Zeek Founder Seeks To Delay Upcoming Trial

A North Carolina man accused of masterminding a massive Ponzi scheme that caused hundreds of millions of dollars in losses has sought to postpone his trial that was scheduled to start later this month.  Paul Burks, who allegedly duped hundreds of thousands of victims who invested in Zeek Rewards, filed the request through his attorney seeking to remove the case from the January 2015 trial term on the basis that his defense team required additional trial preparation time due to ongoing discovery.  Burks, 67, was indicted late last year on charges of mail fraud, wire fraud, mail and wire fraud conspiracy, and tax fraud conspiracy. 

Zeek Rewards

Burks, a former nursing home magician and country music DJ, founded Rex Venture Group, LLC ("RVG") in 1997.  In 2010, he formed zeekler.com, which operated as a penny auction website offering participants the ability to place incremental bids on merchandise in one-cent increments.  Individuals were required to purchase "bids" in lots, usually at a cost of $.65 per bid, in order to participate in the auctions.  Burks launched ZeekRewards in January 2011 as an "affiliate advertising division" of Zeekler.  Participants were then solicited to become investors, or affiliates, in ZeekRewards in the form of investment contracts called the "Retail Profit Pool" and the "Matrix."  None of these investments were registered with the SEC or any state regulatory authorities.

The Retail Profit Pool promised investors the chance to earn lucrative daily returns of "up to 50% of the daily net profits" after completing a process that involved enrolling in a monthly subscription plan, soliciting new customers, selling or purchasing ten Zeeker.com "bids", and placing one free ad daily for Zeeker.com.  According to the ZeekRewards website, a daily commitment of "no more than five minutes per day" was required to share in daily profits.  The daily "award" was usually 1.5% of the individual's 'investment'.  Due to the compounding nature of these "Profit Points", as they were called, the cumulative amount of outstanding Profit Points now numbers nearly $3 billion.  Assuming a 1.5% daily "award", this would require daily cash outflows of $45 million should all investors seek to receive their "award" in cash.  

In addition to the Retail Profit Pool, investors could also participate in the "Matrix", which was a form of multi-level marketing that rewarded investors for each "downline" investor within that investor's "Matrix".  The Matrix consisted of a 2x5 pyramid, and each person added to an investor's Matrix qualified that investor to receive a bonus.  

While ZeekRewards represented to investors that the operation was extremely profitable, in reality, the company's revenues and payments to investors were derived solely from funds contributed by new investors - a classic hallmark of Ponzi schemes.  Indeed, authorities alleged that 98% of all incoming funds were derived from the funds of new investors. Thus, the scheme could only stay afloat so long as new investor contributions were sufficient to satisfy the amount of outflows.  However, because investors were actively encouraged to "roll-over" their "profit points" back into the scheme, the number of outstanding liabilities to investors steadily increased, reaching approximately $2.8 billion in August 2012 despite available cash reserves of less than 4300 million.  Due to the likelihood that those funds would soon be exhausted, the Commission initiated an emergency enforcement proceeding and sought an asset freeze in August 2012.

Burks, as principal of Rex Ventures and Zeek Rewards, is alleged to have withdrawn over $10 million in investor funds for the benefit of himself and his family members.  

January 2015 Trial Date

Indicted in late October 2014, Burks' case was scheduled on the January 2015 trial docket - an ambitious task given the sheer magnitude of the alleged scheme and the fact that hundreds of thousands invested from all over the world.  Burks is the third former Zeek employee to be charged after former Zeek chief operating officer Dawn Wright-Olivares and computer programmer Daniel Olivares pleaded guilty in December 2013 for their role in the fraud.  Neither of the latter two have been sentenced yet, leading to speculation that their agreement includes providing testimony in support of the government's case against Burks.   

The Motion is below:

23 by jmaglich1

New York Man Indicted For $2 Million Ponzi Scheme

A New York investment manager has been arrested on multiple felony charges that he operated a Ponzi scheme that duped several companies out of at least $2 million. Steven Canady, 42, faces four counts of grand larceny in the second degree, four counts of criminal possession of stolen property, and one count of scheme to defraud in the first degree.  Canady has pleaded not guilty to the charges, and is currently being held on $1 million bail.

Canady was the owner and operator of Alliance Warburg Capital Management ("Alliance Warburg"), holding himself out as the Vice President of Structured Finance.  In that position, Canady is accused of soliciting various companies under the guise that he could assist in locating and securing funding for those companies and their business ventures.  Each of the potential companies was promised that, after paying a fully refundable due diligence fee or pre-paid interest, Alliance Warburg would secure them funding.  In total, Alliance Warburg received more than $2 million in due diligence fees or pre-paid interest from three companies: ABA Ventures, of Florida, West Chester Host, LLC of Kentucky, and Lents Construction in Tennessee.  Additionally, a Georgia company, Global Capital Advisers ("Global Capital"), was promised a lucrative short-term return in exchange for a $150,000 investment in one of Canady's business ventures.  

However, no funding was ever secured by Canady or Alliance Warburg for the benefit of ABA Ventures, West Chester Host, or Lents Construction. Nor did Canady make the promised interest and principal payment to Global Capital.  Rather, authorities allege that Canady misappropriated those funds in typical Ponzi scheme fashion to pay off earlier victims or to support a lavish lifestyle that included travel, dining, and living expenses. 

According to prosecutors, Canady was previously convicted by a Georgia court of similar rimes.  Canady has also run afoul of securities regulators in other states, including a 2007 cease-and-desist order issued by the Connecticut Department of Banking relating to an alleged offering of unregistered securities.  

19-Year Old Nightclub Owner Arrested For $500,000 Ponzi Scheme

Ian Bick / FacebookA Connecticut teenager has been arrested on numerous criminal charges that he operated a Ponzi scheme that duped friends and family - including his parents - out of $500,000.  Ian Bick, 19, was charged with eleven counts of wire fraud, three counts of money laundering, and one count of making a false statement to law enforcement.  Wire fraud carries a maximum prison term of twenty years per count, while money laundering and making false statements to law enforcement carry maximum sentences of 10 years and 5 years, respectively.  Bick was released on $250,000 bond, with one of the conditions of his bond prohibiting him from using social media.

Bick is the owner of a popular Danbury, Connecticut club known as Tuxedo Junction.  In addition, Bick also owned multiple entities such as This is Where It's At Entertainment, Planet Youth Entertainment, W&B Wholesale and W&B Investments. According to authorities, Bick used these entities to solicit friends, business partners, and even his parents with the promise that their investments would be used for multiple purposes to yield lucrative returns in short time periods.  For example, potential investors were told that their funds would be used to buy electronics and subsequently resell them for a profit, as well as for the organization and promotion of concerts in Connecticut and Rhode Island.  These investments were memorialized through "loan agreements" and "music venture participation agreements."  In total, approximately $500,000 was raised from at least 15 investors.

However, according to authorities, Bick did not use the funds raised from investors to purchase electronics or organize concerts.  Rather, Bick is accused of diverting investor funds for his own personal use, including luxury travel, the purchase of jet skis, and the payments of fictitious interest to investors.  At an interview with U.S. Postal Inspection Service in June 2014, Bick represented to investigators that 70% - 80% of investor funds had been used on "artist deposits."  However, in reality, only a minimal portion of investor funds were allegedly used as promised.

At 19 years old, Bick is likely one of the youngest known defendants accused of a Ponzi scheme.  Donald French, a Florida man, was 25 when he was arrested in 2012 and charged with operating a $10 million Ponzi scheme.  French is currently serving a 10-year prison sentence.  

Criminal Charges Filed In Alleged $100 Million ATM Ponzi Scheme

Several months after the Securities and Exchange Commission levied civil fraud charges, two California men now face criminal charges for operating what authorities allege was a massive ATM Ponzi scheme that duped over 1,000 investors out of over $100 million.  Joel Barry Gillis, 74, and Edward Wishner, 76, were each charged with one count of conspiracy, two counts of mail fraud, and one count of wire fraud.  The charging of the men through a criminal information suggests that the men are in plea negotiations with criminal authorities. Each count of mail fraud and wire fraud carries a maximum prison term of twenty years along with criminal monetary penalties.

Gillis and Wishner operated Nationwide Automated Solutions ("NAS").  According to authorities, NAS has solicited investors since 1999 by promising that their funds would be used to place, operate, and maintain automated teller machines ("ATMs") throughout the country.  Investors were told that they could purchase ATMs for a price ranging from $12,000 to $19,800 from NAS, and could then lease those same ATMs back to NAS for a 10-year term in exchange for a "rent" of $.50 per ATM transaction.  A contract memorializing the investment purportedly contained the serial number and the location of the ATM, and investors were guaranteed an investment return of at least 20% annually.  Notably, each contract also included a "non-interference" clause prohibiting the investor from interfering with the operation of the ATM by contacting the locations where the ATM was installed or any ATM service provider.  An analysis of NAS' bank accounts from 2013 forward showed that more than $123 million was raised from investors in just that short period.

While the company's records showed that it had sold and was leasing back more than 31,000 ATMs to investors as of June 2014, third-party settlement reports provided by NAS's ATM servicers show that only 253 ATMs were serviced.  As the SEC previously alleged,  

Defendants have “sold” and “leased back” tens of thousands of ATMs to NASI investors that they never owned, that they never operated, and that may have never existed. 

For example, while NAS's internal records claimed ownership or operation of nearly 700 ATMs located at "Casey's Convenience Mart" locations in the Midwest, the Commission's investigation showed that neither NAS nor any of its investors owned or serviced any of those ATMs.  Rather, those ATMs were owned by an unrelated company with no affiliation with NAS.  The Commission also alleged that NAS often sold and leased back the same ATM to more than one investor.  Of the ATMs that NAS did service, those revenues were minimal and were dwarfed by the significant amount of new investor funds.  Those investor funds were used to pay returns to existing investors - a classic hallmark of a Ponzi scheme.  

Authorities alleged that NAS bounced over $3 million in checks to investors in August 2014, with investors told that a "glitch" in connection with retention of a new outside firm handling investor payments was to blame.

Authorities began investigating NAS shortly after the bounced checks, with court records in the SEC's case demonstrating that an application for a temporary injunction and other relief was filed on September 17, 2014.  A receiver, William Hoffman, was appointed at the request of the SEC, and a website has been established at http://www.nasi-nationwideatm.com/ for interested parties.

Several Ponzi schemes purportedly offering lucrative returns from investments in ATMs have been uncovered in recent years, including here, here, and here.

Colorado Investment Advisor Charged With $4.8 Million Ponzi Scheme

A Colorado investment advisor has been indicted on multiple charges that he operated a $4.8 million Ponzi scheme through his financial services company.  Perry Sawano, 51, was indicted on five counts of securiites fraud and twelve counts of theft over $20,000.  Both securities fraud and theft over $20,000 are class 3 felonies in Colorado, and each carries a minimum four-year sentence and fine ranging from $3,000 to $750,000.  Sawano was arrested on December 15, 2014, and is currently free on $100,000 bond.

Sawano owned and operated Integrity Financial Consulting ("IFC"), which was formerly known as Providence Financial Services.  IFC was previously a licensed investment adviser, with Sawano serving as an authorized adviser representative.   Beginning in January 2007, Sawano is accused of soliciting potential investors for IFC, first using their funds for traditional investments.  However, Sawano allegedly moved those funds from traditional investments to alternative investments that were often affiliated with or controlled by Sawano, including multiple investments owned by clients of Sawano.  In total, authorities alleged that Sawano and IFC raised at least $4.8 million from investors.

However, investors were not informed of the switch from their traditional to alternative investments.  Moreover, while those alternative investments were made to appear legitimate to outsiders, many were in fact defunct, fabricated, or lacked any legitimate business purpose.  When clients did learn of the switch, many requested that Sawano liquidate the positions.  According to authorities, Sawano instead used funds from other investors to satisfy the redemption requests - a classic hallmark of a Ponzi scheme.

Sawano and IFC were previously accused in April 2013 of securities violations by the Colorado Securities Commission ("CSC") that resulted in a stipulated injunction permanently barring Sawano from the industry.  However, as a condition of consenting to the injunction, Sawano neither admitted nor denied the CSC's allegations.  

A copy of the CSC's Complaint for Injunctive Relief is below:

Complaint for Injunctive Relief