Zeek Rewards and Internet Censorship

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Re: Zeek Rewards and Internet Censorship

Postby JamesVincent » Fri Jul 26, 2013 4:10 am

A letter received by someone I know who was involved in Zeek Rewards.

We hope that this email finds you doing well.

It saddens me to share with you the news from the court date that was held this past Tuesday regarding the Sorkin motion. This motion was in reference to trying to show that the SEC had no jurisdiction in the emergency shut down of Zeek Rewards saying that Zeek Rewards was not an investment nor a security. Judge Mullins ruled in favor of the SEC and denied this motion. The judge did state that individuals who are sued by the receiver to return excess profits that were made over and beyond losses will be able to submit their own arguments on each individual behalf that Zeek Rewards was not an investment or Ponzi Scheme.

Please realize that we are not an attorney nor can give you any legal advice in regards to Zeek Rewards, the receivership, or how to proceed with your current situation. We do recommend at this time that any affiliate that lost money with their Zeek Rewards business to submit your claim with the receiver at http://zeekrewardsreceivership.com/. The deadline for this claim to be submitted is September 5, 2013, so we recommend getting this done as soon as possible to be sure to submit your claim for losses.

If we assisted you with your bid purchase with Zeek Rewards, please email us letting us know the name of the affiliate, date of purchase, and any other relevant information you can provide us so we can find your receipt that you will need for your claim.

We have heard that the claims process is not the easiest form to fill out and that they have a lot of errors with it. If you need any assistance with the claims form, please be sure to contact the receivership directly. The contact information for the receiver is all on their website for the claims listed above.


Also it seems http://zeekrewardsreceivership.com/ was updated as of June 1, 2013 to:
The Claims Frequently Asked Questions page has been updated on June 1, 2013 in order to address questions raised regarding amending previously filed claims.
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Re: Zeek Rewards and Internet Censorship

Postby notorial dissent » Fri Jul 26, 2013 5:59 am

I see we now have another set of players in this little mellerdramer, Gillmond, and King, both of whom are going to be on the hook for large chunks of cash that they seem to have earned for little input. Sorkin of Bernie Madoff fame, was apparently trying to argue, unsuccessfully, that Zeek was not selling securities, was not a ponzi, and that the receivership should be dissolved. he also opposed Quilling being appointed as "examiner" of the estate.

To paraphrase the judge in the case, that ship has sailed, and there is nothing here to litigate as it is a settled matter of law. That Zeek was anything but a ponzi and that the SEC had every right to shut it down.

Not a happy day for little Zeeklers.
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Re: Zeek Rewards and Internet Censorship

Postby wserra » Sat Sep 07, 2013 2:11 pm

The deadline for submitting claims to Kenneth Bell, the Zeek receiver, was this past Thursday, September 5. Yesterday, Bell sent this letter to the claimants and the other interested parties. The highlights:

  • 200K individuals submitted 173K claims. That's a lot of people and claims.
  • The total of the claims was over $550M. That's a lot of money.
  • The receiver will not only decide how much each claimant is entitled to, but will also take into consideration how much the claimant received from Zeek.
  • Clawbacks will also begin:
    I intend to pursue court action beginning this fall against those who profited from ZeekRewards because those profits came at the expense of ZeekReward’s victims. Potential targets of such action include “net winners,” former insiders, and anyone else who knew or should have known of the inappropriate nature of ZeekRewards’ activities and yet facilitated those activities for their own gain. Funds recovered from any such actions will be used to further compensate ZeekReward’s victims.
  • There will clearly not be enough to go around, even with clawbacks. Although Bell doesn't say it, the usual method is to determine the total of the legitimate claims (subtracting any claimant's receipts from Zeek), the total available to distribute (including money received from clawback), and compensate claimants pro rata.

Go get 'em. Ken.
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Re: Zeek Rewards and Internet Censorship

Postby notorial dissent » Sat Sep 07, 2013 4:13 pm

If the receiver just sent this out, aren't about due for another round of whining and yes buts from Craddock et al?

I kind of thought they would have launched their sure fire legal strategy by now to overturn the receivership, did we miss it?
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Re: Zeek Rewards and Internet Censorship

Postby JamesVincent » Sat Dec 14, 2013 2:12 am

http://mlmhelpdesk.com/attention-breaking-zeek-rewards-news-for-net-losers-net-winners-a-must-read/

This has been a busy week for the Rex Venture Group receiver Kenneth Bell. In two different court filing he lays out what 2014 will look like for both the Zeek Rewards winners and losers.
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Re: Zeek Rewards and Internet Censorship

Postby Funkalicious » Sat Dec 14, 2013 7:42 pm

I'm somewhat confused. Why is Dooly even reporting this given his run-in with the authorities over Zeek?
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Re: Zeek Rewards and Internet Censorship

Postby JamesVincent » Sat Dec 14, 2013 11:51 pm

Funkalicious wrote:I'm somewhat confused. Why is Dooly even reporting this given his run-in with the authorities over Zeek?


Good question, wish I had a good answer. I know at one point he was actively pushing Zeek, don't remember if he was an affiliate or just a shill. Maybe he was an affiliate and is hoping on getting money out of this.
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Re: Zeek Rewards and Internet Censorship

Postby Funkalicious » Fri Dec 20, 2013 1:35 am

James,

See viewtopic.php?f=5&t=9574#p161988

Dooly got consent-decreed by the SEC for posting about Zeek without disclosing that he was a paid consultant for Zeek and had to (or will have to) cough up $6K to the Zeek receiver for what I'm sure was an unintentional oversight.

It just seems to me, admittedly as someone who has never had to agree to a consent order, that it would be better to let this particular dog lie.
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Re: Zeek Rewards and Internet Censorship

Postby JamesVincent » Sat Dec 21, 2013 4:25 pm

Found an interesting article about some of the players from Zeek.

http://behindmlm.com/companies/iwowwe/dawn-wright-olivares-pleads-guilty-to-fraud/

It was widely believed that criminal charges in the Zeek Rewards Ponzi aftermath wouldn’t be laid until the civil action had concluded, but yesterday the SEC filed a surprise criminal suit against Zeek’s Dawn Wright-Olivares and stepson Daniel Olivares.


The SEC says:

The SEC alleges that Dawn Wright-Olivares and Daniel Olivares, who each now live in Arkansas, provided operational support, marketing, and computer expertise to sustain ZeekRewards.com, which offered and sold securities in the form of “premium subscriptions” and “VIP bids” for penny auctions. While the website conveyed the impression that the significant payouts to investors meant the company was extremely profitable, the payouts actually bore no relation to the company’s net profits. Approximately 98 percent of total revenues for ZeekRewards – and correspondingly the share of purported net profits paid to investors – were comprised of funds received from new investors rather than legitimate retail sales.


http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370540530681
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Re: Zeek Rewards and Internet Censorship

Postby Lambkin » Mon Mar 03, 2014 11:27 pm

http://www.the-dispatch.com/article/201 ... /303039984
The attorney collecting money for "net losers" of the Lexington-based Ponzi scheme Zeek Rewards has sued alleged insiders and top affiliates in an attempt to recover an additional $200 million.

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Re: Zeek Rewards and Internet Censorship

Postby GlimDropper » Thu Jun 26, 2014 2:03 am

In a move that is sure to send reverberations through the MLM legal community the court appointed receiver for Rex Ventures, Ken Bell files suit against noted MLM attorney Kevin Grimes. [Link to case files courtesy of Don Ryan's ASD Updates blog]

31. The ZeekRewards scheme, rather than the penny auction site, was the
source of nearly all the company’s income. Relative to ZeekRewards, little or no money
was made in the Zeekler “penny auction” business. According to the ZeekRewards
database, ZeekRewards sold approximately $820 million in compounding / sample / VIP
bids, but only about $10 million in retail bids were sold.

32. Grimes 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. Grimes 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.

<Snip>

36. It was or should have been obvious to Grimes that ZeekRewards succeeded
because it promoted this lucrative “compensation plan,” offering large amounts of
passive income to entice individuals to participate in the scheme. Grimes 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,
Grimes knew or should have known that RVG, with his assistance, was promoting an
unlawful unregistered security.

37. Finally, Grimes knew or should have known that the ZeekRewards
compensation plan was paying Affiliates to recruit other Affiliates in an unlawful
pyramid-style payment system. ZeekRewards openly referred to this system as the
“Matrix.”

<Snip>

Grimes & Reese, P.L.L.C. and Kevin Grimes Played an Integral Role

41. Defendants played an indispensable role in the scheme. 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 Grimes and other legal counsel to assist in promoting and
legitimizing the scheme.

42. Grimes helped in several ways. First, despite his knowledge that
ZeekRewards was a fundamentally flawed and unlawful pyramid and/or Ponzi scheme
and was selling unregistered securities, Grimes offered to create and did create a so-
called “compliance course” specifically designed to encourage investors and potential investors to believe that if they satisfied the course then it would be a lawful enterprise.
Thus, Grimes knowingly allowed Zeek to portray a false appearance of legality through
his bogus “compliance” course.

43. Grimes profited personally from the compliance courses while allowing
ZeekRewards yet another source of investor money. Upon information and belief,
Grimes received payments from ZeekRewards not only for his legal counsel, but also for
sales of his compliance course to Affiliates. Upon information and belief, Grimes
provided the compliance course to ZeekRewards for $5 per affiliate, while allowing
ZeekRewards to charge affiliates $30 each for the course, personally profiting from it and
allowing RVG yet another means of extracting money from unsuspecting Affiliates.

44. As described above, very early in his representation of RVG, Grimes 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.

<Snip>

55. From the time that Grimes began his representation through the time the
unlawful scheme was exposed and shut down, Grimes was an employee of Grimes &
Reese. When he engaged in the wrongful conduct described herein, Grimes was acting
within the course and scope of his employment with Grimes & Reese and in furtherance
of the firm’s business. As a result, Defendant Grimes & Reese is liable for the tortious
acts of its employee, Kevin D. Grimes, alleged herein.

<Snip>

59. Defendants’ negligence and breach of this duty proximately caused an
injury to RVG in an amount in excess of $100 million.

60. As a result of Defendants’ breach, RVG is entitled to recover its damages
from the Defendants.


$100 MILLION !!!

[The sound you just heard was Gerry Nehra sh!tting bricks over his TeleFree involvement]


FINALLY, one of these high priced MLM attorneys are being held accountable for renting their rep to a ponzi scheme. I can't tell you how many times these people get paraded out as a fig leaf of legality only to say "they didn't follow my advice" when the parade marches over a cliff.



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Re: Zeek Rewards and Internet Censorship

Postby Gregg » Thu Jun 26, 2014 12:00 pm

Re-reading this thread I can't help but marvel at how innocently I was first introduced to the name "Frank Craddock" way back in 2012, and what a total dirtbag he has been exposed to be since then.

Oh, and you cannot fathom the happy dance I'm doing over this $100 million lawsuit. I'm sure Gerry Nehra is not gonna sleep well for a while.
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Re: Zeek Rewards and Internet Censorship

Postby notorial dissent » Thu Jun 26, 2014 12:45 pm

I can't think of happier more fitting end to all this.

The only way they are going to be able to deal with scams like this is to go after the enabler lawyers who help the scammer, beyond what is ethically allowable.

I can't wait to see the inevitable response to this.
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Re: Zeek Rewards and Internet Censorship

Postby JamesVincent » Thu Jun 26, 2014 2:10 pm

Just think, with all of this still going on there are companies out there, like GGN (http://www.quatloos.com/Q-Forum/viewtopic.php?f=5&t=10071). They not only copied Zeek's whole concept, they have some of the same players AND are based off-shore in an attempt to keep the SEC away. The learning curve.... doesn't.
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Re: Zeek Rewards and Internet Censorship

Postby notorial dissent » Thu Jun 26, 2014 7:27 pm

I forgot to add to my previous post a thought I'd had at the time I read this. Wonder what their insurance carrier is going to be thinking right about now, and what their liability in something like this is. Sleepless nights for sure for some of them, I hope.

Not that I am complaining mind, but I wonder how the receiver came up with the damage numbers they did, $100M, nice round juicy, painful number if I do say so myself.

One thing I was always curious about, and don't remember ever seeing posted, was what the actual daily income as opposed to investment in the company was. I know they say the records were lousy, but they must have had some idea as to how much the company actually/legally made as opposed to the magic numbers they claimed it did, and give a whole new meaning to the term "imaginary numbers" in math. They had to have had something just to have given them an idea of how big the scam was. Just one of those questions that comes to you at the odd moment.
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Re: Zeek Rewards and Internet Censorship

Postby EagleOne » Thu Jun 26, 2014 11:20 pm

You can also add attorney Howard Kaplan to being sued by Ken Bell for his role in Zeek Rewards, and also for $100 Million+

You know that Robert Craddock, Gerald Nehra, and Keith Laggos have to be sweating bullets about now. Craddock was the one who got K Chang's blog taken down for saying "negative" things about ZR, and crowed that Kevin Grimes would eat him up. We also can't forget Craddock putting together his group to sue the SEC and got donations from Zeek victims for doing nothing. Then he got a dressing down from the SEC which shut him up for a while.

It sure is going to be fun to see just "who's next" for Ken Bell to sue! Now this is a Receiver! :D
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Re: Zeek Rewards and Internet Censorship

Postby notorial dissent » Thu Jun 26, 2014 11:30 pm

Well, they say follow the money and go for the deep pockets, which is about what this sounds like. Beginning to sound like a Gresham novel.

I think it is about time that the propounders and enablers of these things got what was coming to them instead of the slap on the wrist most of them have gotten in the past.
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Re: Zeek Rewards and Internet Censorship

Postby GlimDropper » Fri Jun 27, 2014 1:26 am

It is also of note that Kevin grimes wasn't the only attorney to get sued by Ken Bell yesterday, tax attorney Howard Kaplan got his own hundred million dollar Eff You note as well. Kaplan is a tax attorney who was hired by Zeek to provide tax advice and legal fig leaves to Zeek affiliates.
[Links Again courtesy of Don Ryan's ASD Updates blog.]

In an email from Kaplan to Dawn Wright Olivares (quoted in the complaint) Kaplan acknowledges that:

I concur that because of the way your plan is structured, there is
constructive receipt [of affiliate income] because of the choice your
affiliates have. Perhaps it can be compared to dividend reinvestment,
where one chooses to buy more stock rather than cash out the dividends.


However:

44. And Kaplan quickly came to understand that Wright-Olivares prohibited
the characterization of Zeek as an “investment,” since that word raised securities and
SEC implications. As a result, Kaplan refrained from mentioning on the leadership calls
or in his FAQ the tax implications that would arise if Affiliate payments were treated by
the IRS as an “investment.”

45. Instead of properly informing Affiliates of the different tax implications
they would face if their Zeek payments were properly characterized as coming from an
“investment” rather than a “trade or business,” Kaplan failed to inform Affiliates, either on the calls or in his FAQs, of the material fact that payments to Affiliates should be
characterized as investment income for tax reporting purposes.

46. For example, in the FAQs that he drafted and allowed ZeekRewards to post
to its website, Kaplan advised that Affiliates should use IRS Schedule C (“Profit or Loss
from Business”) to record their income, making no mention of the fact that they should
use IRS Schedule D (“Capital Gains and Losses”).

47. If Kaplan had candidly disclosed the material fact that Affiliate income
would be properly characterized by the IRS as capital gains, the obvious negative tax
implications would have caused many Zeek Affiliates to remove their cash earnings from
the program rather than reinvesting them, short-circuiting the scheme much earlier. Since
he did not, Affiliates were placated in their misguided belief that ZeekRewards was a
lawful program


I have to say, I am LOVING this Legal Malpractice / Negligence / Breach of Fiduciary Duty approach that Mr. Bell is taking. I'm not an attorney so don't claim to assess the legal merit of his arguments but I have seen far to many ponzi games hire someone with no excuse not to know any better and then claim they were not responsible for the impression that their involvement created.

Kaplan went beyond even that, he knew Zeek was an "investment" but got paid to lie about it and in the process a lot of people got ripped off. Today I am sure he very much regrets taking Zeek's money to lie to Zeek's affiliates. Lord, let this be a lesson.




Quick side question. Ken Bell is exercising his authority as the appointed receiver for Rex ventures Group in bringing these suits. It's looking very much like the bankruptcy trustee for TelexFree is moving from a chapter 11 process to chapter 7. I know a receivership is in many ways similar to a bankruptcy trustee but not identical. Will the TelexFree Trustee have similar authority to bring civil actions against someone like Gerry Nehra who so very richly deserves Grimes/Kaplan like treatment?

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Re: Zeek Rewards and Internet Censorship

Postby notorial dissent » Fri Jun 27, 2014 4:46 am

I think it may go eve further than that.

I don't see how any attorney who came in to give advice and guidance, and most particularly financial advice, since they would really have had to have looked at what Zeek was doing to give any advice at all, could not and would not have known had they properly done their due diligence and research that Zeek was neither a real for profit business or an investment, and was instead some kind of scam. At the very least they were skirting the securities laws, and there is no way Kaplan could not have twigged to that, particularly since he was barred from using the "I" word, so they were every bit as much a part of the scam as the ones who originated it.
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Re: Zeek Rewards and Internet Censorship

Postby wserra » Thu Jul 03, 2014 11:51 pm

notorial dissent wrote:I forgot to add to my previous post a thought I'd had at the time I read this. Wonder what their insurance carrier is going to be thinking right about now, and what their liability in something like this is. Sleepless nights for sure for some of them, I hope.


That's actually a very interesting question.

No legal malpractice insurance policy I know of covers fraud. Think "errors and omissions" - what such a policy is commonly called - and it becomes clearer. Is Bell charging Grimes with fraud? Allegations from the complaint:
Grimes 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. Grimes 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.
...
Grimes 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... Grimes deliberately turned a blind eye to these incredible claims and chose not to seek further information.
...
Grimes knew or should have known that RVG, with his assistance, was promoting an unlawful unregistered security.
...
Finally, Grimes knew or should have known that the ZeekRewards compensation plan was paying Affiliates to recruit other Affiliates in an unlawful pyramid-style payment system. ZeekRewards openly referred to this system as the “Matrix.”
...
Grimes knowingly allowed Zeek to portray a false appearance of legality through his bogus “compliance” course.
If that stuff isn't fraud, it's awfully close.

Grimes, of course, has a right to contest Bell's charges, and his carrier may well be obligated to pay for his defense. That's why it's axiomatic that the obligation to defend is broader than the obligation to indemnify. But if it's determined that Grimes' conduct amounted to fraud, from that point on he's likely to be on his own.

He's the one who should be having the sleepless nights. And I am a lawyer, and I'm very glad to see this.
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