Bozeman resident Scott Wacker and his company, Funky Shark, faced a $40,000 fine for illegally selling investment opportunities in Montana, Commissioner of Securities and Insurance Monica Lindeen announced yesterday. The penalty followed the company's brief operation as an MLM penny auction, a model that often drew regulatory scrutiny in the wake of the $600 million Zeek Rewards Ponzi scheme shutdown.
Many new MLM penny auctions launched after Zeek Rewards, often featuring similar compensation plans. Most of these companies announced or entered extended prelaunch phases. This strategy allowed them to charge affiliates money to join before the auction officially started. Companies could then build an initial fund to pay affiliates, regardless of early penny auction revenue.
Funky Shark adopted this prelaunch approach. In September 2012, it began asking "founder members" for $1000. The company guaranteed a $500 commission for each new founder member recruited.
Funky Shark later announced it would abandon its penny auction plans and issue refunds to all investors. The company cited concerns about the feasibility of running an MLM penny auction that relied on retail profits. They did not disclose at the time that they were also facing court action from the Montana Securities Commissioner.
Monica Lindeen's office filed for a temporary injunction against Funky Shark on October 31, the same day the company announced its refunds. An order passed the following day, November 1. This order restrained Scott Wacker and Jennifer Wacker from operating Funky Shark or engaging in securities business in Montana. It also prohibited them from transferring or disposing of any monies or assets obtained from investors. Scott Wacker had used the name "Scott Walker" during Funky Shark's prelaunch; his reason for this alias remains unknown.