ZeekRewards, Zeek Rewards, Paul Burks shut by SEC as $600 Million Ponzi Scheme, What happened, what should you do now?
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You were probably wondering what happened to Zeek Rewards and the answer is not pretty: they where shut down by none other than the US Security and Exchange Commission , or SEC, on Thursday 16-AUG-2012, for being a massive $600 Million Dollar Ponzi scheme.
I have tracked ZeekRewards since April 2012, and I was among one of the first (OzSoapbox of BehindMLM.com was first) to call it a suspicious scheme that can easily be a Ponzi scheme. You can read my analysis.
If you are a Zeek affiliate, I would recommend you NOT to believe any recruiting speech or cheerleading speech from people eager to take advantage of your emotional turmoil. Instead, I would recommend you to read through the facts. I'll start from about a month ago, when the signs started.
If you prefer information in Questions and Answers format, please read the other hub: Zeek Rewards Recovery Q&A
NOTE: Please check the comments for the latest updates, as I don't always have time to revise the hub itself when there are late developments.
End of ZeekRewards Timeline
- A Lexington TV station did a report on penny auctions, highlighting Zeekler, mis-states North Carolina Attorney General's position on Zeekler as "legal".
- ZeekRewards affiliates cheer the report as validation of their business, leading to critics seeking confirmation from NC AG's office
- NC AG's office quickly contacted the TV station, pointing out the error, leading to removal of the video and revision of the website entry.
- North Carolina Attorney General's office sent Zeek a Civil Investigation Demand request documents. This fact was NOT made public by either party until a month later.
- Randy Shroeder, head of MonaVie, a major MLM in the US, stated on his "training call" that ZeekRewards is a Ponzi scheme
- ZeekRewards affiliates and supporters are quick to discredit his viewpoint
- Dr. Keith Laggos, who was previously hired as a consultant for Zeek Reward's "compliance" efforts, was suddenly terminated when he was found to be recruiting for some other company. He then predicted that the Feds will hit Zeek within 6 months.
- Laggos also revealed he is a Zeek affiliate with 4500 downlines and making about 40000 a month.
- Laggo's publication "Network Marketing Biz Journal" touted ZeekRewards as "company of the month" for April 2012. it was later revealed (but NOT confirmed) that Zeek apparently bought $100000 worth of reprints as well as hiring him as consultant for that favorable article.
- Reports surfaced from a North Carolina credit union's fraud prevention unit that it has warned members about ZeekRewards being potentially fraudulent
- The report cannot be fully confirmed by other parties
- ZeekRewards printed a news item from new COO that claims they have located the person responsible in the credit union and the item was 'dealt with'. However, this cannot be confirmed.
- Reports started to surface that future leadership calls and training calls are cancelled, as are the Red Carpet Event scheduled for 22-AUG-2012.
- Lexington newspaper "The Dispatch" started covering Zeek, with photo of Zeek headquarters and people lined up outside wanting to hand in their checks (read article here)
- Zeek headquarters suddenly closes its doors in 3:00PM and all of its websites started to go off line, with no explanation, according to local paper (read article here). Paper interviewed one Zeek affiliate who saw people changing the locks on the door and take a box of stuff out the backdoor. The affiliate assumed those were Zeek employees.
- At first, NC AG's office was suspected to have shut down ZeekRewards. A petition was started by Zeek affiliates to leave Zeek alone. NC AG's office released statement that it had not issue a shutdown order.
- Secret Service agent appeared at doorstep of Zeek HQ, confirms that Secret Service is investigating Zeek, but will not reveal further details.
- In the afternoon, SEC sent out a press release that it had shut down ZeekRewards as a $600 Million Ponzi scheme. (read article here)
- The shutdown was quickly picked up by major news networks, including Reuters, CNN, FOX, NBC, WSJ, and more.
- Court documents revealed that receiver was appointed by the court, and Paul Burks chose to hand over the company quietly and pay $4 million dollars in fines to settle the charges with SEC and waive rights to appeal.
- Unknown groups headed by people linked to RVG started to spread nasty rumors about the SEC, about how Paul Burks was railroaded, without adequate representation, how Zeek will reopen in two weeks, and so on. Some even started petitions to reopen Zeek on various online petition websites.
- Zeek Rewards receiver Ken Bell revealed that he had secured 300 million dollars to be returned to the victims, and he's working on more. And any rumors claiming to have talked to him or SEC is false.
- Zeek Rewards receiver Ken Bell revealed that had has sent out 1200 subpoenas to the "top earners" in Zeek asking them for financial information related to Zeek, in preparation of "clawback", i.e. getting money back from them so they can be distributed to the victims.
Remarks on the Final Days of Zeek
In hindsight, it was obvious that the people changing the locks on the Zeek HQ, and the people removing things out the back door, were Federal investigators, not Zeek employees that the Zeek affiliate had assumed. Yet until the SEC shutdown was revealed, many Zeek affiliates and supporters had hoped that the shutdown was temporary and voluntary, and voiced their opinion doing so, many on the NC AG's Facebook page. It was so overwhelming that AG's office was forced to redesign their FB page.
What was surprising was NC AG's office had sent a civil information demand to Zeek back on 06-JUL-2012, and this was NOT made public until 16-AUG-2012 by either Zeek nor the AG office.
It is also very interesting that the SEC indictment is extremely detailed, that they are well aware of Zeekler and ZeekRewards history, much of which I was able to reconstruct.
Facts from Security and Exchange Commission
SEC press release regarding shutting down $600 Million ZeekRewards Ponzi scheme
The news has been picked up by Reuters, NBC, CNN, FOX, and all the major news networks around the world.
The following are actual allegations from the SEC (you can be sure that SEC has evidence to present this in court and to have judge sign an asset freeze order)
- SEC has charged Rex Venture Group (RVG) dba ZeekRewards as a pyramid and Ponzi scheme
- RVG has raised over $600 Million Dollars from 1 million affiliates since January 2011
- 98% of revenue of RVG, and the purported "profit share" comes from affiliates
- RVG only has $225 Million of assets left in 15 different institutions around the world
- RVG affiliates, all together, has nearly three BILLION VIP Points
- The daily RPP ratio, which averaged 1.5%, was arbitrarily determined by Paul Burks
- Out of 10 billion VIP bids (most purchased by affiliates), less than 0.25% was actually redeemed.
- In July 2012, ZeekRewards took in $162 million USD, but paid out $160 million USD. It is near collapse.
- Burks has taken $11 million out of RVG/ZeekRewards since its operation, and spent most of it, leaving only 4 million in his possession.
- At least 1 million was distributed to family members
- Out of $225 Million RVG assets, $30 million were held by the various financial institutions as 'deposit' hedge against chargebacks outside of United States
- SEC has charged RVG / Paul Burks with multiple violations of the Securities act, such as failure to register securities, selling unregistered securities, using fraud in connection of securities,
- SEC has frozen all RVG assets
- Paul Burks have already surrendered all RVG assets to SEC appointed trustee and will surrender the $4 Million in his possession. Paul Burks agreed to this in order to settle SEC charges against him without admitting guilt.
Other Facts that have surfaced
Most of the following facts are gathered from "The Dispatch" news reports:
- Paul Burks is in his Lexington home, with a security "guard" out front.
EDIT: Paul Burks have moved to place unknown as of MAY 2013.
- Supposedly Paul Burks has received death threats
- Better Business Bureau have fielded over 30000 requests of rating of Rex Venture Group in the past 30 days alone, a volume they had NEVER experienced
Following are from personal observations on the Internet
- A lot of Zeek supporters are still hoping that ZeekRewards can be restarted, when all RVG assets have been turned over by Paul Burks to the SEC already.
- Some Zeek Supporters are quickly rallying their downline to move them to some other schemes they have joined or is about to join.
- Other MLM and scheme members are quickly recruiting Zeek affiliates with promises of free membership and such (much like ambulance chasers)
- All eWallet transactions have been frozen, if your account had transactions with Zeek. This was confirmed with NxPay and STP.
While ZeekRewards and its associated websites are gone, many questions remain, mostly 'what happens now?', but there are specific questions:
- Will additional charges be filed against Paul Burks, head of RVG?
- Is Paul Burks under house arrest or any other travel restrictions?
A: Apparently not, as they left Lexington as of April 2013.
- Is the security guard outside his house hired by SEC, or by himself to keep reporters away? (According to a name search, he's the HEAD of a security company, not a common guard)
- Will additional charges be filed against other members of Rex Venture Group, such as Darryl Douglas, Dawn Wright-Olivares, or the new staff hired only recently?
- Will other agencies join the investigation? Right now, it's Secret Service (SS) and Securities and Exchange Commission (SEC). Though this would also fall into jurisdiction of IRS, FTC, Attorney General's Office (state level), and possibly the FBI, Postal Inspector's office, US Attorney's Office, and more.
- Where are the Zeek officers, except Paul Burks, now?
A: Dawn Wright-Olivares is hosting a podcast with Peter Mingliss on MLM, no news on anybody else.
- Will top affiliates be investigated as well? Many have been confirmed to be earning 1 million a month by Paul Burks himself
- Will there be "clawback", when some of the top affiliates have taken LOTS of money out?
- What happens now to the checks and such that had not been cashed?
ANSWER: By law, Cashier's Checks and such bank instruments belong to Zeek. Regular checks can be cancelled.
If you are a victim, what should you do?
If you are a Zeek affiliate, what happens next depends on whether you have gained money, or lost money. This is my own opinion, of course.
Remember, Feds have Zeek's computers so they know exactly how much they paid you.
I am assuming you are in the US. I don't know what you should do if you are a victim outside of the US. You may wish to contact your local law enforcement and see if they have any ideas. Though this may not do anything until Remission registration actually starts.
Here is what you should do:
- If you have gained money (i.e. gotten more OUT than you put in), don't spend it yet.
WHY: I don't know if the trustee will initiate clawbacks like the Madoff trustee did. If you're "small fry", you *probably* won't get bothered. If you have pulled out tens of thousands of dollars, beware.
- If you have lost money, (i.e. put in more than you got out), you'll need to wait.
WHY: A trustee either has been appointed or will be appointed soon. The trustee will take inventory of all the assets RVG has, and take back all the money in foreign eWallets. Once they are all in his control, he'll then start a 'restitution program' where all people who lost money will submit request. The time period will be limited. If you don't submit a request you won't get anything back. Then your request will be verified, and once they tally up the total the assets will be divided up and you get paid. This process may take two to three YEARS.
Kenneth Bell of McGuireWoods LLP has been assigned by judge to be the receiver of ZeekRewards to start restitution to all victims of ZeekRewards.
The website is NOT active as of 20-AUG-2012 but should be active later in the week.
email address is firstname.lastname@example.org
No further information is available at this time.
It is recommended that you do NOT sign any sort of petition or join any sort of "program" until the restitution program has been made public.
Here is what you should NOT do:
- Do NOT Join any other MLM or scheme until your head is clear
WHY: During period of grief, you'll go through several of the 5 phases of grief due to this huge emotional shock: Denial, Anger, Bargain, Depression, Acceptance. Your emotion is NOT stable, and you will be VULNERABLE to others seeking to take advantage of your weakened mental state.
I already saw reports on various news websites about how other MLMs and schemes are offering free membership, support, and such to Zeek affiliates. In your weakened state, you may not be able to do a proper due diligence analysis of the alleged opportunity. You may be especially vulnerable to a "sympathetic shoulder / voice".
- Do NOT post hate speech or other signs of denial
WHY: Combination of anger and denial may lead you to do very crazy things, such as denounce the government as corrupt (when it is out to save you), that government is out to cheat you out of your money (or your future income), that 's a conspiracy of the rich to keep you poor, and so on. Those actions make you look VERY VERY stupid once you calmed down, and you will likely regret making such statements later.
Remember, if you post something on the Internet, it can probably be found later. It can never really be truly deleted. Such statements may come back and haunt you later.
Many Zeek affiliates are in complete state of denial, still hoping that ZeekRewards can be restarted, or denouncing government as corrupt protecting the rich and oppressing the middle class, and so on and so forth. I hope this is not you, and you don't do something you'll regret later.
- Do NOT try to hide the fact that you were a victim with lies
WHY: You were NOT stupid. You are a VICTIM. You were defrauded, cheated, and lied to. Why would you disguise that?
Should you have known better? Maybe. You made the best decisions based on the best information you had at the time. You can blame yourself for not listening to the critics, or not doing enough research / due diligence, but YOU WERE CHEATED NONETHELESS.
NOBODY IS PERFECT. EVERYBODY CAN BE CHEATED. Even Dr. Stephen Greenspan, who literally wrote the book on gullibility, was cheated... by none other than Bernie Madoff.
If you lost family money, admit it, accept it, tell the truth. You were mislead. You are sorry, and you'll help the government get your money back.
Special Case: What if you have downlines?
Someone brought up an excellent question: what if you have downlines? That you personally recruited into Zeek, by extolling the "virtues" of Zeek? Did you just aided and abetted fraud?
Technically yes, you did.
Therefore, you will need to confess, apologize, and explain that you were mislead
(And I hope you were mislead, because if you recruited knowing perfectly well it's potentially illegal and you did not disclose this fact then you are a shill, and I hope you get what's coming to you. And I know there are MANY of you out there. )
Look up the "judas goat" meaning. You are the goat. You did not know.
You will keep them informed when more information becomes available about how to get back their money (and yours).
And that's all you can do.
Official Announcement from NCDOJ
NCDOJ has set up a special hotline with pre-recorded message and an email box:
However, as of Saturday 18-AUG-2012 no new information is available.
Receiver Appointed, Website Open
The Federal Court, after capitulation of Zeek leader Paul Burks and surrender of all assets to Federal authorities, has appointed Kenneth Bell as receiver to start investigation, tally of all assets, liquidations thereof, and restitution of all victims.
You can find his website at
He has two separate FAQs, one for victims, and one for the 1200 subpoenas he sent out to the top earners in Zeek.
Lawsuits involving Zeek Rewards
Many victims, not willing to wait for receiver's job, and hoping to recover more money, are filing their own class-action lawsuits. On the other hand, another group of affiliates are backing a separate effort to sue SEC and attempt to reopen Zeek. All these are independent of the receiver's upcoming restitution plan. In addition to this, there's additional websites (such as this hub explaining the restitution process).
However, all such lawsuits are ON HOLD as per the SEC lawsuit's FINAL JUDGEMENT (remember, Burks already plead non contest, and the case is OVER). Please see the judge order at the end of this section.
PERSONAL OPINION: You can always join a lawsuit later should you choose to seek representation. You should not have to split any recovered funds with a lawyer, unless you actually think you can get MORE through a lawyer. Several lawyers and Ponzi experts at ZeekRecovery.info agree that paying a lawyer will likely NOT net you more money than what the receiver may net you, and may DECREASE your take due to lawyer fees.
Patrick Miller LLC
Patrick Miller LLC, representing Johnny Belsomme and class from Louisiana, is the first to file class action lawsuit on 24-AUG-2012, with about 10 affiliates. This was reported by Troy Dooly on his website mlmhelpdesk and there is a website setup. This was confirmed by news reports.
My personal reaction: not enough information at this time.
J. "Cal" Cunningham
Mr. Cunningham has been reported by local press to be representing about 90 victims in Davidson County of North Carolina and plan to sue Zeek Rewards, owner, top execs and top affiliates.
My personal reaction: Mr. Cunningham, who's also a local politician, has a blemish on his law career, in that he had previously been reprimanded for ignoring a fee arbitration, and for bill padding, both against the same client. It is not know how good he is in class-action lawsuits.
A petition to sue the Federal government, claiming wrongful persecution, has been circulating from Dave Kettner, organized by Robert Craddock, and supported by top affiliates including Todd Disner. Their claim is Zeek is a fine business, Feds are telling lies, and they want Zeek restarted. And they want your donation (through one of Craddock's companies) to pay SRN Denton's lawyers. Recommendation donation is $50 per person. Later, SRN Denton's name was quickly dropped, and supposedly a Mr. Quilling from Texas was hired. To do what? I have no idea.
My personal reaction: This one is ring very loud alarms. Todd Disner, along with another top Zeek affiliate Schweitzer, are known for filing frivolous lawsuits against Feds trying to restart another Ponzi scheme, Ad Surf Daily. Their ASD related lawsuit was dismissed earlier this year. Robert Craddock is pretending to be just an affiliate on his website, even though he had previously identified himself as working as a Rex Venture Group (Zeek's parent company) Consultant that reports straight to the top. Craddock also wants your donation through his FHTM team called "Fun Club USA" ( FHTM was later shut down as a pyramid scheme by the FTC and 6 state's attorneys general) Dave Kettner had been promoting Zeek since July 2011 and may be a top affiliate as well, with a history in the TVI Express scam.
As for the lawsuit itself, the case is done. The defendant Paul Burks, the owner, plead no contest. It's OVER. Nobody else in the company has standing or the authority to sue the Feds. Who are they going to sue as?
Furthermore, any talk of having evidence to exonerate Zeek is not really believable. If there is such evidence, why would Burks not have used it to fight, with that warchest of 4 million dollars, and instead, just signed away everything?
And even if they manage to sue and win in court, that only takes care of the Ponzi issue. it does NOT resolve any of the issues surrounding selling unregistered securities, fraudulent misrepresentation of business, and the big charges nobody has mentioned: wire fraud. You can go to JAIL for wire fraud. Andy Bowdoin of Ad Surf Daily did.
And what if it is a Ponzi? Consider this... the top affiliates, and company insider, instead of putting their own money on the line, and lots of it, wants you to put in YOUR money, funneled through former Zeek consultant's account connected to another suspect scam. In other words, if it's a Ponzi, then they are spending YOUR money to make sure you do NOT get your money (lost in the scam) back. And that's assuming the money actually reach the lawyers.
If you want to support this effort (and I personally say, "are you kidding me?!"), send the money directly to the law firm. They are obligated to give it back if they are not going forward with the lawsuit. If you give it to Craddock, who knows what they'll actually do with it.
Court Order Appointing Receiver: all lawsuits on hold
ZeekRewards was one of the larger Ponzi schemes in recent memory (except the ginormous Madoff Ponzi) and there are a million victims.
If you need help, seek help.
If you are not sure what to do, ask around, but do NOT make hasty decisions.
You are not alone.
You will get through it.
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