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CHARLOTTE, N.C. – U.S. District Judge Max Cogburn, Jr., sentenced Dawn Wright Olivares, 48, and Daniel C. Olivares, 34, both of Clarksville, Ark., to 90 and 24 months in prison, respectively, for their involvement in an $850 million Internet Ponzi scheme that promised victims a bogus return on investments, announced Jill Westmoreland Rose, U.S. Attorney for the Western District of North Carolina.
The two Arkansas residents were associated with the Lexington, N.C. based Rex Venture Group, LLC (RVG), which owned and operated Zeekler and ZeekRewards. In addition to the prison term imposed, Judge Cogburn also ordered each defendant to serve three years under court supervision. The restitution amount will be set at a later date.
Michael Rolin, Special Agent in Charge of the United States Secret Service, Charlotte Field Division and Thomas J. Holloman III, Special Agent in Charge of the Internal Revenue Service, Criminal Investigation Division (IRS-CI) join U.S. Attorney Rose in making today’s announcement.
According to filed court documents and today’s sentencing hearings, from January 2010 through August 2012, Dawn Wright Olivares, her step-son, Daniel Olivares, and Paul Burks, the owner of RVG, conspired with each other and engaged in Ponzi scheme that raised more than $850 million through a sham internet-based penny auction company named “Zeekler” and its purported advertising division “ZeekRewards” (collectively “Zeek”). According to court records, the conspirators induced more than 900,000 victims – including over 1,500 victims in the Charlotte area – to invest in their fraudulent scheme, by falsely representing that Zeekler was generating massive retail profits from its penny auctions, and that the public could share in such profits through investment in ZeekRewards. Court documents indicate that, at one point, the conspirators claimed that investors would be guaranteed a 125% return on their investment.
Court records show that the co-conspirators represented that victim-investors in ZeekRewards could participate in the Retail Profit Pool (RPP), which supposedly allowed victims collectively to share 50% of Zeek’s daily net profits. The co-conspirators did not keep books and records needed to calculate such daily figures. Instead, Burks simply made up the daily “profit” numbers. Contrary to the conspirators’ claims, the true revenue from the scheme did not come from the penny auction’s “massive profits.” Instead, approximately 98% of all incoming funds came from victim-investors, which were then used to make Ponzi-style payments to earlier victim investors.
In addition to promising massive returns on investments, the conspirators used a number of ways to promote Zeek to current and potential investors. For example, the conspirators hosted weekly conference calls and leadership calls, where participants could call in and listen to Burks, Dawn Wright Olivares and others make false representations intended to encourage victim-investors to continue to invest money and to recruit others to invest in Zeek. Burks and Dawn Wright Olivares also organized and attended “Red Carpet Events,” where victim investors came to hear details of the scheme in person. During these events, Burks and his conspirators made false representations about the massive retail profits generated by Zeek. They also used electronic and print media, including websites, emails and journals, to make false and misleading statements about the success of Zeekler to recruit victim investors.
As the Ponzi scheme grew in size and scope it became unsustainable and it eventually began to unravel as the outstanding liability resulting from the bogus 125% return on investment continued to rise beyond control. By August 2012, the conspirators fraudulently represented to the collective victims that their investments were worth nearly $3 billion, but had no accurate books and records to even determine how much cash on hand was available to pay such liability. Contrary to representations made to victim investors, at that time, the conspirators had only $340 million available to pay out investors.
According to court records, Dawn Wright Olivares was closely involved in the strategic operations and ultimately served as the Chief Operations Officer of Zeek. Dawn Wright Olivares also owned 95% of Wandering Phoenix, LLC, a company that she used, among other things, to receive payments from Zeek and RVG. During the course of the conspiracy, Dawn Wright Olivares and Wandering Phoenix received approximately $7.2 million in victim funds.
Daniel Olivares was RVG’s senior technology officer and was responsible for, among other things, database design, management and operations for Zeek. During the course of the conspiracy, Daniel Olivares personally enriched himself with victim funds totaling approximately $3.1 million. Other unnamed co-conspirators also personally enriched themselves with millions of dollars of victim funds.
Dawn Wright Olivares and Dan Olivares previously pleaded guilty to one count of investment fraud conspiracy. Dawn Wright Olivares also pleaded guilty to one count of tax fraud conspiracy.
In July 2016, a federal jury convicted Paul Burks of wire and mail fraud conspiracy, wire and mail fraud, and tax fraud conspiracy, following a three-week trial. Burks is currently awaiting sentencing.
In making today’s announcement, U.S. Attorney Rose thanked the U.S. Secret Service and IRS-CI for investigating the case, and the U.S. Securities & Exchange Commission, Division of Enforcement for its assistance with the investigation.
The prosecution is handled by Assistant United States Attorneys Jenny Grus Sugar and Corey Ellis of the U.S. Attorney’s Office in Charlotte.
Additional information and updated court filings about this and related cases filings can be accessed at the district’s website: http://www.justice.gov/usao/ncw/ncwvwa.html.