Thursday, December 26, 2013

Scam Post Mortem: How Long Had Zeek Been Investigated Before They Were Closed?

The United States Secret Service star logo.
When did US Secret Service start
investigating Zeek Rewards?
(Photo credit: Wikipedia)
With clawback lawsuits about to start against the "net winners" in the Zeek Ponzi scheme (there's still time to settle, lest you enjoy being served with a lawsuit) one the the questions burning on the minds of the victims (besides "when do I get my money") is how could the Zeek ponzi scheme lasted as long as it did? When did they, the insiders (Paul Burks, Dawn Wright-Olivares, etc.), knew they were being investigated? Why did they continue to perpetrate the fraud rather than shutting the whole thing down?

Part of the answer on how long the insiders had known about the government investigation was hinted in the SEC press release on Dec 20, 2013 where they announced that SEC has brought charges of various securities law violations against Dawn Wright-Olivares and her stepson, Dan Olivares, respectively COO and CTO of ZeekRewards ponzi scheme, that they knew and covered up evidence of wrongdoing. The civil charges has been settled with both of them paying about 11.4 million dollars together, but the CRIMINAL charges being filed by the US Attorney's Office is still pending. 

Let us then put several more documented dates in a timeline so we can visualize it more clearly:
  • circa early April, 2012 -- Zeek Rewards suddenly cancelled all members from certain European countries with a bogus explanation and only offered original money back
  • April 18, 2012 -- Zeek Reward red carpet event in Lexington, NC
  • circa end of May, 2012 -- Zeek posted a profit share of 8.9%, then told everybody they had a manual decimal displacement, it's really 0.89%. This basically proved that the percentage was not calculated, but manually entered
  • May 28, 2012  -- over Memorial Day weekend, Zeek suddenly announced that all Zeek checks have to clear before June 1st or they are void. 
  • June 4th, 2012 -- in a "training call" hosted by Dawn, she announced that 700 Zeek members in Montana can no longer participate due to some legal problems. 
  • June 5th, 2012 -- in another "training call", Dawn announced eWallet through NxPay, then claimed that unless other affiliates put more money into Zeek's eWallet, Zeek cannot pay people. 
  • June 6th, 2012 -- Zeek announced they no longer accept personal checks 
  • June 6th, 2012 -- Dawn attempts to white-wash eWallet issues with now infamous "burger Analogy" (i.e. if you buy from BK you can't pick up your burgers at Wendy's, so if you buy bids with STP you can't get paid from NxPay)
  • June 8, 2012 -- Dawn Wright-Olivares appeared with Troy Dooly on ACES Radio hosted by Jim Gillhouse. Dawn claimed that Burks "manages all that" when asked how was daily profit share calculated. 
  • July 7th, 2012 -- North Carolina Office of Attorney General issued an information request to Zeek, but this was kept secret by both parties
  • July 24th, 2012 -- Keith Laggos, Zeek consultant, "fired" for promoting Lyoness, revealed to be receiving 40K a month through Zeek as a Zeek member.
  • July 30th, 2012 --  Darryl Douglas, major insider at Zeek, dropped out of sight
  • August 1, 2012 -- North Carolina OAG request of Zeek documents was made public
  • Circa August 6, 2012 -- training classes and red carpet event scheduled for August 22 cancelled
  • August 16, 2012 -- Secret Service agents closed the doors of Zeek Rewards and RVG. 
Now, when did the Feds start investigating, and when did RVG / Zeek became aware of the investigation? 

IMHO, and this is corroborated by analysis from and editorial from Lyndell Edginton of Eagle Research, the Federal investigation is likely to have started in April 2012. It is not known what was the trigger or which agency initiated the investigation. However, it is possible for the banks getting suspicious at the amount of checks or credit card or even credit card fraud has triggered a money laundering warning.

Recall that April is when 6 countries were banned, no explanations given, then a week later Paul Burks gave a bull**** explanation involving OFAC which was quickly disproven. This may have also triggered an interoffice alert from OFAC to USSS. A later rumor was that those six countries were chosen as the top credit fraud against Zeek, but this was never proven.

This directly or indirectly lead to Zeek changing banks by June 1st, 2012. The obvious conclusion is they were kicked out... Or their assets were frozen by the bank as part of fraud probe, which is why no checks can be cashed from that account later. Their own "we've grown too big" is PR spin control.

It is unknown how many states started their own investigation, but Montana was first to act by June 2012. 

By June it's clear that Zeek *had* to have known they were under investigation. However, apparently they don't know the scope yet, because another compliance expert was brought in.. Greg Caldwell of White Hat Solutions, and his hit man, Robert Craddock.  They apparently thought the problem can be resolved by leaning harder on the affiliates.

It is also interesting at this time that they may have lied to Troy Dooly, their PR man, who later admitted and was fined by the SEC for accepting payments from Zeek to publish good news to counter all the negative publicity. According to Dooly (quoting from his blog MLM Help Desk 21-DEC-2012 entry)
June or July, I received a call from an MLM Attorney who had shared with me the SEC was investigating some companies which had appeared on a specific blog. Many of the penny auctions were listed on the site along with some other companies with similar pay plan. I know from reviewing my notes I had asked Dawn and Greg about any investigations around May or June and at that time they did not know of any that were directed specifically at Zeek from any regulator. There were some issues with the Montana filing, but I was told the paperwork had been turned in. 
From what I have been told, is that when Dawn anf Greg had asked Paul of any investigations Paul was very clear, the SEC was asking questions about each of the companies listed on the site and that Noell Tin had it handled and the SEC “was satisfied”. In the June or July Red carpet Day I also heard Paul make it clear the regulators (I assumed the NC AG) was asking questions but everything was under control. 
Assuming Mr. Dooly is being honest here (and I don't see why he would lie about this), it's clear that they were lying to him, or we have some of the dumbest and willfully blind "everything's fine" crooks in the land.

So to answer the question... Zeek was WELL AWARE that they were being investigated by June 2012, and the Federal investigation may have started months prior.

I don't know if I had anything to do with that investigation. There was a comment by Troy Dooly that claimed that my Hubpages investigation into Zeek was among the paperwork he was shown in the SEC office. While it does make me feel a bit warm and fuzzy, my hub was published in April 2012. Oz had been reviewed Zeek on BehindMLM long before I got onto the scene.

But that's just post mortem.

I can't answer the "why did they keep going". Maybe they thought they will simply be forced to make minor changes. Maybe they believe in their experts too much. There's a ton of Maybes.

If they ever write a book or two, I hope they are forced to donate every penny to victim restitution. 
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