Zeek Rewards affiliates can now claim Ponzi losses
I never told anyone to invest more money than they could afford, I didn’t tell them to do that. Never.
It’s their fault. Not mine. Don’t blame me.
– Paul Burks, CEO of Zeek Rewards
Amidst several ongoing challenges by Zeek Rewards affiliates who profited from the massive $600M Ponzi scheme, the court-appointed Receivership went live today with the long awaited affiliate claim form.
Affiliates who suffered losses as a result of participation in the Zeek Rewards Ponzi scheme, which if the SEC did not shut down was poised to collapse within months, have until September 5, 2013 to file their claims.
Failure to timely submit a Claim Form, submitting an incomplete Claim Form or submitting a Claim Form without supporting documentation may result in the complete disallowance of your Claim.
The Claim submitted on the Claim Form remains subject to a determination of the allowable amount, if any, of the asserted Claim. The requests for information on this Claim Form do not constitute and shall not be considered the basis for the determination of any Claim or distribution.
Note that, as previously discussed, Zeek Rewards affiliates will not be compensated on their Ponzi points balances.
Regardless of what an affiliate’s upline might have told them, the entire points system was simply monopoly money that didn’t exist.
Money invested by new Zeek Rewards affiliates was simply passed up and paid out to previous investors, on the assumption that new investors would continue to invest in the scheme to pay out those who invested before them.
The amount that will be paid out to affiliates is still uncertain, with the Receiver now looking to get an idea of how much was invested (and likely whether or not it matches Zeek Rewards’ haphazardly kept financials.
In a recently filed “Application for fees and expenses” by the Receiver, he writes
The Receiver continues to investigate the financial information of the Receivership Defendant and to marshal, identify, and secure potential assets of the Receivership Estate.
FTI Consulting (“FTI”) completed the preliminary validation of the information in the RVG databases. FTI also worked to reconcile the financial instruments the Receivership Estate deposited against the RVG databases in order to determine the total amount invested in ZeekRewards and the net winners and losers.
The Receiver continues to work with various financial institutions to obtain the necessary information for the analysis and reconstruction of the Receivership Defendant’s records and a determination of the funds of the Receivership Estate.
In addition, the Receiver continues to investigate and analyze accounts of, and payments and transfers to and from, key insiders, thirdparty advisors, and companies affiliated with RVG and/or its principals and key insiders.
Part of this process involves the investigation of transfers made to RVG accounts through various payment processors and e-wallets.
Additional or supplemental document requests, subpoenas for documents and/or testimony, witness interviews, and other means of discovery will be used to determine whether there are any additional outstanding assets that can be seized for the Receivership Estate.
Finally, the Receiver is working to locate additional Receivership Assets that were not previously seized by the United States Secret Service (“USSS”).
These potential assets are primarily held by institutions that previously turned over assets to the USSS, but which may not have released all Receivership Assets in their possession.
To give you an idea of just how hard those affiliates who profited in the scheme are fighting to keep the money they received from new investors,
The Receiver now maintains four interest-bearing bank accounts on behalf of the Receivership Estate.
One account has been used to deposit Affiliate-Investor payments (the “Affiliate Account”). Another account is reserved for the funds seized from financial institutions and payment processors by the United States Secret Service (“USSS”) on behalf of the Receivership Estate (the “Seized Asset Account”).
A third account is used as an operating account with funds primarily held or controlled by the Receivership Defendant pre-Initial Receiver Order (the “Pre-Filing Account”).
On March 22, 2013, the Receiver opened a fourth interest-bearing account on behalf of the Receivership Estate, which is being used to deposit the proceeds of settlements with net winners (the “Settlement Account”).
As of March 31, 2013, the Receivership Estate held approximately $85.1 million in the Affiliate Account, approximately $221.4 million in the Seized Asset Account, approximately $2.2 million in the Pre-Filing Account, and approximately $36,000 in the Settlement Account.
The Receivership has calculated that the top earners in Zeek Rewards walked away with approximately $291.6 million USD.
The Receiver currently estimates that net winner Affiliate-Investors received approximately $291.6 million in fraudulent transfers from the Receivership Defendant.
The Receiver Team intends to recoup as much of this money as possible for the Receivership Estate, but it is unable to estimate the portion of this amount that may be reduced to judgment and eventually collected.
The Receiver’s litigation team continues to evaluate the most efficient and cost-effective method for pursuing fraudulent transfer claims.
A deadline has been set for “net winners” in Zeek Rewards to settle with the Receivership by May 31st, 2013. In the months that follow, it is expected that the Receiver will ramp up efforts to secure funds from Zeek Rewards affiliates who profited from the scheme and refused to hand over their Ponzi earnings.
The Receiver’s clawback litigation is likely to be a combination of individual actions, group actions, defendant class actions, and other alternative dispute resolutions as approved by the Court.
Such proceedings will establish the key findings applicable to most, if not all, recipients of fraudulently transferred funds (findings such as the existence of a Ponzi and/or pyramid scheme).
They will also separately provide a forum for the efficient determination of the proper amount of each net winner’s repayment obligation.
This follows months of delays and stuffing around by Zeek Rewards’ top earners, not happy about having to return their earnings to those investors who lost money:
During the first quarter, the Receiver opposed the efforts by some of the largest net winners to have an “Examiner” appointed to represent all Affiliate-Investors.
As the Court is aware, on February 7, 2013, the Court denied the motion and declined to appoint an “Examiner.”
In addition, the Receiver filed a response in opposition to the Motion to Intervene and for an Order Dissolving the Appointment of a Temporary Receiver filed by two large net winners.
Furthermore, the Receiver filed a response in opposition to the Motion for an Order Requiring Release of Frozen Third-Party Assets, filed by the same net winners who had previously filed the “Examiner” motion.
These efforts by a small group of non-party net winners have continued to delay the Receiver’s efforts and increase the costs in marshaling the Receivership Assets for distribution to victims of the Scheme.
Finally, the Receiver has been engaged in a number of discovery disputes with various net winner Affiliate-Investors.
These disputes also delay the Receiver and increase the costs to the Receivership Estate.
Many of the top earners in Zeek Rewards have gone on to invest in reload “revenue-sharing” Ponzi schemes similar to Zeek, and are now actively recruiting new investors into them.
One such marketing spiel used is the promise that if a company or affiliate is not based in the US, that authorities there cannot take action against similar revenue sharing Ponzi schemes to Zeek.
AddWallet, who replaced Zeek Rewards’ penny auction bids with “advertising units” and runs a near identical compensation plan, even went so far as to hold an affiliate conference earlier this year advising
They (Zeek Rewards) were incorporated in the southern United States, they were incorporated in North Carolina and they were sitting ducks.
Y’know, once you have so much advertising people know you, you become global and they became a target.
So we saw all the way what happened here. So we incorporated in Ecuador, spoke to the lawyers in Ecuador. They said “this business model is fine”. So by doing that, we are offshore.
The Ecuadorian government loves us, welcomes us. We feel that, besides having our server in Tampa (Florida) right now, getting it, the servers are already in Ecuador, flipping the switch to speak, that’s the only thing left to do.
Shattering this increasingly implemented “offshore safeguard” to ease concerns amongst affiliate investors in MLM revenue-sharing schemes, the Zeek Rewards Receiver writes
The group of net winners identified to date includes numerous individuals residing outside of the United States, with the largest foreign winners living mainly in countries with established legal systems which are signatories to the Hague Convention for international service of process.
While the pursuit of “clawback” claims against these foreign net winners raises various challenges, the Receiver intends to include these winners as parties to domestic litigation based on their contacts with the ZeekRewards Program in the United States so long as doing so will not delay the litigation against domestic winners.
The Receiver will also pursue costeffective foreign litigation to establish the repayment obligation and/or to collect judgments where necessary and appropriate.
In the case of AddWallet, Ecuador is a signatory to the Hague Convention. It seems the idea that being based offshore permits an MLM company to run and market a Ponzi scheme in the US perhaps isn’t as bulletproof as these companies believe.
Zeek’s CEO Paul Burks (right) is also causing headaches for the Receiver, attempting to hamper the Receiver’s ongoing investigations into the company:
Paul Burks has asserted attorney-client privilege and work product protection over communications and electronic documents in the Receiver’s possession and/or control on the grounds of a joint representation by counsel of Mr. Burks and the Receivership Defendant.
As previously reported, the Receiver Team has delayed a significant portion of its document review until the privilege dispute has been resolved in order to save costs.
As I understand it, Burks is objecting to the Receiver using certain (incriminating?) information they uncover, because he and Zeek Rewards briefly shared the same legal representation.
The Receivership are having none of it though, having ‘waived RVG’s attorney-client privilege and work product protection for RVG’s pre-receivership records’ and intending ‘to waive such privileged as to corporate communications over which the Court determines Burks has no right to object‘.
One can only wonder what Burks is trying to stop the Receivership from finding and using. Meanwhile Burks’ objections are currently legally unresolved.
Most welcome is the news that the Receivership is considering going after ‘employees, contractors, or other RVG agents who played an active role in furthering the Scheme’ and
third-party advisors of the Receivership Defendant, vendors, or other service providers that knew or should have known of the inappropriate nature of RVG’s activities and yet facilitated those activities for their own gain.
MLM Attorneys, Executive Board members of the DSA, merchants and vendors supplying services to Zeek Rewards, these people knew exactly what was going on and should have definitely known better.
Many of those involved have since kept a low-profile in the industry with others appearing to have disappeared completely. Perhaps the Receiver taking action against them will be the wakeup call so many in the MLM industry appear to need.
If you professionally sign off on, put your name to, allow a company and its affiliates to market on your name or openly promote these revenue-sharing Ponzi schemes yourself, you are accountable when they inevitably blow up.
Even if you weren’t actively investing in the scheme yourself.
Those affiliates thinking of or who are currently investing in and marketing the various revenue sharing Ponzi reload scams currently doing the rounds would do well to pause and take stock.
Carefully read and re-read the above to absorb it in. You now have the advantageous position of watching the future unfold right infront of you, and we haven’t even gotten to the SEC launching criminal proceedings against Zeek Rewards and those involved yet.
How do you think the all these affiliate-funded revenue-sharing companies that have sprung up and use Ponzi points are going to end?
Good luck to those that file claims against Zeek Rewards with the Receivership. New to the Ponzi scheme investment world or not, I trust you’ve learnt something from all of this.