The court-appointed receiver in the $600 million Zeek Rewards Ponzi case has launched the first round of clawback lawsuits against the principal figures in the scheme as well as net winners. Receiver Kenneth D. Bell filed two complaints in US District Court in Charlotte, NC, last Thursday for the purpose of recovering proceeds from Zeek’s beneficiaries. The scheme had as many as 700,000 victims, though Bell’s adversary suits are targeting the operators and some 9,000 investors who managed to draw a profit of $1,000 or more.
Zeek was an online penny auction that lasted from 2011 to 2012 until it was shut down by an SEC injunction (the order also lists associated entities Rex Venture and Zeekler). The company was operated by 67-year-old Paul Burks, a former magician and ventriloquist. It offered clients, known as “affiliates,” what it claimed were lucrative bids in online auctions. Affiliates were told they would snag 50% of Zeek’s daily income through a distribution system based on their subscription status. As is typical in investment fraud matters, the affiliates were strongly encouraged to let their returns “compound” into ever greater riches, yet it turned out that 98% of investor principal was simply pumped back out as fictitious interest.
Regulators say Zeek, having raised $850 million by 2012, was already on the verge of collapse when they stepped in to freeze its activities. At the present moment not under any criminal charges, Burks has settled an SEC action for $4 million. His colleagues Dawn Wright Olivares, 45, and Daniel Olivares, 31, made a plea agreement with the US Attorney’s Office in February and must hand over $11.4 million in civil restitution. For in-depth coverage of the Zeek Ponzi case, see Jordan Maglich’s continuing analysis at Ponzi Tracker.
- Age: 67
- Company: ZeekRewards
- Scam: Penny Auctions
- Profits: 50% daily income
- Ponzi Time: 2011-2012
- Victims: 700,000
- Amount of Fraud: $600 million
- SEC Complaint: Multiple Violations of Securities Exchange Act
- Location: Charlotte, NC
- Court: US District Court, Western District of NC
Michael A. Hackard, Meriam Hansen, Nou Lee and Jeremy Rutledge are experienced in defending and resolving clawback cases filed by Bankruptcy Trustees and SEC Receivers. If you have been a victim in a Ponzi scheme and face legal action, contact Hackard Law today.