Thursday, August 30, 2012

Rebuttal to "Russian Lawyer for Zeek"

In the last day or two, a letter from Anna Makovsky, who claimed to be a Russian lawyer, posted a missive that was spread on various Zeek related forums citing irrelevant laws and various logical fallacies and fractured arguments. In this rebuttal, we shall attempt to discover who she is, and how fallacious is her "argument" for Zeek (and illustrate how smart, or dumb, Zeek followers are for reposting it).

First of all, the woman claimed to be "Anna Makovsky"

CIS has not been dissolved, so there is no 'former CIS'. Yet the English is quite good, though very stiff.

Anna Makovsky claims to have relatives in the US. Clearly, no random Russian is going to comment on Zeek unless someone's involved. So is there a Makovsky involved in Zeek? Search Makovsky, Zeek, and you come up with Ted Makovsky

And Mr. Makovsky indeed is pretty big in Zeek, though he lives in Indiana. All three domains, and a few more are all owned by him.

Indiana is quite far from D.C., but then, who says we can trust all the details in the missive? let's analyze the missive itself.  Her "missive" will be in blue, and my comments will be in red. This was copied all over the place by Zeekheads.

To whom it may concern,

From the first lines of my letter I want to assure you - this is not a complaint, request or a refund letter.
On the contrary, I want to make a request, and not only from my behalf, but also from international partners all over the world.

Note used of the term "international partners". That would mean "affiliate", wouldn't it? 

As a lawyer (though not in your country), I want to make a few assumptions about the errors made in the fact that ZeekRewards is a Ponzi, or pyramid scam that spread on the Internet, including on the website of attorney.

As she admits she is not a lawyer in the US, let us see what she knows about American law? 

Given America's right, back in 1975 in the trial of KOSCOT Interplanetary, Inc developed the concept of pyramidal system, which is now taken as a basis for legal proceedings.
Specifically, the system is a pyramid, if:
- Its activities are focused not so much on the sale of products to the end consumer, but on the recruitment of new members to the system.
- Limitation of competitiveness;
- Restrictions on the advertising of the distributors;
- The possibility of increasing the number of lower layers
exponentially, leading to a depletion of the recruiting market and sales.
- Unsubstantiated claims about properties for recruiting business, the possible income of man-hours to generate income.

FTC vs. Koscot Interplanetary indeed did define "pyramid scheme". However, the definition quoted by this "Aanna Makovsky" was completely wrong. I'll refer you to what Kevin Grimes, one of Zeek's lawyers, wrote on what constitutes a pyramid scheme

(1) Payment of money to the company;
(2) The participant receives the right to sell a product (or service);
(3) The participant receives compensation for recruiting others into the program;
(4) The compensation is unrelated to the sale of products (or services) to the ultimate user.

Now that we have established Anna Makovsky has absolutely NO understanding of American legal system, and cannot even cite the proper definition of FTC vs. Koscot, let's see what else does she have to say? Maybe she only make one mistake, maybe more? 

Now, let's evaluate the work of Rex Venture Group, Zeekrewards and Zeekler penny auction.
1. Rex Venture Group legally exists as a Registered Firm under U.S. laws.
Penny auction is a system in the U.S., is not illegal.
Bids - it's the same product, because we use them and buy the goods.

SEC claims that there was no full use of bids.
We have the right to decide what to do with bids after buying them. To use or not to use is left to our choice. After all, the person who comes in the store for purchase is not asked if he would use the product or stack it on a shelf, and because of that he has been denied on sale?
Even if the partner bought bids and then played at the auction, losing to the last, this is a problem of a partner, not the company.
The main thing is that the bids – are a commodity!
It does not matter who it was, he came up to the consumer and no one forced not have to buy bids.
And why, in your articles, you are looking for only the victims of ZeekRewards, but do not check how many people actually get items won at auction, and who bought the items that have not been won by anyone?
Compulsory recruitment of who and how many - is not a principle forced by ZeekRewards!
All of us started, and many continue to work, to advertise and advertise the auction in the first place and each of us decides to recruit others or not.

This argument is fundamentally flawed, because bids have two uses: 
1) to be used in penny auctions; and
2) to be traded for VIP points which determines profit share

By ignoring the 2nd use, this is fallacy of omission. 

Furthermore, SEC is arguing that Zeek is a combination Ponzi and pyramid scheme, not merely a pyramid scheme. Thus, arguing it's not a pyramid scheme is only addressing some of the issues, much like ignoring the secondary use of the bids. 

Monthly fee issue.
Do you think that this is illegal? How about the fact that the company was paying taxes?
Our monthly fee to the company - is the right to be her partner and the right to receive a portion of its profits depending on our status in it.

Nobody had argued that monthly fee is an issue. This is a red herring. 

2. Rex Venture Group Zeekrewards does not monopolize the penny auction market.
Only in U.S you have dozens of penny auction sites that operate nationwide.

As explained before, pyramid scheme is has nothing to do with monopoly. Thus, by arguing a fake definition of pyramid scheme, what "Anna" did here is played a "strawman defense"
3. ZeekRewards did offer some resources for partners advertising activities.
The ban was only in need of advertising in English. But, I think that this is the opposite sign of the distinctive features of the company and tells her deeply patriotic thought. Also, inexperienced partners tend to overestimate the effectiveness of advertising and may suffer first, unnecessary costs, and second are wrong to state rules of the auction, and most affiliate programs.

Again, irrelevant, as this is not the problem with Zeek. SEC did not make an issue of "partner advertising activities". 

4. SEC alleges that the payments would be limited by the fact that would be reduced inflow and if all partners have requested payment the company could not have done it.
Extremely dubious claim! Which can be also made in respect to any bank or credit fund.

Another bogus claim. Banks are required to keep a large reserve, and can always request credit from other banks, and even the Federal Reserve if there is a "run" on the bank. Even if the bank "fails", all deposits are covered by the FDIC. 

Furthermore, Zeek is documented to be paying out far more than they should be paying out. With only 2% of revenue derived from non-affiliate sources, 162 million income in July 2012 would have resulted in payout of only 1.62 million (half of 2%) yet it paid out 160 million, 100x what it should have paid out. 

You do not say a word, that the company made a profit, including from the online store. They were preparing to launch a new platform in this direction.

You have no proof that the online store / new platform can / will / have already contributed significant revenue, to the tune of several hundred million. 

And the online store is also a pyramid?
The whole world comes to buy on the internet! And there's nothing illegal there!
It does not matter that buy goods or bids, with which you can get the product or service purchased, and who pays the online store for what it advertised.

Irrelevant appeal. Again, unless the online store have revenue of at least 160 million it is not relevant. Anna is arguing "you didn't count that!" when there's no proof "that" would have affected the result at all. 

Yes, ZeekRewards grew rapidly and reached the international level! But what's so bad that the company grows? The number of people on the planet grows, so will grow a business turnover of America, and therefore taxes. Think about it before you put the verdict.

Paul Burks has repeatedly said such letters are received and all the partners that the company prohibits someone promise anything, to speculate and to make plans and to invest, especially in well-defined size.

Andy Bowdoin also explicitly forbade any one using the word "investment" or "invest" or "interest" and similar words in his Ponzi "Ad Surf Daily". His Ponzi was broken up by SEC in 2008. What the leader said about the business is NOT always the truth. Have you not heard of Madoff? How about MMM by Mavrodi? 

Human nature is different and complainers, who may not have received what they promised defaulting partner, cannot serve as an example for the conclusions of the illegal system of partnership with ZeekRewards.

It is Burks who lied, and told everybody Zeek is not investment when it definitely passes the Howey Test. 

State, we also promise a lot of things, but we are for your life and half of those promises do not get, but that does not mean that we leave the country because of this.

Due to several complaints, you are depriving the possibility of hundreds of thousands of people to live with dignity, in conditions that the state now has more global issues, and cannot devote adequate attention to.

Irrelevant appeal to "why don't you go after more important issues"
  Saving banks? Banks have to serve the people, not live off them.
And the amount of money that people earn in ZeekRewards, placed in the bank, just give the opportunity to develop the banking system and provide loans for the development of other sectors (industry, agriculture and small business.)

And where does the money from from? It is NOT a business, but pretending to be a business by operating a small auction as cover. It is fraud. 

Yes, maybe there are mistakes and shortcomings, poor control, inflated financial bracket, but it does not mean that everything is bad and illegal.

So you don't know if it's bad and illegal? Then why did you write this? As you have demonstrated fundamental LACK of understanding of American law regarding pyramid schemes, what exactly *are* you trying to explain? 

But you have to give people a chance to continue the job. In your hands is the fate of many families in America and far beyond, who believe that your decision is right and just and will allow people to live well.

Ah, the "you'll hurt many good people if you expose this scam" argument. Bogus!

P.S. America has always been considered a model country of opportunities, a country of ideas and fair justice. A visit to Washington D.C is my dream. I have relatives living there, whom I had not seen for many years.

While living in a small country of the former CIS, I can do this only through ZeekRewards and Rex Venture Group, which provide great opportunities!
We'll wait. The main thing is that your decision will be truly fair, correct and impartial because of vested interests.
Best regards to you,
Anna Makovsky.


We can pretty much conclude that Ms. Makovsky, if she really exists, is commenting on something she did no research, claimed to cite something real but actually played a strawman, and used multiple fallacies like "go after another scam" and "lots of good people will be hurt". 

Chances are extremely high this was written by a Zeek affiliate.

And all the Zeekheads who reposted it are guilty of spreading bad information

But then, if they know how to tell good information from bad, they wouldn't have joined Zeek in the first place.

Enhanced by Zemanta

1 comment:

  1. Joe Mama here.

    "SEC claims that there was no full use of bids.
    We have the right to decide what to do with bids after buying them. To use or not to use is left to our choice."

    The problem the SEC had with the bids, other than being purely internal consumption when it comes to an MLM, is that since less than 1% of the bids purchased were actually being used in the auctions, it proves that Zeek was a ponzi scheme since most of the money was coming from affiliates to pay other affiliates. Very little bids being used means that the penny auctions weren't generating the revenue that was claimed. She's not even disputing that point, she's basically saying, "Zeek sold bids and gave away free bids. It's not Zeek's fault that not all bids were used." The fact that very few bids were actually used should be a clue that the "50% of daily profits" thing was a lie.