The ZeekRewards “largest net winners” will soon be required to turn over to the court-appointed Receiver all their records showing, among others, how much money they received in “profit payments” from Zeek, pursuant to the Motion filed by the receiver in federal court.
ZeekRewards.com, Rex Venture Group LLC, and their principal, Paul Burks, have been charged by the United States Securities and Exchange Commission (SEC) with running a fraudulent, Ponzi scheme that victimized over 2.2 million investors worldwide.
While most of the ZeekRewards participants lost the money they put in that alleged scheme, a few of them made hefty profits, according to the Receiver. Three participants collected at least $1.7 million between them. “Profit” payments in a Ponzi scheme are usually made with money that belong to other investors, without such investors’ permission.
Three of the alleged “largest net winners” – David Sorrells, David Kettner, and Mary Kettner – are fighting back the Receiver. They filed their own motions, asking the federal judge to “unfreeze” funds involved in the ZeekRewards alleged Ponzi scheme, and to appoint an independent party to oversee the Receiver’s actions. The Receiver called their request “absurd.”
The Receiver has already petitioned the federal court to award him approximately $900,000 for approximately seven weeks of work.
The fourth member on the Receiver’s “largest net winner” list is Robert Craddock and his business, Fun Club USA Inc.. David Sorrells received at least $900,000 from ZeekRewards, while David Kettner and Mary Kettner got a cummulated $800,000 or more, according to the Receiver.
Whether or not ZeekRewards was a Ponzi scheme is hotly debated. While the SEC argued ZeekRewards was a Ponzi, Burks denied the charges. However, the U.S. District Court, sided with the SEC’s request and appointed a Receiver to take over Burks’ companies and liquidate them in an orderly fashion.
Some of the Zeek participants insist this was not a Ponzi scheme. However, since a significant minority of participants ended up profiting from the scheme, it is possible that some of those arguing against the “Ponzi” theory may be attempting to defend their own winnings: in other Ponzi scheme cases – most famously, Bernie Madoff’s – the court-appointed Receivers have gone after the “net winners” and demanded that they give the money back, to be re-distributed to all participants. The Zeek Receiver has already indicated he may take legal action against the “net winners.”
ZeekRewards’ failure could result in losses of $5-to-600 million, according to the Receiver. While more than $300 million has been recovered, another $300 million or so is missing. Less than ten percent of the participants to the alleged Ponzi scheme made money, while the vast majority – over 800,000 – appear to have lost their “investments.” Of those who made money, about 1,200 allegedly made more than $100,000 in profits, each.
Any payouts to the net losers are not expected before the second half of 2013, said the Receiver.