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April 17, 2014 / 17 Nisan, 5774
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Posts Tagged ‘SEC’

SEC Shuts Down $600 Million Alleged Online Ponzi, But Apparent Israeli Offshoot Still Functional

Sunday, August 19th, 2012

The Securities and Exchange Commission on Friday announced fraud charges and an emergency asset freeze to halt a $600 million Ponzi scheme on the verge of collapse. The emergency action assures that victims can recoup more of their money and potentially avoid devastating losses.

The SEC alleges that online marketer Paul Burks of Lexington, N.C. and his company Rex Venture Group have raised money from more than one million Internet customers nationwide and overseas through the website ZeekRewards.com, which they began in January 2011.

Users who go into the zeekrewards.com website this morning, receive this message: “Zeek Rewards is currently unavailable. More information will be available shortly on this website.”

Not so with zeekinhebrew.blogspot.co.il, which appears to be the Israeli offshoot of the same outfit, and continues to function and lure in unsuspecting get-rich-quick seekers in Israel.

The home page is a Q & A that includes these paragraphs:

How much should you invest after joining ZeekRewards?

To profit from ZeekRewards, you must enter once a day and publish one of the ZeekRewards ads, it takes from one to two minutes a day. In addition, you can invest money in the website and increase your daily interest rate.

How soon see revenues in ZeekRewards?

Once you have registered on the site, you need to post an ad of your choice every day (from a pool of ZeekRewards ads) and paste your ad in one of the free sites that serve ads online (a full list is on the ZeekRewards website).

After you posted an ad, you receive a confirmation which you send to ZeekRewards.

Once you submitted the certificate at ZeekRewards, you have 24 hours during which you are entitled to earn money.

Within 24 hours you can see the revenues (relative to the amount you spent on the site). The gains come by check to your home once you choose [to collect].

According to the SEC’s complaint filed in federal court in Charlotte, N.C., customers were offered several ways to earn money through the ZeekRewards program, two of which involved purchasing securities in the form of investment contracts. These securities offerings were not registered with the SEC as required under the federal securities laws.

The SEC alleges that investors were collectively promised up to 50 percent of the company’s daily net profits through a profit sharing system in which they accumulate rewards points that they can use for cash payouts. However, the website fraudulently conveyed the false impression that the company was extremely profitable when, in fact, the payouts to investors bore no relation to the company’s net profits. Most of ZeekRewards’ total revenues and the “net profits” paid to investors have been comprised of funds received from new investors in classic Ponzi scheme fashion.

“The obligations to investors drastically exceed the company’s cash on hand, which is why we need to step in quickly, salvage whatever funds remain and ensure an orderly and fair payout to investors,” said Stephen Cohen, an Associate Director in the SEC’s Division of Enforcement. “ZeekRewards misused the power of the Internet and lured investors by making them believe they were getting an opportunity to cash in on the next big thing. In reality, their cash was just going to the earlier investor.”

The SEC’s complaint alleges that the scheme is teetering on collapse with investor funds at risk of dissipation without its emergency enforcement action. Last month, ZeekRewards brought in approximately $162 million while total investor cash payouts were approximately $160 million. If customers continue to increasingly elect to receive cash payouts rather than reinvesting their money to reach higher levels of rewards points, ZeekRewards’ cash outflows would eventually exceed its total revenue.

According to the SEC, Burks has agreed to settle the SEC’s charges against him without admitting or denying the allegations, and agreed to cooperate with a court-appointed receiver.

According to the SEC’s complaint, ZeekRewards has paid out nearly $375 million to investors to date and holds approximately $225 million in investor funds in 15 foreign and domestic financial institutions. Those funds will be frozen under the emergency asset freeze granted by the court at the SEC’s request. Meanwhile, Burks has personally siphoned several million dollars of investors’ funds while operating Rex Venture and ZeekRewards, and he distributed at least $1 million to family members. Burks has agreed to relinquish his interest in the company and its assets plus pay a $4 million penalty. Additionally, the court has appointed a receiver to collect, marshal, manage and distribute remaining assets for return to harmed investors.

The SEC’s investigation was conducted by Brian M. Privor and Alfred C. Tierney in the SEC’s Enforcement Division in Washington D.C. The SEC acknowledges the assistance of the Quebec Autorite des Marches Financiers and the Ontario Securities Commission.

SEC Shuts Down Ponzi Scheme Targeting Persian-Jewish Community in Los Angeles

Tuesday, April 17th, 2012

The Securities and Exchange Commission obtained an emergency court order to halt an ongoing Ponzi scheme that targeted members of the Persian-Jewish community in Los Angeles.

The SEC alleges that for the past two years, Shervin Neman raised more than $7.5 million from investors by claiming to be a hedge fund manager. Neman told investors that his purported hedge fund – Neman Financial L.P. – invested in foreclosed residential properties that would be quickly flipped for profit as well as in Facebook shares obtained in private transactions and other highly anticipated initial public offerings including Groupon, LinkedIn, and Angie’s List.

Although Neman promised investors exorbitant returns resulting from his investing acumen and access to pre-IPO shares of well-known companies, what they actually received was simply other investors’ money in hallmark Ponzi scheme fashion.

“Neman deceived members of his own community to raise money in this fraudulent Ponzi scheme,” said Michele Wein Layne, Associate Regional Director of the SEC’s Los Angeles Office. “By exploiting investors’ trust in him, Neman was continually able to raise more money to pay back existing investors and finance an extravagant lifestyle.”

The Honorable Jacqueline H. Nguyen for the U.S. District Court for the Central District of California granted the SEC’s request for a temporary restraining order and asset freeze against Neman and the entities he controlled.

According to the SEC’s complaint, Neman raised funds from at least 11 investors in the fraudulent securities offering. Most of the investors are members of the Los Angeles Persian-Jewish community along with Neman, who lives in the Century City area of Los Angeles. More than 99 percent of the money Neman raised was used either to pay existing investors or fund his lavish lifestyle. Neman spent nearly $1.6 million of investor funds to buy jewelry and high-end cars as well as to finance his wedding and honeymoon, other vacations, and VIP tickets to sporting events.

The SEC’s investigation was conducted by Cindy Eson of the Los Angeles Regional Office. Molly White will lead the litigation. Joshua Bauder, Harden Sooper, and Yanna Stoyanoff conducted the SEC examination that prompted the investigation.

Judge Nguyen has scheduled a court hearing for April 23 at 2 p.m. on the SEC’s motion for a preliminary injunction.

Printed from: http://www.jewishpress.com/news/us-news/sec-shuts-down-ponzi-scheme-targeting-persian-jewish-community-in-los-angeles/2012/04/17/

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