Authorities File Criminal and Civil Charges Against ZeekRewards Ponzi Employees (UPDATED)

Federal authorities announced the filing of criminal and civil fraud charges against an Arkansas woman and her stepson for their roles in the $600 million ZeekRewards Ponzi scheme that collapsed last summer. Dawn Wright-Olivares, one of the main spokespersons of ZeekRewards, and her step-son Daniel Olivares, were charged in separate criminal and civil actions unveiled today. According to court documents, the pair has entered into arrangements with criminal and civil authorities to settle the charges. While the details of the resolution of the criminal charges remain unclear, the SEC announced the pair had agreed to settle the civil fraud charges by agreeing to pay a settlement of over $11 million representing ill-gotten gains and prejudgment interest. It is likely that the fines and penalities paid in the civil and criminal cases will likely be distributed to victims.

According to the SEC's complaint, which is displayed below, Wright-Olivares worked as the chief operating officer or principal marketer for ZeekRewards, while her step-son Olivares worked as the master computer programmer. In 2010, Wright-Olivares and several others, including Paul Burks, formed, which purportedly operated as a penny auction website offering merchandise such as personal electronics. Users participated in the auction by purchasing bids. While the operation was not particularly successful at first, the formation of ZeekRewards in 2011 quickly attracted many users through the establishment of various investment programs that promised astronomical returns by recruiting new investors.

These programs required the purchase of monthly subscription plans, enrollment of new customers, the sale and/or give-away of auction "bids," and the placement of ads. Satisfaction of these criteria allowed the Qualified Affiliate to receive a daily "award" of 1.5% of their investment - an astronomical rate of return. Rather than withdrawing these "awards" as cash, investors were encouraged to convert the awards into additional profit points that had a compounding effect. Another program, the Matrix, rewarded investors solely based on how many new investors they were able to recruit into the scheme.

According to the SEC, ZeekRewards did not start as a legitimate company, but instead was designed as a fraudulent scheme from inception. Wright-Olivares and Olivares are accused of learning that the daily "award" bore no relation to the company's net profits, but was rather the product of an arbitrary and unilateral determination by Burks. Despite this knowledge, neither Wright-Olivares nor Olivares disclosed this information to potential investors. Additionally, after learning that ZeekRewards was under investigation by state and federal law enforcement, Wright-Olivares and Olivares withdrew large amounts of money from the scheme or caused the forgiveness of previous loans made to them by the company. According to the SEC's press release, these ill-gotten gains were approximately $10 million to $11 million.

The charges are significant for several reasons. First, they mark the first criminal charges brought in the aftermath of Zeek's collapse last August, which resulted in losses in excess of $600 million and an estimated 600,000 victims. Notably, the scheme's alleged mastermind, Paul Burks, has not faced any criminal charges in the scheme despite being initially charged by the SEC when the company was shut down. It remains unknown as to whether or not this delay is due to Burks' cooperation or simply the building of a case by prosecutors. Indeed, little has been reported about Burks since he agreed to pay a $4 million fine in connection with the SEC's case. The charges are also significant in that they represent authorities' belief that others were criminally involved with operating the scheme.

UPDATE 1:53 P.M. EST: The criminal complaint filed against Wright-Olivares and Olivares charges each with two counts of criminal conspiracy. One of the conspiracy charges relates to conspiracy to commit investment fraud through ZeekRewards, while the second count alleges the pair conspired to commit tax fraud by reporting fictional income through submission of Form 1099's to the Internal Revenue Service. The criminal docket indicates that both Wright-Olivares and Olivares have entered into plea agreements with authorities. Those documents remain restricted and thus further details are unknown.

The docket also includes a motion seeking to have the court-appointed receiver in the SEC's civil enforcement action also oversee distribution of any ordered restitution through the already established receivership.

Prior Ponzitracker coverage of the ZeekRewards Ponzi scheme is here:

A copy of the SEC Complaint is below:

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A copy of the Criminal Information (thanks Don at ASDUpdates!) filed against Wright-Olivares and Olivares is below:

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