zeekrewardsIn contrast to Paul Burks’ criminal trial brief, the Zeek Receiver’s facts make it abundantly clear Zeek Rewards operated as a Ponzi scheme.

Like all classic Ponzi schemes, the vast majority of the Zeek winners’ money came from the Zeek losers rather than legitimate business profits.

Of the over $900 million that was paid in to Zeek, only approximately $10 million (1.1%) came from actual retail purchases.

More than 97% came from the sale of “VIP bids” and “subscriptions,” which were the currency of the scheme. And, nearly all (93%) of those payments came from net losers.

Two of the primary creators and operators of the ZeekRewards scheme have already admitted it was a Ponzi scheme and pleaded guilty to criminal conduct in connection with the scheme.

In sum, the evidence that ZeekRewards was a Ponzi scheme is overwhelming.

Even the Defendant class’ expert has acknowledged finding no evidence that “disproves that the business as a whole operated as a Ponzi scheme.”

Long-time readers will remember Zeek’s victims had to cough up $35,000 to pay for the net-winner’s expert witness analysis.

As above, that analysis failed to disprove Zeek Rewards wasn’t a Ponzi scheme. Armed with that conclusion, the Zeek Receiver has filed for summary judgement against Zeek’s net-winners.

In total, Zeek’s “net winners” (those who received more money from Zeek than they paid in to Zeek) received over $282 million in net winnings, with the largest winners each receiving well over a million dollars.

Largest winners named in the Receiver’s lawsuit who have so far refused to settle include:

  • Jerry Napier (over $1.74 million)
  • Durant Brockett (over $1.72 million
  • Darren Miller (over $1.63 million)
  • Rhonda Gates (over $1.42 million)
  • T. Le Mont Silver Sr. (over $773,000)
  • Global Internet Formula, Inc. (owned by T. Le Mont Silver, over $943,000)
  • Karen Silver (T. Le Mont Silver’s wife, over $600,000)
  • Aaron and Shara Andrews (over $1 million)
  • Innovation Marketing, LLC (owned by Aaron and Shara Andrews, as above)
  • David and Mary Kettner (over $930,000)
  • Desert Oasis International Marketing, LLC and
  • Kettner & Associates, LLC (both owned by David and Mary Kettner, as above)

Default judgement has already been granted against net-winners Michael Van Leeuwen, Todd Disner, David Sorrells, Trudy Gilmond and Trudy Gilmond, LLC.

In September of 2015, Berkeley Research Group was authorized to act as an expert witness for the Zeek net-winner class. The Receiver’s expert witness is FTI Consulting Inc.

David Turner, a Senior Managing Director at FTI who regularly performs analyses of financial and accounting data and who is an expert in the areas of system and database design, management and analysis, led the FTI engagement and authored the expert report detailing FTI’s findings.

In Mr. Turner’s report, he first concludes that nearly all funds (approximately
97%) came in to Zeek in the form of payments made for VIP bids and subscriptions from Affiliates and that Zeek’s auction business produced no additional revenue.

Without new incoming VIP bid payments, there would not have been sufficient funds from which to pay Affiliates.

Then, after noting that the ZeekRewards scheme resulted in a significant number of net winners (there were over 9400 individuals in the United States who received at least $1,000 more in payments from Zeek than they paid in to Zeek), he states that nearly all of the net winners’ money came from the contributions of Zeek net
losers.

Again, over 97% of funds paid in to Zeek came from VIP bids and Subscriptions, and approximately 93% of these funds came from usernames that were net losers.

Thus, the primary sources of funds used to pay RPP awards were funded almost entirely by usernames that were net losers.

The Net Winner Class’ expert is Berkeley Research Group (“BRG”), who despite
an expansive opportunity to review the RVG records and ask questions of FTI, has not raised or suggested any material objections or evidence that challenges FTI’s
conclusions.

In its “Phase II” report, BRG reached two conclusions (bolded in the report):

a) [B]ased upon a preliminary analysis, it does not appear that the magnitude of profit from the auction business would materially impact the assessment of whether or not the business, taken as a whole, operated as a Ponzi scheme.

b) As a result of our testing in Phase II, we have not found evidence that definitively disproves that the business as a whole operated as a Ponzi scheme.

Both of these conclusions are, of course, fully consistent with FTI’s conclusions.

Dropping $30,000 on an expert witness in the hope they’ll come up with a reason for you to keep your stolen Ponzi money, only for them to conclude Zeek Rewards was a Ponzi scheme?

Ouch.

In light of these findings, the Receiver is now asking the court to order

judgment against each of the named Defendants in the amount of their net winnings from the ZeekRewards scheme.

With respect to the Net Winner Class, the Receiver seeks a declaratory Judgment determining that the net winnings they received were fraudulent transfers from RVG that must be repaid to the Receiver and are subject to a constructive trust for the benefit of the Receivership Estate.

Whereas the named net-winner clawback amounts are not in dispute, the Receiver wants to establish a process for unnamed net-winner class members.

This process,

to be set by the Court, (will) provide class members the opportunity to respond to the Receiver’s calculation of their net winnings.

If the Receiver’s motion is granted, named net-winners will have full judgement entered against them.

Unnamed net-winners (anyone who made $1000 or more from Zeek in the US) who refuse to settle once their net winnings are determined, will eventually face a similar fate.

The Receiver asserts he ‘will pursue collection of these judgments vigorously, and expect(s) the ultimate amount collected will be a substantial sum‘.

The Receiver’s June 30th “Motion For Summary Judgement Against Remaining Named Defendants And Partial Summary Judgement Against The Net Winner Class” filing is available from the Zeek Rewards Receivership website.

Stay tuned for a decision on the matter…

 

Update 30th November 2016 – On November 29th summary judgement was granted against the entire Zeek net-winner class.