Zeek Rewards investors could hit 2 million
August 29, 2012 9:09 AM
LEXINGTON, N.C. – The receiver for Rex Venture Group, LLC, says as many as two million people may have invested in Zeek Rewards.
In a press conference call Monday, Charlotte attorney and court-appointed receiver Kenneth Bell said it will be a “long time” before any money returns to the hands of affiliates who bought in with Zeek Rewards.
“We want to have substantially all of the funds before we start to issue checks,” Bell said, adding that it’s hard to predict a timetable for the future.
It has been about 10 days since the U.S. Securities and Exchange Commission (SEC) froze the assets of Rex Venture Group, the Lexington-based company that operated Zeek Rewards and penny auction site Zeekler.com. The SEC alleges the company was operating an illegal pyramid and Ponzi scheme since January 2011, defrauding millions of people of their money.
The SEC estimates that Zeek Rewards raised $600 million from investors, a number Bell said will also be on the low end.
“This is one of the largest Ponzi schemes to ever go into receivership,” Bell said, adding that he and his colleagues have been “drinking out of a fire hose” since being appointed Aug. 17.
Rex Venture Group and Zeek Rewards currently holds about $225 million in investor funds at about 15 foreign and domestic financial institutions, according to SEC estimates.
Zeek’s former Chief Executive Officer Paul Burks, 65, also hold millions of dollars in multiple bank accounts. For instance, one Charles Schwab account registered in the name of “Paul Ray Burks” contains $1.3 million in securities and about $2.3 million in cash, according to court records.
Burks has not admitted or denied any of the allegations, but has agreed to pay a $4 million penalty for his actions.
Most of those funds known to the SEC have already been identified and frozen, Bell said. Now, it’s his job to find things that aren’t readily available and obvious, he said.
“We are trying to collect as big a pool as possible for these investors,” Bell said. “Until we know how much we are able to collect, we just don’t know how much of a pool we have.”
Since the SEC’s action two weeks ago, many have wondered whether the receiver will use federal “clawback” laws to retrieve any money actually paid to affiliates. According to the SEC’s complaint, Zeek Rewards paid out nearly $375 million to its qualified affiliates who bought bids for the penny auction site Zeekler.com, posted promotional advertisements online or recruited other people to the program.
When asked if “clawbacks” will be in order, Bell said, “We’re going to go after every dollar held by someone that ought not have it.”
At this point, the ratio of affiliates who lost money compared to those who made money is unclear. However, based on the number of complaints circulating online, most suspect there are far more losers.
Jesse Meyer, of Wisconsin, put in about $50 with Zeek Rewards and made about $500. Like most affiliates that profited, Meyer said he paid taxes on his earnings and filled out a 1099 miscellaneous income form.
“I don’t see how they are going to take that back,” Meyer said. “I already paid taxes on it, and I don’t think I should have to pay it back.”
Meyer, who said that the SEC moved far too quickly in its court action, added that it will create a large problem if the government goes after everyone who made money with the company.
“Everyone’s taxes won’t be right,” Meyer said. “If they want to go that route, then they must be able to pay me back those taxes I paid.”
Meyer isn’t the only one expressing concern with the SEC’s action. More than 25,000 people have signed an online petition that supports keeping Zeek Rewards open. Additionally, a website entitled “Zteambiz” has been created for Zeek Rewards affiliates “united against what is believed to be unlawful action by the SEC.”
A handful of affiliates have worried for weeks about cashier’s checks they sent to the company, but were never deposited. On Monday, Bell said cashier’s checks will be part of the pool of money he is obligated to collect.
“A lot of people have been trying to cancel those (checks),” Bell said. “Under the law, those cashier’s checks are assets of the receivership, and under the law, I have to take those funds and make them a part of the pool to make things as whole as I can.”
Most banks are not allowing stop-payments on the cashier’s checks, citing recommendations they have received from the North Carolina Attorney General’s office as well as statutes included in the Uniform Commercial Code. However, some banks, like the N.C. State Employees Credit Union, have placed outstanding funds from cashier’s checks into an escrow account and are awaiting approval from the SEC to dish that money back out.
Robin Snyder, a Zeek Rewards affiliate from Arizona, sent two cashier’s checks for $10,000 each to the company in mid-August. One of the check’s was deposited just two days before the company shut its doors, and the other has yet to be cashed.
Snyder contacted her local bank to cancel the payments, but was informed she could not stop the transaction.
“That check has been stolen from me,” Snyder said. “That is not their asset. It’s still my asset.”
Snyder said she has also tried to file a “declaration of loss,” claiming her check was stolen.
“To me, I can say that it has been stolen because a government agency closed them down for fraud,” Snyder said. “What is fraud? Fraud is theft.”
Bell said he continues to receive thousands of emails and phone calls from concerned Zeek Rewards affiliates, like Snyder. He said most of them are wondering when they will get their money back.
“I understand that behind all of these stories is heartbreak, and I see it as my job to collect and hold every dollar,” Bell said. “That’s going to take a while.”
Bell has visited Zeek’s headquarters at 803 West Center St. and is in the process of going through “terabytes” of information provided by the company. While he said he has been working with Burks’ attorney, he said has not been in direct contact with the former CEO.
For now, Bell said the best thing for affiliates to do is visit the website, www.zeekrewardsreceivership.com, not his direct contacts at work.
“Every one of those emails and phone calls gets in the way of them trying to recover funds and help them out,” Bell said.
Nash Dunn can be reached at 249-3981, ext. 227, or atnash.dunn@the-dispatch.com.
Read more: http://www.gastongazette.com/articles/rewards-74888-zeek-hit.html#ixzz24ypd6oQV
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