Zeek Receiver Sues Insiders: Paul Burks and Others Served With Lawsuit

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    Hat tip to Don Ryan over at ASD Updates for breaking the story on the lawsuit.


    Dawn Olivares, Operations Officer for Zeek Rewards, Pleads Guilty To Two Counts of Fraud

      Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

      Dawn Olivares, operations officer at Zeek Rewards, pled guilty today to two counts of criminal charges for her involvement with the ponzi scheme. The SEC broke the story this morning in an article titled “SEC Charges Woman and Stepson for Involvement in ZeekRewards Ponzi and Pyramid Scheme.” The copy of Dawn’s guilty plea is signed below (hat tip to Don Ryan over at ASD Updates for finding the document). She pled guilty to both counts levied against her: Count 1 = Securities and Wire Fraud. Count II = Conspiracy to Defraud the IRS. Both counts carry a maximum penalty of 5 years imprisonment. The charges were filed and a plea was entered the same day, which tells me this was all negotiated between Olivares and the federal authorities. We’ll see what kind of penalty shakes out of this. See below for an excerpt from the SEC’s press release:

      The SEC alleges that Dawn Wright-Olivares and Daniel Olivares, who each now live in Arkansas, provided operational support, marketing, and computer expertise to sustain ZeekRewards.com, which offered and sold securities in the form of “premium subscriptions” and “VIP bids” for penny auctions. While the website conveyed the impression that the significant payouts to investors meant the company was extremely profitable, the payouts actually bore no relation to the company’s net profits. Approximately 98 percent of total revenues for ZeekRewards – and correspondingly the share of purported net profits paid to investors – were comprised of funds received from new investors rather than legitimate retail sales.

      If you’re reading this via email, click here to download a copy of the guilty plea.

      Recover Losses From Zeek: Submit your claim form

        Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

        keep-calm-and-please-hurry-upThis is likely going to be our last post / email blast regarding Zeek Rewards. It has been a little over a year since the company was shut down by the SEC. I know the company’s demise resulted in a lot of frustration, anger and pain. I’ve talked with people that literally lost their entire life savings. I’ve even talked with people that walked away with six figures in earnings and blew it all on frivolous expenses, stressing over ways to pay it back. Bottom line: it was bad for a lot of people.

        But for those of you that lost money, there’s an opportunity to get most of it back. SUBMIT YOUR CLAIM! The receiver is charged with doling out the funds to the net losers in a fair and equitable fashion. He’s not able to do it unless you submit your claim. The deadline for the submissions is September 5. In his most recent letter sent two weeks ago, Ken Bell said,

        If you have not completed and fully submitted a claim through the Receiver’s online Claim Portal or through alternative means expressly authorized by me in writing prior to 11:59pm prevailing Eastern Time on September 5, 2013, your claim will not be counted and you will not receive a distribution on account of any amounts that Zeekrewards may owe you.

        The official website for the claims process is: http://www.zeekrewardsreceivership.com/. There’s a “FILE A CLAIM” button right in the middle of the site. Push it. Since it’s in electronic format, the submission process could not be any simpler. This firm actually considered helping participants file their claims. But the online portal is so simple, there’s just not much for us to do. Please submit your claims before the deadline. According to the receiver, hundreds of thousands of participants have not filed their claims. And when you submit your claims, try to follow the instructions as closely as possible. If you miscalculate your investments in Zeek, it may result in serious delays and / or a rejection of the claim.

        Ken Bell’s most recent update can be found below. If you’re reading this in your email inbox, it can be found here.

        The First One is On Us, Second One is On You: Be warned of Leveraged Profit Sharing Programs

          Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

          Leveraged Profit SharingWhen Zeek Rewards got shut down, the consumers really lacked an understanding of the problems. As I wrote about in the past, this ignorance in the market was largely our fault. Our “self-regulated” industry failed them. The first one is on us. But with this new breed of Leveraged Profit Sharing Programs (“LPSP”), it’s now on you.

          Remember Zeek? It’s been close to eight months since they were shut down. If you will recall, Zeek Rewards was nailed by the SEC mainly for operating as a pyramid scheme and for selling unregistered securities i.e. encouraging passive investments, hinting at lucrative returns on the money, etc. Zeek Rewards taught its participants and the entire network marketing industry a very painful lesson: promises of passive return on investment + a network marketing compensation plan = hurricane of pain.

          But it’s not an investment…

          Sure, I know the counter-argument. People argue that Zeek never “asked for investments.” Instead, they were selling “sample bids” (wink, wink), which led to activity on the website, which led to profit, which led to profit distributions to the investors / distributors. Curiously though, the vast, overwhelming, ridiculous majority of those sample bids (99%+) were never used, which means the program was just cycling money from older investors to newer ones. While I know the counter-argument, it’s flat out silly. And those of us in the industry, we knew it and we said nothing. We let Zeek take advantage of the credibility we all work hard to create.

          I’m getting to the point…

          Zeek Rewards was like cocaine for a number of the net winners. They’re now hooked on the high. They want more. As the air in Zeek is deflated, reality is starting to sink in for people: Zeek Rewards is never coming back. With that in mind, it has led to the next generation of high yield investment MLM. I’m referring to these sorts of programs in the industry as “Leveraged Profit Sharing” programs. High Yield Investment Programs, or HYIPs, is a phrase commonly used; however, it’s easy for LPSPs to distinguish themselves from HYIPs because there’s “no investment.” I think LPSP is a better fit because it embraces the very terms they promote in their plans: profit sharing. And it’s precisely how they work in practice. The companies leverage the investments made by participants to grow the company. With growth, comes profit. And with profit, comes distributions to the investors i.e. leveraged profit sharing.

          The point…

          At some point, consumers have to accept responsibility for their financial decisions. Zeek brought painful clarity on the subject. And it was widely publicized. Perhaps I live in a fantasy world, but I think consumers should now know better. When participants are asked to fund the growth of a company by way of buying “samples” for anonymous, no-name customers, and when they’re promised a return based on company profits, they should simply know better! In this Information Age, where information is readily available on computers and cell phones, the excuses are starting to shrink. LPSPs would cease to exist if they lacked support from participants.


          Where there was 1, now there are many. This is just an example. Recently, I’ve heard of “investor co-ops” where people pool money together and invest in multiple LPSPs. It functions sort of like of a mutual fund, but for…other kinds of programs. The companies they were allocating investor dollars: Banners Brokers, Profit Sunrise and GoFun Places. Why would people pool resources and passively invest in these programs? Because…well, you can decide for yourself. And these are just a few. If you get burned in a LPSP, do not blame the consultants or any vendors. Blame yourself. The information is out there. And by the way, the idea of “invest now, get out fast” might come back to bite you. There are a number of net-winners in Zeek that are currently negotiating deals with the receivership to pay back their gains. The other net-winners, the ones that are hoping for the clouds to clear, they’re about to be jack hammered in a whirlwind of litigation.

          Think about it.

          +Kevin Thompson

          Zeek Rewards Shut Down

            Kevin Thompson is an MLM attorney, proud husband, father of four and a founding member of Thompson Burton PLLC. Named as one of the top 25 most influential people in direct sales, Kevin Thompson has extensive experience to help entrepreneurs launch their businesses on secure legal footing. Recently featured on Bloomberg TV and several national publications, Thompson is a thought-leader in the industry.

            Disclaimer: This article contains my opinions. I’m not stating with certainty that Zeek is fraudulent; however, in my opinion, I believe that to be the case.  I think the investigation is timely and will serve a valuable function.    

            It’s official.  Zeek Rewards has recently closed its doors.  Literally.  In fact, the SEC and U.S. Secret Service are now involved. This is what we know: the doors are locked and the website is down.  It’s not looking good.  Was this done voluntarily?  Were they required to do this by the SEC?  This all has occurred recently after the North Carolina AG’s office expressed “concern” over the Zeek model.

            I’ve got mixed emotions.

            I’m both angry and relieved.

            Why am I angry?

              I really think we lost our minds with this model. The MLM community took the bait and walked off a cliff like a herd of lemmings. Do you want to know what happened?  I’m going to be candid:

            Zeek exploited the gray.  They took a bath in it.  They skinned it and made a coat out of it.  They hired the right people and adopted the right lexicon.  And who is going to pay the price?  The entire industry.  This is bigger than just the participants.  There’s an ocean of gray separating legitimate network marketing companies from pyramid schemes.  Instead of shrinking the gray, we fight like hell to obfuscate.  As an industry, we’re self-delusional.  It’s true.  We think it’s better to have vague standards.  But now we’re seeing first hand what happens when the inmates take over the asylum.

            “Those are not investments, those are ‘samples’ given to ‘customers’ in an effort to entice them into buying more….it’s like Amway distributors giving samples of soap to customers.”

            It’s not the same thing! Amway distributors are not spending $50,000 on soap, giving it all away to strangers while dramatically increasing their earning potential. Amway distributors have a direct, real connection with customers.  With Zeek, it’s just a combination of 1s and 0s on a computer screen.  Who in the hell were these customers?  Where were they coming from?  Were they real?  Were they ever asked to verify their accounts? Nobody knew and nobody seemed to care.  People knew the angle.  They read from the script, mastered the narrative and explained with eloquence why Zeek was “just like Amway, but with penny auctions.”  Zeek affiliates were essentially rewarded IMMEDIATELY after they bought the bids, regardless if they were ever used. This is not consistent with traditional MLMs.

            I’m angry because they leveraged your credibility. They leveraged the credibility of my colleagues and competitors. They leveraged mine.  And we all look like idiots.

            I’m angry because this recent news is going to be devastating for tens of thousands of people.  People that will likely associate this horrible experience with “network marketing.”  These were the people that cashed in on their 401(k)s because they were promised tremendous gains in a short amount of time.  These were the people that “invested” more money than they could afford to lose, hoping that maybe, for once in their life, they could get a decent ROI. If the money ends up being locked away in receivership, which is a possibility, it’s not coming out without a court order. Will everyone get their money out? I’m not sure.

            I’m angry because this actually impacted my relationships with clients, current and former.  When I gave my candid advice, I was sometimes met with hostility.  I was considered “out of touch.”  I was told that Zeek was “spending countless dollars to be compliant” and I was just envious to be on the outside.

            I’m angry because we allowed the cancer to infiltrate the host and spread.  We opened the door and welcomed it with open arms.  Zeek leadership took on top positions with trade associations, recruited top distributors from reputable companies and networked intelligently with industry influencers.  Have cash?  We’ll dance. We provided them with the semblance of legitimacy, and they ran with it. We empowered them.

            Why am I relieved?

            I’m relieved because the conversation is finally over.  I’ve been fielding calls at least twice a week with somebody else looking to launch their version of Zeek.  It’s hard to tell someone “no” when there’s someone across the street making a fortune with the exact same model.  Finally, it’s over.  We can resume normal business.

            I’m relieved because this should mark the end for companies having to defend themselves from Zeek. Zeek was soaking up a lot of leaders from a lot of different companies, causing a considerable disruption in the space. Companies, trying to hold onto their people, found themselves in the cross hairs between zealous distributors looking for a quick buck and industry pundits, all defending the Zeek model. It put company executives in an awkward spot.

            What did we learn?

            Money Clouds Judgment

            When people have a serious economic position with something, they’ll fight hard to protect it. They’ll go to great lengths to find a mental justification, even if it defies all logic and intuition.  There were a lot of distributors in Zeek that really should have known better.  They were around for the FutureNet, SkyBiz and Equinox cases. They knew better. And despite that experience, they really believed they were in the clear on this one.  I think their belief was genuine. They were just under a spell.  Once they got a taste of the enormous commissions, they were hooked and went to great lengths to defend the business.  Adults under the influence of serious cash are like teenage boys with girls…all logic goes out the door.

            Watch Out For Name Dropping

            People relied heavily on the credibility of Zeek’s lawyers: Gerald Nehra and Kevin Grimes.  They said “These guys are good; therefore, we’re good.”  I can speak on this first hand: hiring an attorney by itself does not legitimize a program.  At the end of the day, we MLM attorneys explain the boundaries for our clients and provide advice.  It’s on them to follow the advice and stay within the lines. I can guarantee you of one thing with 110% certainty, Zeek is not surprised by recent events. Grimes and Nehra are both good attorneys and good competitors. I’m confident Zeek was fully informed of these potential issues. MLM attorneys can lead horses to water…we can never make them drink.

            Commissions Must Be EARNED

            If someone promises you easy, run fast!.  We can do better.  Any measure of success in life requires hard work. Really, really hard work.  In the network marketing industry, we need to stand for meritocracy: as you perform, so shall you bonus.  We work hard to ensure the pay plans are fair and that reps are rewarded commensurate with the work they do.  With Zeek, the general tone was that people could make money with minimal effort. There was very little effort involved in reaping the rewards from the penny auction platform (with the exception of buying some customers and placing ads online). I understand that measures were taken to strengthen the program i.e. the compliance course, eliminating the customer co-op, etc; however, rewards were still allocated immediately upon purchases, regardless if the bids were ever used. This was a problem. There must always be a direct connection between the rewards received and work performed.

            With modern technology, there seems to be more “make money while sitting on your rear-end.” And as typical Americans, we’re drawn to it! As network marketers, we need to promise VALUE instead of promising EASE.

            If It Looks Like a Duck….

            Richard Brooke recently said, “If it quacks like a duck, it may not be technically a duck but duck hunters WILL KILL IT!”  Zeek just looked too much like a security. I understand that there are countervailing arguments, but the bottom line is simple: Zeek fought hard to train people to NOT call it an investment opportunity because that’s exactly what it looked like.  People, when they were pitching the program as an investment opportunity, were just following their instincts.  Why?  Because it looked like a duck….


            There are a number of issues that will likely come to light during this investigation.  Is it a Ponzi scheme?  Is it a pyramid?  Is it an unregistered security?  Is it all of the above?  Will criminal charges follow?  Who knows…

            As an industry, I think it’s time to tighten up the skates.  This should serve as a wake up call. This is embarrassing.  Absolutely embarrassing.  Zeek flew under the banner of protection provided by US, the network marketing community.  They danced in the gray and profited. We need to stop drinking our own kool-aide and shrink the gray. When I first started practicing, I wrote an ebook that has been read over 12,000 times. It’s titled, Pyramid Schemes: Saving the network marketing industry by defining the gray. I propose some ideas on ways to make the space better. I think it’s time. Otherwise, this WILL happen again. And at the pace of technology, it will happen soon.

            As for my representation of Bidify, which I’m sure will be an issue, they’re paying attention to this situation. Since retaining me, they’ve made a number of difficult decisions. I’m not going to comment further on their business other than to say they’re working hard to get their model in order. Their recent decision to reduce the max cost to 5,000 euros forever is proof of it. If you want to park a lot of cash, Bidify is not the spot for you.

            If you learned something, please hit the +1 or “Like” button above and get it out there. Thanks.

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            The SEC filed suit against Zeek Rewards. See below for a copy of the complaint. The most shocking sections are paragraphs 44, 45 and 46.

            44. Defendants represent that daily awards are calculated by dividing “up to 50%” of daily net profits by the number of Profit Points outstanding among all Qualified Affiliates. This calculation results in a daily dividend paid to each Qualified Affiliate that consistently has averaged approximately 1.5% per day.

            45. In fact, the dividend bears no relation to the company’s net profits. Instead, Burks unilaterally and arbitrarily determines the daily dividend rate so that it averages approximately 1.5% per day, giving investors the false impression that the business is profitable.

            46. Despite encouraging affiliates to purchase and give away VIP Bids to promote and drive traffic to the Zeekler penny auction website, Defendants fail to disclose that almost none of the VIP Bids given away by Qualified investors are actually used on the Zeekler penny auction website. Of approximately 10 billion VIP Bids purchased by or awarded to investors, less than one-quarter of one percent have been actually used in auctions on the Zeekler penny auction website. Thus, the VIP Bids do little or nothing to actually promote the retail business.