On February 28, 2014, the Zeek Rewards Receivership initiated clawback litigation against top affiliates and insiders, aiming to reclaim funds for victims of the $600 million Ponzi scheme. These legal actions target individuals who profited most from the fraudulent operation, which the SEC shut down just as it faced collapse.
The Receiver's efforts seek to recover money distributed to net-winners. These individuals often served as the public face of the scheme. Zeek's insiders also operated the program with significant assistance from managers and advisors, which boosted its perceived legitimacy and success.
Some of these top earners have already settled with the Receiver. Quarterly reports have consistently mentioned pending clawback litigation against those who refused to return their illicit gains. The recent filings identify these individuals, underscoring the Receiver's commitment to recovering assets for victims.
Zeek's insiders received victim money through an unlawful Ponzi and pyramid scheme. They are not permitted to retain these winnings. The law requires them to return the fraudulently transferred funds to the Receiver for distribution to Zeek's victims.
Paul Burks, the CEO and owner of Zeek Rewards, stands as a primary target. Burks, a resident of Lexington, North Carolina, was the acknowledged leader of RVG, the parent company. He personally received over $10 million from RVG.
Burks used investor money for personal expenses and gifts. Records indicate he provided more than $250,000 in cash gifts to his son and over $30,000 to his daughter.
Burks and other insiders knew that affiliate payouts would come from new participants, not from retail profits generated by the penny auctions. They understood the compensation plan was unsustainable. There simply would not be enough new participants to support full daily cash payments to a growing base of existing affiliates.
Burks actively dodged questions from affiliates about the calculation of the "profit percentage." In one Skype chat, he stated: "a proprietary system is used to determine the amount of profit sharing that is done each day. We do not divulge the details of how those numbers are determined." This alleged "profit percentage" hid the scheme's true nature.