Zeek Rewards Receiver destroys desperate net-winner arguments
Now that Paul Burks has been found guilty on all counts, you’d expect those who profited the most in Zeek Rewards to give up on the notion that they’re entitled to keep funds they stole.
Not so. Literally a week after the Burks verdict was handed down, Zeek Rewards net-winners continued to fight the Receiver in court.
In early July the Receiver filed for summary judgement against Zeek Rewards’ net-winners. It is this battle that is still playing out in court.
First and foremost, it is important to understand that despite spending over a year of time and considerable cost (to the Receivership) of engaging a defense expert to investigate the fundamental question of whether or not ZeekRewards operated as a Ponzi scheme, Defendants have conceded—without a single reference to their own expert—that ZeekRewards was a Ponzi scheme which intentionally defrauded hundreds of thousands of victims out of hundreds of millions of dollars.
The fact that ZeekRewards was a Ponzi scheme has now been established as a matter of undisputed facts and law.
Unable to argue that Zeek Rewards was not a Ponzi scheme, Zeek’s top thieves now insist
- Zeek Rewards’ Terms Of Service prohibit the Receiver from making claims against them and/or
- they are “internet marketing specialists” who are ‘entitled to be paid as employees rather than investors‘
The Receiver alleges both defenses are “pure fiction” and lack merit.
Zeek Rewards’ Terms Of Service
Zeek Rewards’ Terms Of Service any claims barred any claims not made within twelve months.
Zeek Rewards’ top investors are using this as a basis to argue the Receiver’s clawback claims against them should not be allowed.
As the Receiver points out, adopting this legally would give every Ponzi scammer a loophole clause that permitted them to keep stolen funds.
Adopting Defendants’ position would create a ready-made roadmap for fraudsters to protect anyone who won money in their scheme, thus further encouraging participation and enhancing the scheme.
A receiver ought not to be handcuffed from recovering assets based on the wrongdoing of the fraudster, as that would undermine the receiver’s very purpose.
“Limitations” periods of a few months or waivers of claims entirely would likely become commonplace if a company operating a Ponzi scheme could “contractually” limit the subsequent claims of a receiver through the terms of the scheme.
Whereas the Receiver has to address the preposterous argument within a legal context, for me the issue far more simpler.
By virtue of the fraudulent nature of the business model, Ponzi scheme “terms and conditions” are meaningless.
To accept otherwise would be to open the door on claims from investors who were promised (implied or otherwise) a fraudulent ROI.
That’s not going to happen, so likewise any legal defense based on a Ponzi scheme’s TOS should be struck down.
Zeek’s Net Winners were employees
Defendants claim that those Defendants who spent the most time successfully promoting the scheme and multiplying the number of its victims should be given the most credit against the Receiver’s claims to recover their fraudulently transferred winnings.
The above summation from the Receiver will likely only make sense to a Ponzi scammer desperate to keep funds they’ve stolen.
Put more directly, Defendants claim that they should be allowed to keep the victims’ money that they “won” in ZeekRewards because they spent time recruiting those same victims to the program (as well as a few minutes a day posting an internet ad).
The notion that Zeek Rewards affiliates’ provided value to the scheme is laughable.
I mean really, what are we arguing here… that promotion of a fraudulent Ponzi scheme actually constitutes legitimate work?
Other than promote Zeek Rewards in order to collect referral commissions, all Zeek Rewards affiliates had to do to collect a ROI was dump bids on fake Zeekler accounts.
That’s not value-creating work, even if Zeek Rewards wasn’t an $850 million dollar Ponzi scheme.
Contrary to Defendants’ arguments, the Receiver has not asked the Court to rule—and the Court need not rule—that no one providing “services” to a Ponzi scheme can keep the money they were paid for their services.
Instead, the Receiver asks the Court to rule, as numerous courts have done for many years, that actual participants and investors in the scheme cannot establish that they gave “reasonably equivalent value” for their profits through their efforts participating in and recruiting others to the scheme.
Nearly all of the courts to have considered this issue have applied what has come to be known as a “Ponzi scheme presumption.”
“In the case of Ponzi schemes, the general rule is that a defrauded investor gives ‘value’ to the Debtor in exchange for a return of the principal amount of the investment, but not as to any payments in excess of principal.”
Despite Defendants’ suggestion, there is no recent “trend” away from this rule.
Courts still apply the Ponzi scheme presumption with regularity.
Further, Defendants’ specific claim that they could have provided “reasonably equivalent value” by recruiting victims to ZeekRewards ignores the overwhelming weight of contrary case law.
Courts have routinely held that there is no value in recruiting new investors to a fraudulent scheme.
As to whether Zeek’s net-winners were employees;
Defendants’ effort to portray themselves as employees of RVG fails.
They ask the Court to compare them to “internet marketing specialists” valued at $50,000-$80,000 per year.
This characterization of their “work” is, however, directly contradicted by the undisputed facts.
RVG Insiders specifically advertised the program as a passive opportunity.
The Receiver goes on to claim the posting of ads by Zeek affiliates
was just an attempt to manufacture a cover for the investment of money by Affiliates with the expectation of receiving daily “profit” distributions.
The placing of ads cannot supply the required “reasonably equivalent value” for the transfers made to Defendants.
And, if some people may have spent considerably more time recruiting downline investors to enhance their share of the imaginary “profits” that does not change the fact that the “work” RVG asked Defendants to do was, to put it mildly, minimal and of no real value.
One of the more comical arguments Zeek’s net-winners raised was that
entering summary judgment in favor of the Receiver would allow him to sue the utility company that provided electricity to RVG or the janitor who cleaned its offices.
The utility company and the janitor are also easily distinguishable from Defendants here.
First, the utility company and the janitor were not investors or participants in the scheme like Defendants.
Second, providing electricity and cleaning facilities were the regular trade duties of the utility company and the janitor that each presumably provided to many other clients as well.
Third, the utility company and the janitor each have regular prices that are charged for their services, unlike Defendants, who expected to receive an undetermined (but unreasonably high) payout from the profits of the business which was unrelated to the specific amount of services they provided.
Therefore, the utility company and other innocent trade creditors are not comparable to Defendants and have no relevance to this action.
And with that, the last-ditch attempt to justify Zeek’s net-winners’ profiting in a Ponzi scheme are dead and buried.
Following the Receiver’s filing yesterday, Judge Mullen has yet to make a decision on the Receiver’s Motion For Summary Judgement.
Footnote: Our thanks to Don@ASDUpdates for providing a copy of the Receiver’s “Reply Brief In Support of Receiver’s Motion For Summary Judgement” (filed August 16th).