First day of Burks trial sees new attorney & four witnesses testify
After publishing over one-hundred and fifty articles covering Zeek Rewards intimately over just under five years, it feels odd not to have first-hand information to report on.
Unfortunately I don’t have direct access to the North Carolina courtroom Paul Burks’ trial is taking place in, so over the next few weeks we’ll be relying heavily on local news coverage.
The second day of Burks’ trial saw a seated jury hear opening statements from both the DOJ and Paul Burks’ attorneys.
Four witnesses for the prosecution were heard from and a new attorney joined Paul Burks’ defense team.
On July 6th Paul Burks filed a motion requesting permission for Isham Reavis to appear as a defense attorney. The motion was granted shortly after it was filed.
Reavis is from Aoki Law and has ‘represented clients facing charges of white-collar crimes, reckless endangerment, and assault.‘
For more on the opening statements of the trial, we turn to The Dispatch.
The prosecution began the opening statements. Corey Ellis, First Assistant United States Attorney, spoke and began his address by simply stating how the prosecution viewed this case.
“This case is about the defendant telling lies in order to get money, it is as simple as that,” Ellis said. “Every fraud has a fairy tale, and this one started with a penny auction site.”
Though there was no fraudulent or illegal behavior with Zeekler, the penny auction portion of Burks’ business, it only accumulated two percent of all the business’ total profits.
The prosecution alleged that the rest of the money came from those affiliates who invested their money or “bought bids” from ZeekRewards.
Burks’ defense lawyer, Noell Tin, led the defense’s approximately 45-minute opening statement. Tin used his time to strip the history of Burks and his company to what he referred to as “the bare bones.”
Tin explained Burks created the ZeekRewards website as a way to generate traffic for Zeekler. He said ZeekRewards acted as a multi-level marketing branch of the business, allowing anyone to buy bids and post ads to bring more people to the auctions.
The defense repeatedly contested the use of the word “investor” during the trial, and said those who paid money in were buying nonrefundable bids that had no monetary value on their own.
Tin also explained Burks and his company always planned to “make good on their promise.”
“Even on the day (ZeekRewards) closed it had enough money to fill its obligations,” Tin said.
“Paul Burks’ dream was that everyone wins …” Tin said. “Everyone has things clearly explained to them and were not lied to.”
Witnesses called by the DOJ included two Zeek Rewards victim affiliates and a former NewBridge Bank employee.
Wilma Gray and Thomas Harding, were affiliates who had put in $10,000 and approximately $8,000, respectively, into ZeekRewards and saw none of their promised returns.
Lisa Christensen, a former NewBridge Bank employee who filed three separate suspicious activity reports, or SARS, regarding Burks after he began depositing substantial sums into his account.
“We didn’t know where the money was coming from,” Christensen said. “… We like for our customers to have money, but we have to make sure there is no illegal or suspect activity.”
The Fourth witness for the day was Dan Olivares. Olivares was part of Burks’ Zeek Rewards management team and has already plead guilty to one count of securities fraud.
The SEC claim Olivares was “chief architect of (Zeek’s) computer databases”.
(Olivares gave) a brief history of how ZeekRewards was created as an advertising avenue for Zeekler because the site, according to Olivares, was not doing well at the end of 2010.
Court will resume Thursday morning with the rest of Olivares’ testimony and cross examination by the defense.
Stay tuned…
things are moving along pretty fast in the trial so far.
just two days in, and we have the jury seated, opening statements done and witnesses testifying already!
from what i understand, the prosecution has dismantled the zeek ponzi/pyramid scheme to its simplest form of ‘intent to defraud’ by ‘lying’.
IMO it boils down to – if zeekrewards was ‘intended’ to feed the penny auctions at zeekler, then how will the defense explain:
– the low penny auction business volume transacted at zeekler which is in stark contrast to the ‘bids’ sold on zeekrewards.
– if zeekrewards was set up to promote zeekler via posting ads, how did burks track whether it was working or not.
– if zeekrewards/zeekler were set up with good intent, how did burks calculate the daily profit and did he have enough data to do so.
what i’m not getting is how will the prosecution avoid the ponzi/pyramid debate in proving their points.
eg: a movie theater can sell tickets to a show. ticket buyers may not attend the show at all. the theater will still calculate its legitimate profit based on ticket sales, and there is nothing illegal with the nonconsumption of the tickets.
but if the tickets are sold on the promise of commissions on promoting ticket sales and on the promise of profit sharing, then the explanation will be about why these ticket sales are not legitimate profit as they were never purchased for consumption, and this will require explanations on how ponzi/pyramid schemes work.
with all of the high voltage legal advice burks engaged for zeek, his lawyers should have advised him to make ‘usage’ of the bids in the penny auction ‘compulsory’.
something like – 50% of the bids you purchase should be used in the penny auctions to get your daily profit share. that would have established the bids as a ‘product’ and not an ‘investment’. when products can show real ‘consumption’ then proving ponzi/pyramid would be more difficult for prosecutors.
lets see, maybe these things will get addressed at some point in the trial.
People were re-investing in tens of thousands (hundreds of thousands at the upper investor tiers) daily.
Mandatory use of bids wasn’t feasible as Zeekler auction prices were inflated to buggery as is. Making affiliates blow through literally millions of reinvested in bids each day wasn’t possible.
That’s the other side of making them Mandatory, it starts to reveal the true value people assign the points.
If people are willing to spend $1000 of bids to win $100 items it still shows they aren’t buying something of value.
IMHO, it’s simpler than that.
The promo bids were sold in volumes that far exceeds the monthly volumes of bids used Zeekler ever ran.
I don’t have the exact numbers, but take the final month of Zeek for example, read somewhere they took in 172 mil that month? Assume 90% from bids (may be underestimating) and bids are, what? 66 cents each? (forgot exact price) That’s 234.5 million bids sold that month.
There’s NO WAY they ran enough auctions to even use 10 million bids a month, muchless 234.5 million bids. I doubt they even ran enough auctions to use 1 million bids a month.
And all they really needed to do is to prove that Burks’ daily profit share number is not based in reality. Show a chart of the supposed numbers vs. the actual volume that day, or have a programmer, such as Danny boy there testify that there is NO mechanism in the system (no query, no spreadsheet, whatever) to calculate “daily profit”, thus daily profit share percentage is just a number in Burk’s head.
The problem with that line of reasoning is movie tickets are not fungible… they have a definite expiration date and time. Bids don’t, even the alleged “demo bids” that I recall. You can’t count them as profit until you are sure they will NOT be used.
If they were immediately counted as profit, it suggests fraud as they were not used for demo/promo after all, but only as investment vehicle, i.e. how much profit to “share”.
Let me rephrase that…
Bids sold can only be counted as REVENUE, not profit, until bids either expire (do they ever?) or gets used/consumed. If it’s immediately counted as profit, it suggests that the management *knew* they would NEVER be used or have REASONABLE EXPECTATIONS of such.
Which means Zeek is expecting advertising efforts to have MINIMAL effect (i.e. did not bring in much bidders to use the bids) while they are happily counting the bids BOUGHT as profit.
Which means the whole advertising effort is a hoax, fraud, and busy work to keep the masses “occupied”.
And don’t forget the many cases where the winning price of the penny auction was MORE than the value of the item.
Whatever automation was running the Zeekler backend was not very intelligent. My assumption was Zeek needed to consume as many bids as possible, so decided to artificially inflate bid prices with backend automation.
Will be interesting to see if any of that evidence comes out in trial.
My assumption was simpler than that, people had vast quantities of bids, the only way to get something of value out of them was to bid in the auctions, the limited number of auctions vs the number of bids meant people just kept bidding – the bids were worthless otherwise so why just hold them?
This effect of pushing the prices up effectively could cut out legitimate bidders, meaning there was even less actual retail revenue than there might have been otherwise.
No news for Friday, July 8th; is the trial proceeding today? If not, waiting for Monday.
If I wasn’t with family in Canadia and had the means I would fly to Maryland and watch the trial in the courtroom, if it’s open to the public.
Don at ASD has shared a document #105 : “Government’s Reply Brief in Support of its Motion in Limine Regarding Defense Experts,” which asserts that the government does not need, nor does it intend, to prove that Zeekler was a ponzi.
If the judge approves the motion there will be no ponzi/pyramid debate as the defense will not be able to raise the issue or introduce expert witness testimony regarding it.
Its worth reading.. I think.
Minute order states the trial is currently in the evidence stage.