The court appointed receiver tasked with recovering assets for the $600 million ZeekRewards Ponzi scheme has fired off the first salvo of clawback lawsuits seeking the return of nearly $300 million from company officers and investors fortunate enough to profit from the scheme. The Receiver, Kenneth D. Bell, filed two lawsuits in North Carolina federal court on Friday, February 28, 2014 - one lawsuit seeks the return of tens of millions of dollars from company insiders, such as Paul R. Burks and Dawn Wright-Olivares, while the second lawsuit asserts fraudulent transfer claims against not only the ten largest scheme "net winners," but also against a class of approximately 9,000 victims that received at least $1,000 from the scheme.
The first lawsuit names several key Zeek officers, including Paul R. Burks, Dawn Wright-Olivares, Danny Olivares, Roger Plyler, and Darryle Douglas. According to the complaint, each of the officers received at least $1 million from Zeek:
- Paul R. Burks - At least $10 million
- Dawn Wright-Olivares - $7.8 million
- Danny Olivares - $3.1 million
- Roger Plyler - $2.3 million
- Darryle Douglas - $1.975 million
The 40-page complaint goes into excruciating detail and paints a picture of an intricate conspiracy between the defendants to perpetuate the appearance that Zeek Rewards was a highly-successful operation. While the operation was known for its consistent 1.6% - 1.8% daily returns, the complaint alleges that these percentages were nothing more than figures selected by company insiders with the goal of portraying a consistently profitable venture. Recognizing the crucial fact that the company needed to maintain its payment structure and schedule to avoid unwanted attention, Paragraph 83 recounts a text message from Dawn Wright-Olivares to her son, Danny, that
“[t]he fastest way to get charge [sic] as a Ponzi scheme is for distributors to claim they are not getting paid.”
The complaint asserts several counts, including fraudulent transfer claims, breach of fiduciary duty, conversion, unjust enrichment, and constructive trust. Additionally, the complaint seeks entry of an injunction preventing the defendants from dissipating their assets prior to entry of any judgment.
"Net Winners" Lawsuit
The second lawsuit brings "clawback" claims against not only the ten investors receiving the largest amount of profits, but also seeks establishment of a defendant class that each received at least $1,000 from the scheme. The lawsuit names the following individuals and entities as the top ten "net winners":
- Todd Disner, in his individual capacity and as trustee for Kestrel Spendthrift Trust - $1.875 million;
- Trudy Gilmond and Trudy Gilmond, LLC - $1.75 million;
- Jerry Napier - $1.745 million;
- Durant Brockett - $1.720 million;
- Darren Miller - $1.635 million;
- Rhonda Gates - $1.425 million;
- Michael Van Leeuwen - $1.4 million;
- David Sorrells - $1 million;
- T. Le Mont Silver Sr and Global Internet Formula, Inc. - $1.717 million;
- Aaron and Shara Andrews - At least $1 million;
- Karen Silver - $600,000;
- David and Mary Kettner - At least $930,000; and
- Lori Jean Weber - $1.94 million.
As some will notice, several of the individually named "net winners" were involved with initial efforts to challenge the Receiver and SEC's authority in shutting down Zeek, claiming that "the SEC mislead (sic) the judge" in securing an emergency asset freeze, and even claiming that the SEC had admitted problems with the case (which were subsequently refuted here). Despite reportedly raising tens or even hundreds of thousands of dollars in victim donations, Zteambiz sent out a "final posting" in November 2013 clarifying that "As you know the goal was to assist the people of Zeek Rewards, and provide relevant information relating to the Zeek Receivership."
In addition, the complaint seeks to bring a class action lawsuit against a class of net winners that allegedly received more than $1,000 in false profits from the scheme. According to Bell, this class consists of at least 9,000 individuals living in the United States. Because the proceeding is a receivership, exclusive jurisdiction is vested in the North Carolina district where Zeek was located, and a class action against the net winners, rather than instituting 9,000 separate lawsuits, would not only be cost-effective but would also significantly lessen the strain of thousands of lawsuits being filed in the Court's docket. The class action would also prevent the possibility of competing determinations that could result in the case of separate actions.
The two complaints are below: