The Zeek Rewards Receivership moved yesterday to file lawsuits against two of the scheme's attorneys, Kevin Grimes and Howard Kaplan, in North Carolina District Court. The Receiver accused both men and their firms of legal malpractice and negligent conduct.
The court granted the Receiver's request on the same day. The Receiver's office stated that a careful analysis of RVG's records, document review, and witness interviews led to the conclusion that these attorneys caused significant damages through wrongful conduct.
Kevin Grimes, an attorney known in the multi-level marketing industry, runs the firm Grimes & Reese. His "MLM Law" website claims the firm established itself in 1996 as a premier provider of legal services to direct sellers. He states the firm gained unmatched expertise from his time as in-house counsel for Melaleuca, a direct sales company.
The Receiver's lawsuit contradicts these claims of expertise. It states that RVG operated a massive Ponzi and pyramid scheme through ZeekRewards from January 2011 until August 2012. Grimes served as legal counsel to RVG from around January 2012 until the company entered receivership in August 2012.
The lawsuit alleges Grimes knew or should have known RVG was perpetrating an unlawful scheme. This included a pyramid scheme, an unregistered investment contract, or a Ponzi scheme. Despite this knowledge, Grimes allegedly encouraged investors to participate. He created a "compliance" program that offered a false sense of legality and allowed his name to be used for scheme promotion.
Grimes knew or should have known that the penny auction business generated insufficient income to pay the daily "profit share" ZeekRewards promised. He also knew or should have known that money for ZeekRewards' distributions came almost entirely from new participants, not from Zeekler penny auction income.