ink.