"“It's a process...We're going to try to gather as much money as we can and figure out who deserves what.”
Kenneth Bell, Court-appointed Receiver of ZeekRewards
The Securities and Exchange Commission ("SEC")'s shutdown of ZeekRewards last Friday left many of the estimated one million victims shocked and confused, with many still refusing to believe that they had fallen victim to one of the largest Ponzi schemes in history. With the SEC alleging that Zeek's cash reserves were far insufficent to cover the nearly 3 billion "profit points" accumulated by members, it will be up to the court-appointed receiver to begin the arduous task of trying to recover assets for the benefits of victims. The Receiver has already indicated that the process will likely "take a long time." A court-ordered asset freeze on the $225 million currently held by Zeek in various financial institutions ensures that victims can be assured of at least some recovery.
The establishment of a receivership is common in the wake of an exposed Ponzi scheme. Usually simultaneously with the filing of charges, the SEC also requests the appointment of a receiver. In this case, the SEC chose Kenneth Bell, a North Carolina attorney with law firm McGuireWoods who is experienced in white collar fraud. According to Lexington newspaper The Dispatch, Bell visited Zeek headquarters for the first time today. There, Bell likely took possession of investor files and office computers, which he will try to use to piece together to fully understand the scheme. Bell also announced that he will be establising a website, www.zeekrewardsreceivership.com, where he will communicate with all concerned parties. At the time this article was published, the website was not yet live.
Likely due to the staggering amount of victims, Bell also stated that communications with investors would be through email only, and provided this address for victims: info@ZeekRewardsReceivership.com. Before any distribution process can be established, it is likely that Bell will first provide the court with a report on his investigation and findings. This process will likely take weeks or months.
In addition to any funds recovered by the Receiver, both the SEC and Department of Justice ("DOJ") allow for any funds forfeited or paid as penalties to be returned to investors. In the context of an SEC proceeding, this is known as a "Fair Fund", while the DOJ process to return funds to victims is known as remission. For those familiar with the AdSurfDaily Ponzi scheme, which was similar to ZeekRewards in that it purported to pay investors daily returns in exchange for visiting websites daily, those investors received approximately $55 million in funds seized by the Department of Justice from foreign bank accounts.
After the Receiver completes his initial investigation, he will then begin the process of recovering assets for the benefits of victims. These efforts may include securing or disposing of property owned by Zeek and/or Burks. Additionally, there is also the possibility that the Receiver could employ the use of "clawback" lawsuits, which target those investors that withdrew funds in excess of their initial investment. This will especially be important in the context of Zeek, where those that invested early in the scheme and grew their "downline" affiliates likely received exponential returns exceeding their original investment. Mr. Bell said that it was still unclear as to whether clawback lawsuits were likely. He may also look to financial institutions or other third parties who were involved with Zeek that ignored or should have noticed "red flags" relating to the scheme.
In the near future, many will simply be waiting for word from the Receiver as to his initial findings. Some investors have already begun to secure legal representation as well. Kevin Thompson, a well-known attorney in the direct sales industry who operates themlmattorney.com, indicated that he had already been contacted by 2,000 victims seeking help whose losses ranged from $500 to $70,000. Many of these stories, according to Thompson, were "heartbreaking", and involved many victims who had cashed out their retirement accounts to invest in Zeek. Thompson estimated that there could potentially be up to 1.2 million victims.
The North Carolina Attorney General's ("NCAG") office has also warned Zeek's victims to be wary of "reload scams", which purport to "help them replace the income they were receiving from Zeek Rewards." Some of these programs even refer to themselves as the "Zeek rescue program." The NCAG urged investors to cut their losses rather than lose even more.
A statement released by the Receiver this evening is here.