The Securities and Exchange Commission (SEC) this week filed suit against Keith Laggos, a consultant accused of shaping and profiting from Zeek Rewards, one of the largest Ponzi schemes in recent history. The federal agency alleges Laggos played a critical role in the fraudulent operation that defrauded investors of millions.
Laggos joined Zeek Rewards in June 2011. He advised the company to abandon its fixed 125% guaranteed return promise. Instead, he proposed a variable payout structure spread over 90 days. Laggos publicly claimed this change would keep Zeek Rewards within legal boundaries concerning pyramid and Ponzi laws. His assessment proved incorrect.
His involvement extended beyond consulting. Laggos owned and operated Network Marketing Business Journal. He used this publication to lend legitimacy to MLM schemes he promoted. In June 2011, Laggos published a favorable feature on Zeek Rewards, calling it the 'company of the month' and praising its earnings, customer base, and compensation plan. Despite concerns raised by Zeek Rewards' chief operating officer about false claims, Laggos ran the article without corrections in the July/August 2011 issue.
This promotional coverage helped solidify Zeek Rewards' image as a legitimate business for potential investors. During this period, Laggos received undisclosed payments for his consulting and promotional work. By August 2012, his monthly earnings from the scheme reportedly reached approximately $40,000.
A dispute arose when Paul Burks, the head of Zeek Rewards, opposed Laggos's efforts to promote other schemes. Laggos then began pitching Lyoness, another Ponzi operation, to his downline of about 4,500 Zeek affiliates as a 'plan B.' Their falling out was significant enough that Laggos predicted the FTC would shut down Zeekler within six months.
His prediction about the scheme's closure was accurate, though not the agency involved. Just weeks after Laggos made his statement, on August 18, 2012, the SEC filed its suit against Zeek Rewards and halted its operations.
The SEC's complaint details specific charges against Laggos. The agency claims he acted as a paid consultant who altered the compensation plan. Simultaneously, he used his publication to promote the scheme, receiving undisclosed compensation. The SEC asserts Laggos knew or recklessly disregarded that Zeek Rewards was operating as a Ponzi and pyramid scheme. The agency notes that Laggos's suggested changes were intended to create an appearance of legal compliance. Zeek Rewards selectively adopted some recommendations while discarding others.
Network Marketing Business Journal ceased publication shortly after Zeek Rewards collapsed. The SEC's lawsuit underscores the precarious line between legitimate consultants and those involved in fraudulent schemes. Investors who lost money in Zeek Rewards may find information on recovery through the SEC's Office of Investor Education and Advocacy.