In Rare Move, SEC Seeks To Seize ZeekRewards “Prolific” Ponzi Promoter’s Vermont House

A Vermont woman dubbed as among the “most successful and prolific promoters” of the ZeekRewards $900 million Ponzi and Pyramid scheme is the subject of a lawsuit by the Securities and Exchange Commission to seize a Vermont residence that she allegedly fraudulently conveyed in the wake of the scheme and concealed from her creditors.  Trudy Gilmond, who received nearly $2 million from ZeekRewards for her efforts in attracting investors to what is believed to be one of the largest Ponzi schemes in history based on the number of victims, is also known for hiring Bernard Madoff’s former lawyer in an unsuccessful effort to dissolve the receivership shortly after it was shut down by the Commission.  Several years after both the court-appointed receiver and the Commission secured millions of dollars in still-unpaid judgments against Gilmond, the latest action seeks to seize a house that was purportedly concealed by Gilmond and which was paid for in cash.  

Under the name “Team Fired Up,” Gilmond worked in the multi-level marketing space recruiting  new investors to join ZeekRewards’ platform that promised 1.5% daily returns purportedly through the purchase of penny auction bids.  Gilmond allegedly worked closely with the scheme’s founders, including Paul Burks, in serving as a “field liaison” for investors and was characterized by the Commission as one of the “most successful and prolific promoters of ZeekRewards.”   The scheme ultimately raised $850 million from hundreds of thousands of investors, and Gilmond was richly compensated for her efforts through the receipt of nearly $2 million in commissions and bogus profit-sharing payments.  

The scheme’s collapse was followed by a coordinated and extraordinary campaign of disinformation by the former promoters and insiders.  Many investors were told tales of misdeeds and misconduct by the Commission and the Receiver and incentivized to avoid cooperation through whimsical promises that the business would soon re-open.  Scheme insiders and promoters also raised untold sums from these victims with the spurious claim that these funds would be used to fight the Receiver and government; it is believed that many victims were re-victimized by sending hundreds of thousands of dollars that were never accounted for.  A sampling of various claims made by these promoters are below:

“Just got word from a solid source that the head of the SEC has been forced to resign due to the major pressure that the SEC is dealing with now in the wake of over 1700 lawsuits fighting against the SEC wrongful allegations against Zeek. I wonder if the SEC will now find a way to end this sooner rather then later and give us our company back.”

“If all goes well and the case is dismissed. I would estimate that Zeek Rewards would need another 2 months to get organized again and reopen. Personally I am hearing the best news I have ever heard about Zeek Rewards. Robert said there is a 99% chance that we will complete phase 1 this year. This should brighten everyone's Christmas.”

“The next phase is filing the motion with the courts to have all of the pending Zeek Rewards commissions that were processing to be paid to us for the work that we already did. All of these phases are building blocks needed to move forward in the process of winning this fight by proving that Zeek Rewards was not a Ponzi or an investment but rather a very profitable legitimate business.”

“For Zeek Members that would like to send their support for us to fight this battle and challenge the actions of the US Government and get the funds due to you released, please use the Fun Club USA Solid Trust Pay Account to send your donations. The username is ( funclubusa ). Again we want to thank you for all the help you have given. You can also submit check details on the site listed under donations.”

“We just want to see an end to this ongoing extortion of this group by Kenneth Bell, as do you. Rodney and Michael our attorneys are crystal clear, no one should in anyway hand over any funds to Kenneth Bell, and he knows and has acknowledged he does not have the ability to win in a crawl back action. Read the filings"

Despite the illusory claims, none of those promises ever came to fruition and many of the promoters were sued for their receipt of “false profits” from the scheme.

While Gilmond was not criminally prosecuted, she faced several civil lawsuits for her role in the scheme.  One came from the ZeekRewards court-appointed receiver who identified her as one of the largest “net winners” and sued her and others for the return of their ill-gotten gains.  The Receiver subsequently obtained a judgment for $2.1 million against Gilmond in May 2015 which has not been repaid.  The Commission also charged Gilmond in December 2015 for the unregistered sale of securities and unlicensed broker-dealer activity and later obtained a separate judgment exceeding $2 million.  Gilmond also did not pay any portion of that judgment.

According to the Commission’s latest suit, Gilmond began withdrawing substantial funds from ZeekRewards as she and other insiders became aware of increasing scrutiny from regulators.  Of those withdrawals, the Commission claims that Gilmond transferred over $400,000 through several of her accounts and later made 35 cash withdrawals each under the $10,000 Bank Secrecy Act reporting requirement.  This theoretically was done to avoid scrutiny or the required filing of a currency transaction report for such circumstances, although financial institutions are also required to file such reports when it appears that the withdrawals are done in a conscious effort to avoid the reporting requirement - known as structuring.

Several days after Gilmond learned she had been sued by the ZeekRewards court-appointed receiver, the Commission alleges that she transferred a vacant parcel of Vermont land to her mother for no consideration.  During the next year, Gilmond “managed” the construction of a house on the property and purportedly funded paid all construction expenses in cash.  Despite being questioned by the Commission at a post-judgment deposition about the property’s transfer and subsequent construction, Gilmond “falsely denied ever owning the Subject Property.”  

The move is relatively rare for the Commission especially with the existence of a court-appointed receiver who often takes the lead in prosecuting claims against insiders and later collecting on judgments to raise assets that can then be distributed to victims.  However, it appears that the Commission continued to pursue its case against Gilmond even after it obtained a default judgment and civil penalty against her, as evidenced by the reference to a post-judgment deposition conducted by the Commission.  And, if true, some of the referenced conduct such as “falsely” denying ownership of the property and an intent to circumvent currency reporting laws through sub-$10,000 withdrawals could potentially have criminal ramifications.  

The Commission is seeking a Court order finding that the transfer of the Vermont property was  a fraudulent transfer and ordering the sale of the property with the proceeds to be provided to the Commission. 

A copy of the Complaint is below:

Connecticut Investment Adviser Arrested For $10 Million Ponzi Scheme

A Connecticut senior citizen and investment adviser is facing multiple federal fraud charges on allegations that he used his financial services firm to conduct a Ponzi scheme that took in at least $10 million from clients over 20 years. James Booth, 74, was arrested yesterday morning on one charge of wire fraud, one charge of securities fraud, and one count of investment adviser fraud, and is also the subject of an enforcement action filed by the Securities and Exchange Commission.

Booth, who has been in the securities industry for nearly 30 years, was the founder and operator of Booth Financial Associates (“Booth Financial”) where he provided advisory services and sold insurance products to clients. Booth was also affiliated with several broker-dealers as a registered representative and investment advisor, most recently being affiliated with LPL Financial from February 2018 to June 2019 after previously being at Invest Financial Corporation December 2005 to February 2018. While serving as a registered representative and investment adviser and using Invest Financial’s trading platform, Booth allegedly solicited Booth Financial clients to invest in outside opportunities through a company, Insurance Trends, Inc., that he controlled. In doing so, Booth purportedly told potential clients that he could achieve larger returns for them through Insurance Trends and encouraged them to invest their inheritances, retirement savings, and children’s college funds.

Clients that invested with Booth were provided with account statements showing positions in securities that Booth had promised would be purchased with funds invested with Insurance Trends. These statements included details about those securities, including cost basis, total gains, and returns. In total, Booth convinced clients to invest over $10 million with him and Insurance Trends from 1999 to the present.

LPL Financial, Booth’s then-current broker-dealer, made an unannounced onsite office in May 2019 in part stemming from complaints by former Booth clients about difficulties in transferring their assets to a new investment adviser. After LPL officials reviewed Insurance Trend bank statements and raised questions about the company, Booth allegedly confessed to running a Ponzi scheme for the last 20 years and to having stolen from $4 million to $10 million from clients. Booth also admitted that he had fabricated account statements that had been provided to clients during the scheme. LPL subsequently terminated Booth’s association with the firm the next day, and Booth later submitted a written response to a regulatory inquiry by the Financial Industry Regulatory Authority confessing to operating a Ponzi scheme and stealing client funds. Booth has since been barred from the financial industry.

Booth’s ownership and association with Insurance Trends constituted an outside business activity under regulatory rules and thus he was required to both disclose and gain approval of that OBA while he was associated with a broker-dealer. That disclosure in turn obligates the associated broker-dealer to supervise the registered representative’s OBA with the goal of preventing situations like Booth’s where client funds are misappropriated through fraudulent means. In reviewing Booth’s FINRA BrokerCheck, it appears that Insurance Trends was not listed in the “Other Business Activities” section and thus it remains unknown whether Booth sought to concela his association from Invest, LPL, and other broker-dealers with whom he was associated during the duration of the Ponzi scheme.

A copy of the SEC’s Complaint is below: