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Tuesday
Sep252012

Co-Founder of Zeek “Victim Group” That Openly Challenged SEC Reportedly Receives SEC Subpoena  

One of the individuals leading an advocacy group openly critical of the Securities and Exchange Commission’s (“SEC”) handling of the alleged $600 million Zeek Rewards Ponzi scheme has reportedly been subpoenaed to appear before the SEC.  The individual, Robert Craddock, made this disclosure in a September 22, 2012 mass email directed to victims who have rallied behind claims that the SEC may have mis-handled the case.  While the SEC did not provide the reason for the subpoena, some have speculated that recent comments attributed by Craddock to the SEC concerning purported admissions of fault in the SEC's case against Zeek which were later refuted may have piqued the SEC's interest.

The SEC shut down Zeek in mid-August, alleging that the operation was nothing more than an elaborate Ponzi scheme that paid existing investors with funds raised from new investors.  The same day the SEC filed its complaint containing these allegations, it also disclosed that the two defendants, Rex Venture Group, which was the parent company of Zeek, and Paul Burks, the company's founder, had agreed to enter into consent judgments to resolve the case without admitting or denying the conduct alleged. Burks also agreed to pay a $4 million civil penalty.  With the cases against RVG and Burks all but resolved, the SEC then obtained the court's approval to appoint Kenneth Bell as receiver over Zeek's assets.

However, within days after Zeek was shut down, several groups were formed protesting Zeek's shutdown and rallying victims by promising to take action.  The groups appeared to be operating in tandem, and one group, "Zeek Rewards Affiliates United Against The SEC," claimed that the SEC had "mislead" the federal judge overseeing the Zeek case and began soliciting funds from victims for the establishment of a "united legal front" to petition the court to re-open Zeek.  The group, in conjunction with Zteambiz.com, claimed it was formed by the "leaders of Zeek Rewards," and promised that "donating anything from $20 dollars to $100 dollars (sic) will allow us to hire one of the best if not the best firm in the country to protect us."  The quest seemed to be quite successful; in a chart posted on Zteambiz (but later removed), it appeared to show that at least 6,000 victims had contributed a minimum of $20 towards this "legal fund" – if true, this indicates that over $100,000 had been raised.

As the group grew in number, the regular updates continued to lambaste the SEC's handling of the case and appeal for donations.  An August 25th message from another "leader" of the group, Dave Kettner, promised recipients that information would be provided "which will disprove everything the SEC has stated”, and, in return for their donation, they would be "part of the protected group who will be fully represented by our law firm that will be retained."

However, it was a September 8th update that gained immediate attention when a law firm purportedly hired by the group disclosed several "facts" to Craddock in a phone call, including: 

The SEC acknowledged that there are a couple of problems with the case against Zeek Rewards and Rex Venture group. Here are the problems:
1.    We (the SEC) are not able to find a victim in this case. We are not able to find anybody at this time that has been harmed by Zeek Rewards.
2.    We (the SEC) are having a hard time finding a security. In the complaint, it said that Zeek was selling securities and was an investment scheme.
Based on their (the SEC) new knowledge of the Zeek Rewards business model, they are having a hard time moving forward in making their case. And they are now looking for a path or way to back out of this.

If true, the SEC would be taking the nearly-unprecedented step of admitting a massive mistake even though the company and individual behind the alleged scheme had already entered consent judgments in which they did not deny the allegations made.  However, several issues with the revelation  raised suspicions, including that such admissions would be highly unlikely to originate from the SEC and especially to an unrelated party to the civil proceeding.  Ponzitracker confirmed these suspicions several days later during a conversation with an SEC lawyer involved in the case who categorically denied the allegations as "inaccurate" and "false".   A later update from Zteambiz decried the "junk and lies being posted around the internet," and began directing victims to join a private mailing list to avoid future updates from being posted publicly.

The group continued to criticize the SEC, and in a September 12, 2012, update, Dave Kettner urged victims to "disregard" letters from the receiver, Ken Bell, as they were "nothing important."  An update several days later on September 18th from Craddock cautioned victims not to "fall for the trap the receiver would like everyone one (sic) of you to fall into," questioning why victims should fill out a claim form for the receiver "thus saying they were a victim."  Just after that announcement, Craddock reported that he had been served with a notice to appear in front of the SEC - the timing of which he deemed "highly suspect."

According to Washington, D.C. white collar defense lawyer Mark Schamel with Womble Carlyle Sandridge & Rice, assuming Craddock did indeed receive an SEC subpoena, “he has picked up a sufficiently large stick to poke the tiger in the eye."  By making statements to a mailing list of likely thousands of victims purporting to contain admissions of fault by the SEC and urging non-compliance with the court-appointed receiver, the SEC may have felt it had no choice but to act to prevent the spread of misleading information on such a large scale, especially in the infancy of what may be the largest receivership proceeding ever conducted.  While Craddock is certainly entitled to make the statements, according to Schamel, "it is not freedom of speech if you are obstructing an investigation."  In an update several days later, Craddock hinted at the SEC's focus, indicating that:

“My day has been filled with getting the requested files showing my involvement with Zeek.”

The move also comes as a Texas law firm has sought court approval to appear as legal counsel for Fun Club USA, Inc. and other victims whose “assets were seized” as a result of the receivership.  As discussed in a previous article, Fun Club is a Florida entity operated by Craddock. 

It appears the alleged subpoena may have had its desired effect; in an update yesterday, Craddock indicated that "after speaking with the attorneys today they have requested that I go silent for a while and not give any more updates."  

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    Co-Founder of Zeek “Victim Group” That Openly Challenged SEC Reportedly Receives SEC Subpoena   - Ponzitracker - Ponzitracker
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    Co-Founder of Zeek “Victim Group” That Openly Challenged SEC Reportedly Receives SEC Subpoena - Ponzitracker - Ponzitracker

Reader Comments (6)

Gee, and they were so close to getting Zeek back up and running.

"I'll take 'Obstruction of Justice' for $1000, Alex".

September 26, 2012 | Unregistered CommenterGregg Evans

I am wondering if the SEC doesn't also want to discuss these comments made by Mr. Craddock:

"In the conversation with the SEC, our attorney's have already put forth the direction with moving forward with what they are calling "Zeek Rewards 2.0". They already have decided on another law firm where our attorneys would write an opinion letter which is something we have been told should have been done a long time ago with Zeek and had not been done. What this opinion letter will do is go to all regulatory agencies which will put them all on notice as to how this business, "Zeek Rewards 2.0" operates. Furthermore, if there should ever happen in the future like what happened with the SEC emergency injunction against Zeek, there will be a process that will have to be done first where they would have to go through a series of steps going through the law firm first that fully understands the business model. In other words, what happened to Zeek Rewards on August 16 which was a major mistake by the SEC, will never happen again.

It has also been our goal to fight the SEC allegations to prove that what they accused Zeek and Rex Venture to be false, and then to get Zeek Rewards back into operation. The SEC, since we have basically called them out to prove their allegations and put their feet to the fire, they now have to own up to this HUGE mistake on their part. They can no longer sweep this mistake under the carpet and are now going to be forced to assist us in getting our business back up and running more then likely stronger then ever. The SEC were the ones that actually have recommended how to set up the opinion letter with the law firm that they recommended to be sure that the new Zeek is protected from this ever happening mistakenly again."

Especially that last sentence. But maybe it is because of these comments:

"Greetings good people; we have not heard anything from our attorney. Yesterday I received many emails from fellow Zeekers, regarding statements from the receiver and, I like you, was shocked and viewed it as their attempt to say, there is no need to be represented by counsel. Well, as we all know we live in America, and for the fellow Zeekers that live outside of America this is not the behavior the world has come to expect from this country and its legal system, simply we all want to get the honest facts and it would appear that the receiver would rather all of us just roll over and take it.

As most of us know, to be appointed as a receiver is a profitable job, and some would call it legalized stealing. The court comes in and says it wants to protect everyone, but did you ever hear any one complain that they did not make money with Zeek Rewards, has the goverment produced anyone, that asked the goverment to stepin because Rex Venture Group LLC., was not paying its bills? Well I sure did not hear it, nor have I seen any filings regarding or supporting that conclusion."

Or possibly this announcement from Mr. Craddock:

"Over this past week, we have sought out to get the proof that was needed to prove that Zeek Rewards was not a Ponzi scheme and not an investment but rather a legal viable business that was thriving and paying out its affiliates daily profit sharing from the proceeds from the Zeekler auctions and Free Store Club and not that of the proceeds from purchasing of sample VIP bids by its affiliates. We now have the proof that we need to defend Zeek Rewards against the SEC allegations and to bring this proof before the courts to defend Zeek Rewards and all of our independent businesses as per our legal rights of due process.

Furthermore, we will petition the court to allow us to provide the legal proof that we have attained from the corporate office of Zeek Rewards, legal statements of Zeek Rewards corporate officials, and accounting records which will disprove ALL accusations by the SEC to be false and severely misrepresented."

I think someone in corporate may be in a heap of trouble by giving out that information. But then again it could be all of these comments as to why the SEC wants to "chat."

September 26, 2012 | Unregistered CommenterLynndel "Lynn" Edgington

Just for your information, Judge Mullen has granted Motions to Appear for both Mr. Quilling Fun Club USA) and Mr. Freedman (Receiver)

September 26, 2012 | Unregistered CommenterWizzard7

Zeek was the opportunity for people who are serious about assuming responsibilty for thier financial future to do so. During our struggling economy it was the opportunity that anyone could use and earn the much needed income that most of us need to survive. We would hope that our govenrment agancies are there to support good viable businesses that offer the oppotunity for us to suceed. We thank GOD for this opportunity and do hope that it will return stronger than before.

September 30, 2012 | Unregistered CommenterWilbert maynor

Since the shut down by Zeek by SEC, life seems having no meaning, no hope for many people that I know.I littealy know 3 of them who die from heart attack.It is so sad that they could not find a better way to solve this.

October 10, 2012 | Unregistered CommenterLJB

PTSD because of a failed ponzi scheme. Really? Come on.

October 17, 2012 | Unregistered Commenterzeekster

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