Zeek Reciever sues Gerry Nehra for over $100 million
In what is probably one of the more anticipated Zeek Rewards clawback efforts, Gerry Nehra is now being held accountable for his role in the $850 million dollar Ponzi scheme.
Filed on September 21st against Gerald P. Nehra, Nehra and Waak, Gerald P. Nehra, Attorney at Law PLLC, Richard W. Waak and Richard W. Waak Attorney at Law PLLC, the Receiver’s lawsuit is part of ongoing efforts to ‘recover damages for the harms incurred by RVG‘.
Zeekler has been focused on compliance since last year when the company hired the Nehra & Waak law firm to review every aspect of the Zeekler program to ensure all was in compliance.
Rex Venture Group was the parent company of Zeek Rewards, who Gerry Nehra very publicly represented.
In an attempt to justify the guaranteed 125% ROI Zeek Rewards initially offered investors, said Paul Burks to a gathering of his top investors in late 2011:
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.
Meanwhile, according to the Receiver, the reality behind Nehra’s representation of Zeek Rewards was an exhibit of “willful, wanton, and outrageous” legal failure:
By virtue of their knowledge of RVG and ZeekRewards and their legal expertise, Nehra and Waak knew or should have known that RVG was perpetrating an unlawful scheme which involved a pyramid scheme, an unregistered investment contract and a Ponzi scheme.
Despite this knowledge, Nehra and Waak encouraged investors to participate in the scheme by knowingly allowing their names to be used in providing a false façade of legality and legitimacy and gave improper legal advice that allowed the scheme to continue far longer than it would have without the Defendants’ support.
To this day, how “the number one MLM lawyer in the world” failed to identify the Zeek Rewards Ponzi scheme defies belief.
Nehra and Waak’s improper and negligent actions, which breached their fiduciary duties to RVG and assisted RVG’s Insiders to breach their fiduciary duties, caused significant damage to RVG.
With their inside knowledge of multi-level marketing schemes and access to RVG’s Insiders, Nehra and Waak knew or should have known that insufficient income from the penny auction business was being made to pay the daily “profit share” promised by ZeekRewards.
The Defendants knew or should have known that the money used to fund ZeekRewards’ distributions to Affiliates came almost entirely from new participants rather than income from the Zeekler penny auctions.
Further, based on their inside knowledge and access, Nehra and Waak knew or should have known that the alleged “profit percentage” was nothing more than a number made up by Burks or one of the other Insiders.
With RVG’s and the Defendants’ knowledge, Affiliates regularly and openly touted the consistent payments in their recruiting of new participants.
This fake consistency should have, at a minimum, caused reasonably diligent legal counsel to inquire further about the validity of the alleged profits.
Indeed, the program publicly advertised historical average returns of 1.4% per day, which no legitimate investment could accomplish.
But, Nehra and Waak deliberately turned a blind eye to these incredible claims and chose not to seek further information.
As long as the money was flowing in, Nehra and Waak evidently didn’t care what Zeek was.
It was or should have been obvious to the Defendants that ZeekRewards succeeded because it promoted this lucrative “compensation plan,” offering large amounts of passive income to entice individuals to participate in the scheme.
Nehra and Waak knew that participants in the ZeekRewards scheme invested money in the scheme expecting that they would receive profits from the Zeekler penny auction or other Zeek efforts.
Thus, Nehra and Waak knew or should have known that RVG, with their assistance, was promoting an unlawful unregistered security.
Finally, Nehra and Waak knew or should have known that the ZeekRewards compensation plan was paying Affiliates to recruit other Affiliates in an unlawful pyramid-style payment system.
Nehra and Waak, although they knew or should have known that ZeekRewards was an unlawful Ponzi and pyramid scheme, nevertheless negligently and falsely told RVG that the structure of the RPP was “legally defensible.”
This further encouraged the RVG Insiders’ desires to keep the substance of the unlawful scheme intact as long as it was making them money.
Nehra and Waak continued representing RVG and billing it for their services through July 2012, the month before ZeekRewards was shut down.
And it wasn’t just a failure to recognize the glaring Ponzi fraud taking place under their noses, Nehra and Waak also actively promoted the scheme too.
Because of the lucrative, seemingly “too good to be true” claims being made by RVG and ZeekRewards, many potential investors were skeptical of whether the scheme was legal and legitimate.
So, RVG enlisted the aid of Nehra and Waak and other legal counsel to assist in promoting and legitimizing the appearance of the scheme.
It was through this promotion, that Gerry Nehra and Richard Waak utterly failed the MLM industry as attorneys:
The Defendants knew or should have known that ZeekRewards was an unlawful Ponzi and pyramid scheme.
In addition to their legal experience and knowledge of the scheme, they received specific inquiries on this topic. As one individual wrote in an email to Nehra:
“Would you or Mr. Grimes be able to assist me in my responding to a request from a prospective affiliate . . . for me to provide a letter confirming that Zeekrewards and associated entities are not Pyramid nor Ponzi.”
Yet despite their knowledge that ZeekRewards was a fundamentally flawed and unlawful pyramid and/or Ponzi scheme and was selling unregistered securities, the Defendants allowed RVG to use their names to encourage investors and potential investors to believe that ZeekRewards was a lawful enterprise.
And it wasn’t just Zeek Rewards’ management they failed, but its affiliates too:
Nehra and Waak knew that their continued representation of RVG encouraged prospective ZeekRewards affiliates to invest with the scheme and existing affiliates to continue investing, thus perpetuating the scheme, deepening RVG’s insolvency, and causing significantly more loss to RVG than it otherwise would have incurred.
As one affiliate wrote to Nehra on April 27, 2012,
I have been advised by another affiliate of Zeekler that your company Nehra & Waak is the law firm hired by Rex Venture Group LLC to handle their legal affairs.
I am seeking to verify that this information is accurate.
You and your law firm are highly respected and would definitely bring some credibility to Rex Venture Group.
Another affiliate wrote to Nehra:
I am now leaving my job, that I have been working on these last 12 years, because I totally believe [in] this company [e]specially because of you . . . and of course Mr. Paul Burks and his incredible team.
The Receiver also calls out Zeek Rewards’ pseudo-compliance, which he identifies Nehra and Waak to largely be the architects of.
Nehra and Waak knew or should have known that ZeekRewards was an unlawful program that might change its terminology and surface appearance but would not change in substance.
And the Defendants were closely involved in the cosmetic changes ZeekRewards made to the program during the summer of 2011 so the scheme could fly below the radar of government authorities.
Paid top dollar, this is the type of legal advice Nehra and Waak provided Zeek Rewards:
The Defendants’ notes reflect that they were more concerned with terminology than with recommending substantive changes that would make the program lawful:
“Be careful. This program already looks a lot like gambling – You don’t need to use gambling terminology in even your internal docs.”
Further, Nehra and Waak reviewed and provided comments on an adjusted compensation plan provided to RVG by Keith Laggos in June 2011, noting that ZeekRewards should not speak of “selling businesses,” since this is a “pyramid element,” and that it should instead speak of “selling bids.”
In another recommendation of terminology over substance, the Defendants encouraged ZeekRewards not to refer to affiliates’ “purchasing” VIP bids, instead recommending that it should speak of the “sales” of VIP bids.
Similarly, they recommended that Zeek not state that affiliates were required to “purchase” a subscription – instead, Nehra and Waak recommended that Zeek use the term “earn qualifying PV” or “‘sell’ a subscription,” because “If personal purchase of a commissionable product is the only way for an affiliate to participate in the cash rewards, the deal is a pyramid.”
Rather than truly “clean up” Zeek Rewards as Paul Burks claimed, in reality all Nehra and Waak did was polish a Ponzi turd.
That polishing now sees the Receiver accuse them of legal malpractice, negligence and breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment and constructive trust.
The Receiver alleges that Gerry Nehra and Richard Waak’s conduct resulted in damages in excess of $100 million dollars. The Receiver is also seeking plus punitive damages, an award of full restitution and any transfer of funds, assets, or property from Zeek Rewards to either Nehra or Waak.
Gerry Nehra and Richard Waak were issued a summons on the 22nd of September, with neither of them having yet replied.
Stay tuned…
Footnote: Our thanks to Don@ASDUpdates for providing a copy of the Receiver’s September 21st complaint against Nehra and Waak.
Update 15th October 2015 – Claiming that the SEC’s complaint ‘raises complex issues of law’, Nehra has asked for an extension till the 16th of November to reply.
Doesn’t seem all that complex to me. Zeek Rewards was a Ponzi scheme and as an attorney with adequate knowledge of such things you failed miserably in preventing it.
Update 17th November 2015 – As per a new filing on the 16th of November:
The parties are discussing details of a settlement and expect to reach an agreement shortly.
If no agreement is reached by the end of November, Defendants will file responsive pleadings.
Will be interesting to see if they reach a settlement and furthermore how much Nehra pays back. He’s going to get hit again for TelexFree at some point too no doubt.
Well, he did the same thing in ASD Cash Generator and when he testified at the Evidentiary Hearing, the Judge said he helped prove the Prosecutors case! Almost fell off my chair laughing at that one, and how he kept his reputation intact afterwards was shocking and surprising.
Finally getting the comeuppance he deserves. Long overdue!
I am surprised he hadn’t been disbarred yet.
And don’t forget Nehra’s on stage endorsement of TelexFree’s very “solid legal footing.”
It’s long past time that Gerry starts repaying some of the money he took to legitimize scams to the victims he helped create.
I believe it. Number one in something doesn’t have to have a positive connotation. We could have ‘the number one gangster in the U.S.’ , ‘the number one drug lord in Columbia’, and so on.
It fits perfectly if one has the correct thought process; and his title is further proven accurate by the receiver’s actions.
I think you can stab someone and not get disbarred. It’s just amazing.
What I would like to know, if everyone knew or accused of knowing it was a ponzi, why did it take authorities nearly 2 years to take action?
Didn’t the authorities know but everyone else did? If they took action at of the start of these ponzis, then momentum and millions wouldn’t be pumped in.
Or dare I say it, do the authorities sit back and wait, then rub their hands together at the millions they will make in fees.
1) It was only one of a large number of similar frauds which existed at the time. The “authorities” are severely hamstrung by government imposed funding restrictions which limits their ability to prosecute.
2) If you read the original complaint documents, they were investigating at least twelve months before taking action. This isn’t TV we’re talking about here, where a crime is committed, investigated, solved and prosecuted in forty minutes plus advertisements. Evidence needs to be collected and every “i” dotted and “t” crossed before action is taken.
3) Defendants are considered innocent until proven guilty in a court of law. The authorities simply can’t come out and declare a business is a ponzi or pyramid.
Thankfully, the SEC can use civil law to stop the fraud and freeze the assets. If they had to rely on criminal law, it could take years before a case made it into court. Years which would give the “innocent until proven guilty” defendants ample time to dispose of the proceeds.
Authorities don’t get any of the fees. The receiver and his staff in fact gave government discount rate for doing this, and all expenses have to be approved by the presiding judge.
Forensic accounting is NOT cheap, and ponzi schemers don’t keep detailed records of their own crime. They are busy taking and spending money to keep the scam going.
The people you should be griping about are people like Craddock who tried to hire lawyers to DELAY the receiver through multiple motions, such as appointing an opposing “examiner” to slow down the receiver.
And remember, Craddock, et al raised MORE money from Zeek victims claiming he could have exonerated Zeek and he’s going to hire Denton and all that.
Sad to think some public councils will endorse/represent a scam when the dangling carrot has dollar signs printed all over it and with not a care if the endorsement will damage their rep at some point down the line.
I’m not griping, merely asking a question. A ponzi is a ponzi by its inception.
So day one, Oz puts up a break down of a scheme, and calls it a ponzi. Ponzi’s are illegal are they not.
Authorities surely can go in and investigate, tie the ponzi owner up in legal stuff, which at that point, the owner has made very little, so it would break them financially as they can’t afford defend the accusations.
If its a ponzi structure, its ponzi.
The US has a current estimated population of over 320 MILLION people.
The “usual suspect” HYIP ponzi forums list multiple thousands of HYIPs, ponzis and pyramids.
Several hundred thousand more “get-rich-quick” schemes can be found on the ‘net.
How much of your tax dollars would you like to be spent investigating each and every one of them on the off-chance it will evolve into a “Zeek Rewards” or a “TelexFree”
I can’t speak for Oz, but, I’m sure there is nothing he or other anti fraud bloggers would like to have than an “in” with the relevant agencies so they could act on his / their recommendations.
Unfortunately, that ain’t the way it works.
I must be missing something here then. I thought if they are illegal they are illegal, whether they evolve into Zeek or not lol
So they spend the tax dollars investigating the large ones so they can cover their costs then lol
Some 35,000 haven’t signed to get money released and I’m sure ten’s of thousands haven’t bothered to claim, I know 4 people here, that had no contact by the receiver and no idea how to claim their money.
I suppose the money left, that hasn’t been sent to net losers goes into the Government coffers.
So you can run an illegal ponzi scheme as long as you keep it small?
The ponzi structure alone is not illegal. It’s the act of operating the ponzi structure.
I see micro-cyclers being more common here on with west coast where people really don’t understand they are not actually making any money.
Many start within the hispanic communities as a group of friends cash gifting each other in a circle. Even the people who organize the whole thing do not understand the math just doesn’t work out.
The larger, more organized schemes which appear here and on other blogs are highly organized players who understand the game.
Upon inception, downlines are loaded up and promoters are brought in who have the ability to convince people they lost out too – but the next one will be the one.
Agencies generally cannot act until there is a crime or violation of some type. Nobody starts to complain until they stop being paid, or come to the realization they really are not being paid.
Either they will be lead by the perosn who brought them into the opportunity to another to try to make back their money, or they make a complaint to an appropriate authority.
Many learn their lesson and don’t want to admit in public they did something so careless with their, or their family’s life savings.
Once enough complaints come in, the squeaky wheel will get the grease.
Sad – but just the way it works.
Montana will usually halt illegal MLM programs relatively early based on some local state laws. Funky Shark was fined $40,000 for something a few months after pre-launch.
behindmlm.com/companies/funky-shark-fined-40000-by-montana-csi/
One of the reasons seems to be “software problems”. People are UNABLE to complete the Release/OFAC form because it simply isn’t were it should have been (in the claims portal → Status screen).
As I said in the original post:
Can you suggest a way the “authorities” could realistically deal with that volume and range of fraud and fraudsters, while keeping the costs to taxpayers within an acceptable range ??
It’s simply not possible or practical.
The best they can do is pick off the “next-big-thing” frauds such as Zeek Rewards and hope the resulting publicity results in the public becoming a little more careful with its’ investing decisions.
It should be also remembered that a large number of participants know exactly what they’re doing and the inherent risks of doing so.
Many of the 35,000 you mention who have not signed on to obtain refunds never will.
The reasons for that are many and varied.
Some because they aren’t real people and don’t want the “authorities” sniffing around their accounts, or are criminals themselves or, simply because they are serial HYIP ponzi / pyramid players who accept their losses as being part of the risk they take.
It’s just the way it is.
Authorities act upon investor complaints not reviews.
And, let us not forget that in many cases, it is the same players, serial promoters. In some cases it adds to their problems, in others, they almost seem to get away with things.
More often than not, the authorities go after the big fish, not the minnows or protozoa. And it take month/years to garner sufficient evidence to proceed in court.
As long as people are generally greedy, we will always have these schemes.
Which the reason serial ponzi pimps start a money grabbing scheme, let it collect money and names, drop it, and start a new one every 6 months to a year.
Law enforcement, by definition, is a REACTIVE process. That means you need enough victims to complain and be actually cheated. It is not a proactive process, i.e. “Precog” in Minority Report.
Remember even AFTER Zeek’s shutdown, there are folks (you can Google them) who claimed that “there were no victims until the government stepped in”?
The primary characteristic of a ponzi scheme is very few people “feel” cheated because vast majority were deceived by the false promises of large payback LATER. And the larger the ponzi scheme, the longer it can sustain itself because it’s taking in money faster than it’s going back out. The scheme also can prolong itself by inventing new withdrawal rules to slow the money going back out.
By the time the victims realized they’d been had and started complaining to the authorities, the schemer’s just about dead.
Don:
You also forget that all the major pimps, players, shills of these Ponzi’s all tell the members not to go to the authorities or they will ruin it for everyone.
This is far more complicated than you think and trying to make it out to be. Oz could do an entire article on this topic and still not cover all the issues deep enough for people to fully understand what all is involved and it takes to shut this stuff down.
In fact, Andy Bowdoin of Ad Surf Daily actually had a member go over his books, and he told Andy flat out ASD is a Ponzi scheme.
Andy decided to pay him off (let him withdraw the amount) in exchange for his silence. And the scam went on for another, what, 2-3 years, Lynndel?
Like I said, as long as people are greedy, these things will continue. If it sounds too good to be true, it probably is…..
Article updated with Nehra’s request for an extension to file his response.
Article updated with news of possible settlement.