A federal receiver seeking $900 million from Zeek Rewards' top earners faces a defense claiming "value provided," even after their own expert witness failed to prove the scheme was not a Ponzi. The legal team's July 29th response to a summary judgment motion presents this argument to the court. The expert, paid $30,000, did not support the defendants' position that Zeek was a legitimate business.
Zeek Rewards, which operated from 2010 to 2012, attracted over one million participants worldwide. The Securities and Exchange Commission and the North Carolina Attorney General both declared the operation a Ponzi scheme. Paul Burks, the founder, received a 14-year prison sentence for his role in the fraud.
The defendants' lawyers argue their clients genuinely believed Zeek was legitimate. They claim the "net-winners" provided "reasonably equivalent value" for their earnings. They assert the Receiver must prove the defendants failed to provide valuable services and that they committed fraud, placing the burden of proof on the Receiver.
Clawback litigation serves to recover money stolen through investment fraud. If individuals profit from a Ponzi scheme, they are generally required to return those funds. The Receiver's approach aligns with established legal precedent in these cases.
The defense also states these net-winners acted as "internet marketing specialists." Their filing suggests that a legitimate business would pay $50,000 to $80,000 annually for comparable services.
This argument overlooks the actual activities performed. Zeek affiliates recruited new members and generated traffic for a fraudulent scheme. Their "marketing" often involved spamming classified websites with advertisements for the Ponzi. No legitimate company pays significant sums for this type of activity.
Evidence indicates these were not innocent participants. The "marketing" they engaged in—distributing junk Ponzi ads across unused websites—was not real work or a legitimate service. It fueled the mechanism stealing money from victims.
The Receiver's legal position appears more robust. In fraudulent transfer cases linked to Ponzi schemes, courts have consistently prioritized the recovery of victim funds. The defendants' belief in the scheme's legitimacy or their effort does not change the scheme's fraudulent nature. The U.S. District Court for the Western District of North Carolina oversees the Zeek Rewards receivership.
The net-winners accumulated wealth directly from new investor funds, a defining characteristic of a Ponzi operation. The court filing by Receiver Kenneth D. Bell seeks to establish that these earnings must be returned to compensate the scheme's victims.