ZeekRewards News

ZeekRewards Founder Arraigned in Federal Court

Npros.com | 11/14/2014

Burks entered a plea of not guilty during the hearing. If convicted, he could face a 65-year sentence and a $1 million fine. He was release on a $25,000 bond.

ZeekRewards was shut down in 2012 by the Securities and Exchange Commission, which accused Burks of fraud in a civil complaint. Burks agreed to pay a $4 million penalty and cooperate with a court-appointed receiver. The receiver has been trying to recoup money from ZeekRewards executives and investors who made money. Since 2012, $320 million has been recovered and investigators have sued 9,000 people to collect about $200 million more. Meanwhile, victims wondered if Burks would ever face criminal prosecution.

After the arraignment, Burks' attorney said Burks "did not commit any crime. We look forward to presenting our case in court."

ZeekRewards President Indicted On Federal Charges

Press Release | 10/28/2014

FOR IMMEDIATE RELEASE

October 24, 2014

United States Attorney Anne M. Tompkins Western District of North Carolina

CHARLOTTE, N.C. – The president of ZeekRewards, Paul Burks, has been indicted on federal charges for operating an Internet Ponzi scheme that took in more than $850 million dollars, announced Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina. The criminal indictment was returned today by a federal grand jury sitting in Charlotte, charging Burks, 67, of Lexington, N.C., with wire and mail fraud conspiracy, wire and mail fraud, and tax fraud conspiracy.

Russell F. Nelson, Special Agent in Charge of the United States Secret Service, Charlotte Field Division and Thomas J. Holloman III, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation Division (IRS-CI) join U.S. Attorney Tompkins in making today’s announcement.

According to allegations contained in the indictment, from January 2010 through August 2012, Paul Burks was the owner of Rex Venture Group, LLC (RVG), through which he owned and operated Zeekler, a sham Internet-based penny auction company, and its purported advertising division, ZeekRewards (collectively “Zeek”). The indictment alleges that Burks and his conspirators induced victims – including over 1,500 victims in the Charlotte area – to invest in their fraudulent scheme, by falsely representing that Zeekler was generating massive retail profits from its penny auctions, and that the public could share in such profits through investment in ZeekRewards. Indeed, the indictment alleges that Burks and others claimed, at one point, that investors would be guaranteed a 125% return on their investment.

The indictment alleges that Burks and his conspirators represented that victim-investors in ZeekRewards could participate in the Retail Profit Pool (RPP), which supposedly allowed victims collectively to share 50% of Zeek’s daily net profits. The indictment alleges that Burks and his conspirators did not keep books and records needed to calculate such daily figures, and that Burks simply made up the daily “profit” numbers. The indictment further alleges that, contrary to the conspirators’ claims, the true revenue from the scheme did not come from the penny auction’s “massive profits.” Instead, approximately 98% of all incoming funds came from victim-investors, which were then used to make Ponzi-style payments to earlier victim investors.

In addition to promising massive returns on investments, the indictment alleges that the conspirators also used a number of ways to promote Zeek to current and potential investors. For example, according to the indictment, the conspirators hosted weekly conference calls and leadership calls, where participants could call in listen to Burks and others make false representations intended to encourage victim-investors to continue to invest money and to recruit others to invest in Zeek. The indictment further alleges that Burks also organized and attended “Red Carpet Events,” where victim investors came to hear details of the scheme in person. During these events, according to the indictment, Burks and his conspirators made false representations about the massive retail profits generated by Zeek. The conspirators also used electronic and print media, including websites, emails and journals, to make false and misleading statements about the success of Zeekler to recruit victim investors.

The indictment alleges that as the Ponzi scheme grew in size and scope, it began to unravel as the outstanding liability resulting from the bogus 125% return on investment continued to rise beyond control. According to the indictment, by August 2012, the conspirators fraudulently represented to the collective victims that their investments were worth approximately $2.8 billion, but had no accurate books and records to even determine how much cash on hand was available to pay such liability. According to the indictment, by August 17, 2012, Burks and his conspirators had only $320 million (or approximately 11% of $2.8 billion) available to pay out investors. The indictment alleges that over the course of the scheme, Burks diverted approximately $10.1 million to himself.

Burks is also charged with tax fraud conspiracy for failing to file corporate tax returns or to make corporate tax payments for his companies, among other things. In addition, the indictment alleges, for tax year 2011, Burks issued fraudulent IRS Forms 1099s, causing victim-investors to file inaccurate tax returns for phantom income they never actually received.

The court has issued a summons against Burks and he is expected to appear in federal court for his initial appearance in the coming days. The wire and mail fraud conspiracy charge, the mail fraud charge and wire fraud charge each carry a maximum prison term of 20 years and a $250,000 fine. The tax fraud conspiracy charge carries a maximum prison term of five years and a $250,000 fine.

The details contained in this indictment are allegations. The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

Two of Burks’ conspirators, Dawn Wright Olivares, Zeek’s Chief Operating Officer, and her step-son and Zeek’s Senior Technology Officer, Daniel C. Olivares, pleaded guilty in December 2013 to investment fraud conspiracy. Dawn Wright Olivares also pleaded guilty to tax fraud conspiracy. Both defendants await sentencing.

In making today’s announcement, U.S. Attorney Tompkins thanked the U.S. Secret Service and IRS-CI for investigating the case, and the U.S. Securities & Exchange Commission, Division of Enforcement for its assistance with the investigation.

The prosecution is handled by Assistant United States Attorneys Jenny Grus Sugar, Corey Ellis and Mark T. Odulio of the U.S. Attorney’s Office in Charlotte.

Additional information and updated court filings about this and related cases filings can be accessed at the district’s website: www.justice.gov/usao/ncw/ncwvwa.html.

Receiver Recovers 300 Million in ZeekRewards Assets

Npros.com | 9/22/2012

Kenneth Bell of the Charlotte law firm McGuireWoods LLP was appointed to recover assets after the SEC shut down ZeekRewards, calling it a Ponzi scheme that was close to collapse. Once all assets have been recovered, which Bell said will take months, Zeek affiliates will be able to make claims to get money back.

Some Zeek affiliates are defending the Ponzi scheme allegations and have signed a petition to keep ZeekRewards alive, saying that the shutdown has "devastated" them and that the company has given them "the leadership and the freedom to support our families."

Paul Burks, the founder and CEO of ZeekRewards, agreed to pay a $4 million penalty and relinquish his interest in the company, without admitting or denying guilt.

ZeekRewards Receiver Wants Affiliate Profits Returned

Npros.com | 9/22/2012

In a letter to ZeekRewards affiliates dated September 13, Bell wrote that "Many of you received little or nothing from this enterprise. In order to make everyone as whole as possible, those who profited from participating should surrender their gains."

Bell's letter went on to say that the process for official claims against ZeekRewards' assets has not be established, but that his office hoped to soon have a method for collecting information from victims for future claims processes.

ZeekRewards Receivership Page Now Up

Npros.com | 9/22/2012

Included on the site is the SEC complaint against Rex Venture Group, LLC d/b/a ZeekRewards.com and Paul R. Burks, alleging that the company and Burks fraudulently sold unregistered securities as part of a Ponzi scheme. Also included are answers to frequently asked questions and updates from the Receiver, including the recent letter in which he urged affiliates to surrender any profits they made from participating in ZeekRewards.

The ZeekRewards Receivership Website can be found here: http://www.zeekrewardsreceivership.com/

Zeek Rewards Shut Down by SEC – Assets Frozen

Npros.com | 8/18/2012

August 18, 2012 -- On Friday, The Securities and Exchange Commission shut down Zeek Rewards and its parent company, Rex Venture Group, filing a complaint in federal court in Charlotte and freezing the approximately $225 million in investor funds in the company's bank accounts.

According to the SEC's complaint, Zeek Rewards affiliates were offered the oppportunity to make money by purchasing securities in the form of investment contracts. These securities were not registered with the SEC as required by federal law. Zeek Rewards affiliates were collectively promised as much as 50% of the company's daily net profits through a system in which they accumulated rewards points that could be exchanged for cash payouts. The SEC complaint alleges that these profit-sharing payouts to affiliates (referred to as investors by the SEC) did not come from the company's profits at all but instead came from the funds of new investors. The SEC also stated that Zeek Rewards' obligations to investors exceeded its cash on hand, which prompted the emergency closure of the company and freezing of its assets.

The SEC has also accused Rex Venture Group head Paul Burks of siphoning off millions in investor funds for himself and members of his family. Burks has agreed to settle the SEC case and relinquish his interest in the firm and its assets, plus pay a $4 million penalty. The SEC can only pursue civil charges against Burks, but he could still face criminal charges from other investigations.

A receiver has been appointed to collect and distribute Rex Venture Group's remaining assets to affected investors.

ZEEK REWARDS CLOSES DOORS

Npros.com | 8/17/2012

LEXINGTON, N.C. — Rex Venture Group, the company that operates Zeekler.com and Zeek Rewards, has closed its headquarters and is apparently under investigation by the North Carolina Attorney General. Signs posted on the windows of the company's headquarters stated that the offices were closed and instructed visitors to check the company's website for more information. As of today, Zeekler.com and ZeekRewards.com had no further information other the following message: “Zeek Rewards is currently unavailable. More information will be available shortly on this website.”

The North Carolina Attorney General's office has received dozens of complaints and inquiries about the company since February.

An unidentified spokesperson for Zeek Rewards said the company closed so that it could respond to a Civil Investigative Demand — an administrative subpoena issued when the Attorney General suspects an individual or organization may have information relevant to an ongoing investigation.