Judgments against net-winners in the Zeek Rewards Ponzi scheme reached $169 million, according to the Second Quarter 2018 Status Report filed by court-appointed Receiver Kenneth D. Bell. These judgments target individuals who profited from the fraudulent operation by withdrawing more money than they initially invested and subsequently refused to settle with the Receivership.
Rex Venture Group, operating as ZeekRewards.com, was an alleged $600 million Ponzi and pyramid scheme that collapsed in August 2012. The U.S. Securities and Exchange Commission filed an enforcement action against the company and its founder, Paul Burks, who later pleaded guilty to fraud charges. Over one million participants worldwide had invested in the scheme, which promised daily returns through a "retail profit pool" tied to penny auctions, primarily funded by new investor money rather than legitimate business operations.
Kenneth D. Bell, appointed by the U.S. District Court for the Western District of North Carolina, has been tasked with recovering funds and distributing them to victims. His efforts include unwinding fraudulent transfers, legally known as clawbacks, from those who benefited financially. These actions are typically rooted in federal bankruptcy law, specifically Section 548 of the U.S. Bankruptcy Code, or state Uniform Fraudulent Transfer Acts, which allow the recovery of funds transferred by an insolvent entity.
Instead of pursuing each debtor individually, the Receivership plans to sell the $169 million in judgments in bulk to specialized debt collection agencies. This strategy aims to streamline the recovery process, offloading the administrative burden and costs of individual collections to third parties. These agencies would then assume the responsibility and risk of collecting on the outstanding judgments.
Between April and June 2018, 2,508 net-winners agreed to settle with the Receiver, totaling $18 million. Of this amount, the Receivership collected $12 million by June 30, with $4.2 million still outstanding. These settlements often involve paying a percentage of the net winnings back to the Receivership to avoid prolonged legal battles.
Some of Zeek's largest net-winners continue to challenge the clawback demands. They have appealed their cases to the Fourth Circuit Court of Appeals. The Receiver's team spent the second quarter reviewing the appellants' legal briefs and drafting a formal response. Court filings indicate the appeal is not expected to significantly impact the overall Receivership Estate or its ability to recover funds. These appeals often argue that the net-winners were "good-faith transferees for value" and unaware of the underlying fraud.
International enforcement efforts for judgments have become more selective. The Receiver is exploring how to enforce a $160,000 judgment against a German net-winner. However, the costs and complexities of pursuing foreign defendants in various legal jurisdictions led the Receiver to halt enforcement efforts in most countries. Only Germany and Canada remain active targets for international judgment enforcement, likely due to existing reciprocal enforcement treaties or more favorable legal frameworks.
Several key tasks remain for the Receivership. The net-winner appeal in the Fourth Circuit must conclude. Clawback payments from settling affiliates require processing. The $169 million in judgments will be prepared for sale to debt collectors. Furthermore, the Receiver is actively working to recover $13.5 million in investor funds that were allegedly stolen and are currently held by payment processors Payza, Payment World, and VictoriaBank. These recovery actions involve separate legal proceedings against the financial institutions holding the funds.
Once all recovery efforts are finalized and administrative tasks are complete, victims with approved claims will receive a final distribution payment from the recovered funds.