CEO Paul Burks admits Zeek Rewards a Ponzi scheme
If I were to disappear today, it’d probably be a long time before any of you even knew it.
-Paul Burks, CEO of Zeek Rewards
Following the collapse of the Zeek Rewards Ponzi scheme, much speculation has focused on the extent of the involvement of Zeek’s executive management.
The SEC in their complaint claimed that Paul Burks single-handedly was responsible for manually adjusting the daily percentage ROI paid out to affiliates, but beyond that exactly who was responsible for what is unclear.
For the most part, Zeek Rewards executive management have gone into hiding and their whereabouts is currently unknown. Sales Director Darryle Douglas disappeared a few week ago due to “health reasons” and Chief Marketing Officer Dawn Wright-Olivares is yet to make a public appearance following the Ponzi collapse.
Recently appointed Chief Operating Officer Greg Caldwell has been largely silent but is believed to be helping investigators with their enquiries at a corporate level. Whether Caldwell still believes in the company or is merely performing contractual and/or legal obligations with Zeek Rewards however is unclear.
With no criminal charges having been filed, again speculation has been rife over whether or not there will be any future charges laid out. Primarily the focus in on Paul Burks who, other than paying a $4 million fine to the SEC, appears to have (for now) gotten off scott-free.
Claims as to why criminal charges haven’t been filed against Paul Burks and other members of Zeek Rewards executive management largely focus around the length of time investigations take place.
Currently the US Secret Service and North Carolina Attorney General’s Office are known to have investigations open on Zeek Rewards, but the status of each investigation is unclear.
A third agency was claimed to also have an investigation open into Zeek Rewards by the media but as of yet no further details have been made public.
Meanwhile those, perhaps still in denial about whether Zeek Rewards was indeed a Ponzi scheme, proclaim the innocence of Paul Burks and his team.
Troy Dooly of MLM Helpdesk in particular has recently started pushing the idea that Zeek Rewards might have been infiltrated by some sort of murky international Ponzi scheme ring.
But what if Burks knew all along what he was doing was a Ponzi scheme? What if not only he knew but did nothing to stop it?
Today we explore those very questions.
At the heart of this article is a new video that has surfaced in the last 12 hours that was shot by an attendee at a Q&A session.
Attendees include Zeek Rewards CEO Paul Burks and presumably some top company affiliates (most likely part of the 200 strong rumoured “Founders Club”).
Note that the linked video above is a copy provided by Troy Dooly from MLMHelpdesk in August 2012.
The original YT video was uploaded in December 2011 on the YouTube account ‘soljaboy2006’ as an “unlisted” video.
A few hours after this article was published soljaboy2006 pulled the original video offline.
As best I can tell, the video was shot sometime in late 2011 as in the video, Paul Burks (photo right) recounts how he “came up with Zeekler about a year and three-quarters ago” [4:42].
Zeekler was launched in January 2010 so a year and three-quarters would put the meeting that takes place in the fourth quarter of 2011.
The session, which goes on for about an hour covers a lot of the history of Zeek Rewards, the planning that went into it, some concerns the affiliates present have and Paul Burks future plans for the company.
Most damning of all however and what should obviously be the focal point of the meeting, is the admission from Burks that Zeek Rewards is a Ponzi scheme.
Shortly after someone refers to Burks as a “genius”, an affiliate present (photo right) who joined Zeek Rewards just “three weeks” prior to when the meeting takes place [16:08], asks Burks
[35:45] Chief, will there ever be a cap on our ability to reinvest?
For example in my account I have fifty (Ozedit: fifteen?) million bids and I’m taking nothing out of the system.
Uh, does that scare the system? Based on the thoughts, what’s the executive thinking on doing 800 million dollars or more?
If the question made Burks uncomfortable at all, he sure didn’t show it. Cool as an iceberg, Burks responded with
[36:06] Obviously you can’t sustain millions and millions and millions of dollars in rewards every day. To somebody for placing one ad every day, that’s not sustainable.
[36:20] We are looking at things now that will keep that realistic.
You can earn a great deal of money in rewards with our program, and right now we have people that are in the hundred thousands in VIP balances.
You can’t let that go forever, otherwise you would be operating a Ponzi scheme.
Since its inception till the closure of Zeek Rewards was shut down by the SEC on the 17th August, the company never placed any restrictions or caps on the amount of VIP points an affiliate was able to accumulate.
Thus, by Zeek Rewards CEO Paul Burk’s own admission, Zeek Rewards was a Ponzi scheme for the entire duration of the 20 months it was active.
Not only that, but in his admission Paul Burks clearly indicates that not only did he know what he was doing (by not having a cap) but that he was fully aware that in doing so he’d be running a Ponzi scheme.
Burks does go on to state that theoretical examples of how Zeek Rewards might cap affiliates generated points and earnings, but the fact of the matter is nothing was ever implemented. Furthermore, the SEC revealed that in July 2012 Zeek Rewards just managed to meet affiliate payouts ($162 million into the company with $160 million paid out in returns).
Regardless of what Paul Burks theoretical plans might have been, it was clear that long before the August 2012 shutdown, Zeek Rewards was, in Burks own words, a Ponzi scheme that operated as such for 20 months.
[37:56] It would be impossible to sustain forever, if you just let it grow and grow and grow, and then at some point set your (reinvestment) balance to 0% and start taking out a million dollars a day or whatever.
Yet up until the day Zeek Rewards was shut down, “grow and grow and grow” is precisely what Paul Burks allowed affiliates to do with their VIP point balances.
In reference to Zeek’s North Carolina head office, Burks previously stated ‘there’s not a lot that’s actually done here, as far as the day to day field operations (goes)’ [2:08], but maintained that ‘all of the management of the company is done here, between me and “Dama” and “Rebecca”‘.
[59:12] I went to a business training course when I was nineteen years old, I had an oldschool teacher.
This one thing that he taught over and over and over and over again that I never forgot. He said, “no matter what your business is, no matter how tall you are or how large you are, always sign the checks” (laughter).
He said “the businesses that fail almost always have an owner who let somebody else handle the money”. Nobody can handle the money like the guy whose neck is in the noose.
So, to answer your question about will we farm that part of things (the money side of Zeek Rewards) out, not as long as I’m here.
[1:01:20] There are three people in the company who are capable of handling the money and I’m one of those three and right now I do almost all of that.
But Dama, you heard her coming in, Dama is extremely capable with that stuff. She actually has a rubber stamp that has my signature on it that she uses for checks that we send out to the field.
And Roger, Roger has the authority to sign the company checks as well. Roger Plyler, he’s been with me for fourteen years.
Roger Plyler was Zeek Rewards’ Member Service Director and “Dama P” an Executive Administrator.
Despite the above claims though, at other times Burks’ involvement in the greater operations outside of the core Ponzi scheme appears to be that of a frontman.
At [11:35] into the video Burks refers to himself as a “titular figurehead” and that Zeek Rewards has ‘we have numerous people who know more about the day to day operation than I know‘ [11:52].
titular, adj: holding or constituting a purely formal position or title without any real authority.
When Burks was pressed on how affiliates actually make money through Zeek’s then recently added “Shopping Daisy” revenue stream program, claimed he “doesn’t know enough about it personally” [24:28] to provide an answer.
That said, Burks does claim to have personally mentored every one who works under him [11:56]. Who specifically he is referring to and what they individually were responsible for however is not made clear.
Whether Burks co-operation in divulging this information to the authorities has any connection to Paul Burks seemingly light punishment of just a 4 million dollar fine is also unclear. As I mentioned earlier, the SEC claim Burks personally fudged the daily percentage ROI paid out to affiliates to keep the Ponzi afloat but repeatedly throughout the meeting Burks seeks to distance himself from being involved in the day to day operations of Zeek Rewards.
Another point of interest in the meeting is the brief discussion that places concerning Zeek’s attorney Gerry Nehra (photo right) signing off on the legitimacy of Zeek Rewards.
Despite requesting the person recording the video to turn off the video before asking his question (‘yeah you, you can’t tape this, what I’m going to ask. Yeah, not this question‘ [15:02]), our camera man agrees but then simply places his recording device on his lap – still recording what is then discussed (there is a brief pause in filming but nothing appears to be lost in the conversation).
The man asking the following question is the same pictured above who asked Burks about a possible cap on affiliate’s VIP points:
[14:40] Obviously the biggest challenge to this company, in my humble opinion, is the feds, right? And let’s talk straight-talk.
[14:50]So as these groups, especially those that go wild with it (Zeek Rewards), will be generating millions and millions of dollars as it compounds daily, how tight is the relationship with – (hesitation and warning to cameraman about taping the question).
[15:12] How tight it the relationship with Nehra? What are the couple (Gerry Nehra and Richard Waak) putting in legally?
I’m sure it’s well thought out, but in terms of really making it (Zeek Rewards) as rock solid as possible, of course we all do the praying and you do the legal side right (laughter)?
Because if this will last even five years, can we really trust them – (at this point a woman talks over the man and I can’t make out what he’s saying).
[15:40] So my question, it’s just my one burning question, like how brutally within the realm of all we can do, how brutally is the legal being undiverted?
(Ozedit: I’m not entirely sure on the use of “undiverted” as it’s hard to make out exactly what is said)
At this point the woman sitting next to our camera guy asks if they have permission to record Paul Burks answer, to which he replies “no” [15:56].
However, luckily for us he continues to record the secret conversation:
[16:11] When we started this in January, we put the program together in a way that I thought was solid, completely solid. And we discovered, early on, that there were some lightning rods in there that had caused other companies to have problems.
As Paul Burks goes on to explain, these “lightning rods” of course were the 125% ROI that Zeek Rewards guaranteed investors during their first six months of operation.
What is especially worrying here is that Paul Burks seems to think offering investors a 125% guaranteed ROI in MLM is “completely solid”.
[16:37] That’s when we initially contacted Gerry Nehra. Nehra had done some legal research for me in the past with “Free Store Club” years ago.
Seven of our key players in Zeek Rewards had a relationship with him and wanted to get him involved, cuz he’s, he’s probably the number one MLM lawyer in the world.
Just having him on retainer and having him on our team, it goes a long way from keeping anybody from launching an attack. Because generally when Gerry Nehra is involved, the Feds know that he’s cleaned up the act really well.
Ad Surf Daily was a Ponzi scheme shut down by “the feds” in 2008. In the subsequent legal action against the company and founder Andy Bowdoin that followed, Gerry Nehra filed an affidavit in Federal Court claiming that Ad Surf Daily (ASD) “was not a Ponzi scheme”.
Nehra made this declaration after “cleaning up” Ad Surf Daily and signing off on it compliance wise.
Later ASD’s founder Andy Bowdoin confessed that ASD was a Ponzi scheme, pleading guilty to “wire fraud” after being arrested by the US Secret Service.
Despite this, Paul Burks seem utterly convinced that the mere mention of Gerry Nehra’s involvement in Zeek Rewards would reassure everyone they were legit:
[17:22] He (Nehra) just took our system apart. When he first came in he said “you can’t do this”.
You know, we were using terminology that I thought was applicable, like what we call the “retail profit pool” now we called “the compounder” in those days.
At this point somebody interrupts saying “I like that term” and the whole room erupts into laughter.
Functionally, the linguistic renaming of “the compounder” to the “retail profit “pool” is mechanically pretty much all that changed, meaning if it was a Ponzi scheme before then it was still one after the linguistic change.
Fundamentally, as was also the case with Ad Surf Daily, Nehra’s MLM legal compliance seems to be unable to get over the ineffectiveness of simply renaming something without actually changing the functionality of it.
No matter how many times I might refer to and insist everyone else refer to my television as a toaster, at the end of the day it’s still a television.
Gerry Nehra seems to wholly believe and would advise his clients however that, following my applied change in terminology, I would indeed then own a toaster.
[17:55] He (Nehra) said it doesn’t matter that you’re not doing anything wrong, it looks like you’re offering people an investment opportunity and you can’t do that.
If this is indeed what Nehra advised Burks, it truly is beyond belief. When the SEC took down the Zeek Rewards Ponzi scheme, it was revealed that 98% of the money being paid out as a daily ROI was money being invested by new affiliates.
Infact, one of the affiliates present in the Q&A session actually asks Burks ‘How is calculated the point share?‘ [46:04], to which Burks replies
if I told you that I’d have to kill you’ (laughter). That is entirely proprietary information there, our competitors would love to know that.
Yet after going over the Zeek Rewards business model, the only problems Gerry Nehra was able to identify was that they were using the “wrong terminology” and offering a 125% fixed return.
Note that Burks claims Nehra told him he was doing nothing wrong prior to linguistic terminology changes and changing the guaranteed 125% ROI offered to affiliates to a variable ROI (which was supposed to be pegged to Zeekler’s auction revenue but was in fact doctored up by Paul Burks each day).
I’m a big fan of if it looks and sounds like a duck, then it is a duck. And it is with all due respect that I challenge Nehra’s legal advice to Burks (not as a lawyer, as I’m not one) and state the reason it “looked like” Zeek Rewards was offering an investment opportunity to affiliates is because they were.
Some might suggest Nehra had no idea but I’d strongly contend that should you, as legal counsel be willing to put your professional name compliance wise on a company, you’d be completely aware of the inner workings and fundamental mechanics of the business – including money flow in and out of the company.
This is strongly supported by Burks detailing the specific reasoning Nehra gave for changing Zeek’s 125% guaranteed ROI to a variable ROI:
[18:14] He (Nehra) said you can’t offer a fixed percentage, 125% was what we paying. “You can’t do that”, he said.
“You can offer them a period of time that they can get rewards, based on their balance”. So we changed to the 90 days.
In changing from a fixed 125% ROI to a variable ROI over 90 days, all Zeek Rewards (on the advice of Nehra) did was introduce an implied ROI guarantee, in that nobody would sign up and invest should Zeek Rewards not pay out a high enough ROI over 90 days such that affiliates could grow their point balances and effective daily ROI.
Paul Burks himself goes on to acknowledge this:
[18:35] That also gives us some additional flexibility in the future. If needed, we can add more time to that.
If you swallow the company line that there is no guaranteed ROI upon investment into Zeek Rewards, one can only wonder why Burks might need flexibility in being able to extend the days affiliates receive a daily ROI on their investments.
It is only when you accept the implied ROI guarantee that Zeek Rewards implemented on Nehra’s advice, that creates a rolling 90 liability for the company in that it has to ensure every affiliate is paid out a large enough daily ROI to grow their point balance over any 90 day period.
Despite being a prominent flaw pointed out repeatedly in critical analysis of Zeek Rewards, this implied guarantee was largely ignored and discredited as being non-existent by the majority of Zeek Rewards affiliates, consultants and supporters.
As evidenced above however, Paul Burks and Gerry Nehra knew exactly what they were doing with the change and the underlying mechanics of it.
Burks closes the discussion of legal compliance by stating that Richard Waak and Gerry Nehra had given Zeek Rewards “a clean bill of health on the way things” were at the time.
Between late 2011 and the SEC shutting down Zeek Rewards in August 2012, no changes were made to the core mechanics of the variable daily ROI paid out to affiliates and the implied ROI guarantee it introduced, both of which Gerry Nehra signed off on.
And then of course there’s the ‘98% of the money paid out as a daily ROI to affiliates was simply newly invested affiliate money’… something I find it hard to believe Nehra had no idea was occurring given the information he would have had access to when making his recommendations to Burks.
As of yet criminal charges have not been laid against any individual involved in Zeek Rewards, be it management, employees, consultants or affiliates. With revelations like the above slowly leaking out of the 1 million plus strong affilaiate network however, one can only wonder not if they will be filed but when.
In closing, I’ll leave you with some rather tragic irony:
The key thing to remember as marketers is always tell the truth. Tell everything like it really really is [42:48]
-Paul Burks, founder and CEO of Zeek Rewards
Perhaps if Mr Burks felt the above also applied to the executive management of his company and not just its marketers, a good number of those who wound up involved in Zeek Rewards would not find themselves in the precarious position many of them do today.