Zeek Affiliates --Basic Understaining on SEC Investigation Process

Whenever I tried to ask questions to my upline about the status of Zeek Rewards' investigation, I got a very vague answer with encouragement that Zeek Rewards would be back in business very soon. This was very confusing since I read the announcement by SEC said that Mr. Paul Burks had already entering settlement process with SEC and paid $4 millions penalty fee on the allegation. So, how could Rex Venture Group d/b/a Zeek Rewards.com would come back in business again? I decided to study the SEC investigation process myself, here is what I found from SEC's website. 

SEC investigations can be triggered in many ways, including the review of forms filed with the SEC, routine inspections of persons or entities regulated by the SEC, tips from members of the public, referrals from other government agencies, news reports, and information received in other SEC investigations. Regardless of how they are triggered, SEC investigations are almost always conducted privately.

The stages of a typical SEC investigation are represented as a flowchart below. The first stage of an SEC action is typically an informal investigation. At this stage, the Commission staff has no formal subpoena power, and hence must rely on the cooperation of the relevant individuals and entities to gather information. At the conclusion of an informal investigation, SEC staff may recommend that the Commission undertake an enforcement action seeking sanctions, seek a formal order of investigation from the Commission, or conclude the investigation without recommending an enforcement action.

When the SEC staff request and receive a formal order, the next stage is a formal investigation. The Commission approves requests for formal orders when it finds that it is likely that a securities law violation has occurred. The formal order grants designated SEC staff the ability to issue subpoenas and to administer oaths.

When the staff has concluded its investigation, it may recommend to the Commission that enforcement proceedings be commenced, or it may determine to take no further action. If the staff has determined to recommend that the Commission commence an enforcement proceeding, it typically gives prospective defendants a Wells notice informing them of the staff?s intent. The recipient of a Wells notice has a period of time, generally one month, to provide the staff with a Wells submission, which is essentially a brief arguing why an enforcement proceeding is not merited. Upon reviewing the Wells submission, the staff may elect to modify or reverse its recommendation to the Commission.

Upon the staff's recommendation to bring an enforcement action, the Commission has several options. It may authorize a civil action in federal court, an administrative proceeding before an administrative law judge, or no enforcement proceeding at all. Whether the Commission authorizes a civil action in federal court or an administrative proceeding depends on several factors, including the severity of the allegations, the nature of the conduct alleged, tactical considerations, and the type of sanctions sought. 

After reading the investigation process, I have a better understanding that in fact Rex Venture Group has already passed the last stage on the flow chart. In other words, SEC has supposedly gone through investigation steps from top to bottom as shown in the flow chart--Informal and formal investigation, Well notice, Wells submission, Civil Action, and Settlement. This makes some top affiliates claimed that they had no idea about this SEC investigation and asset freezing prior to the SEC announcement on the last Friday, August 16th. I imagine that the attorney and CEO at least would be fully aware of the ongoing investigation. It is totally in my humble opinion, of course. 

Does it mean this is a game over for Zeek Affiliates? Thank you for your participation in our show sort of speaks? May be, but Not quite!!!! As you may already learned that a group of top Zeek Affiliates including Dave Kettner an experienced internet marketer and Robert Craddock a former employee of Rex Venture Group lead a campaign on Facebook, radio shows, and websites called Zeek Rewards Affiliates United Against The SEC. They accept donation on their website zteambiz.com to hire an international law firm called SNR Denton  to be a focal affiliates' representation against SEC that we believe that SEC could be misconducting and mishandling the investigation of Rex Venture Group, LLC. They aim to unlock the involvement of SEC and its receiver Mr. Ken Bell. That would unfreeze the 15 oversea bank accounts and get Rex Venture Group and its popular penny auction website zeekrewards.com back to business.

They claimed that SEC probably used unlawful tactics to force Paul Burks, CEO of Rex Venture Group into settlement and giving up his right in Rex Venture Group's asset and its interests. The fact that Zeek Rewards Affiliates United challenged SEC, this would probably lead to revealing the long and short of how Rex Venture Group conducted their business in a so called penny auction and the affiliate program.

Although we do not know who would prevail eventually, one sure thing is it would take a long time before any of the former Zeek Rewards Affiliates would receive refund checks back.

Zeek Rewards investors could hit 2 million

August 29, 2012 9:09 AM

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Nash Dunn

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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