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Pair agree to plead guilty in $850M, N.C.-based Internet Ponzi scheme

An Arkansas woman and her stepson agreed Friday to plead guilty in an $850 million, North Carolina-based Internet Ponzi scheme that claimed hundreds of thousands of victims worldwide, including at least 1,500 Charlotte-area residents, federal prosecutors said.

Dawn Wright Olivares, 45, agreed to plead guilty in federal court in Charlotte to charges of investment fraud conspiracy and tax fraud conspiracy. Daniel Olivares, 31, agreed to plead guilty to investment fraud conspiracy. Each charge carries up to five years in prison and a $250,000 fine.

The Olivareses agreed to pay full restitution to their victims; the amount will be determined by a judge at sentencing.

Also on Friday, the U.S. Securities and Exchange Commission filed civil charges against the Olivareses in federal court in Charlotte.

From January 2010 through August 2012, prosecutors said, the Olivareses, an unindicted co-conspirator and others engaged in a Ponzi scheme that raised more than $850 million through a sham Internet-based penny auction company named Zeekler and its supposed advertising division, ZeekRewards.

Prosecutors said the Olivareses and their co-conspirators lured investors by falsely representing that ZeekRewards was generating massive profits from its penny auctions, and promised substantial returns on their investment, as much as 125 percent.

By August 2012, victims were told their investments were worth a collective $2.8 billion, prosecutors said. Yet the Olivareses had no accurate books and records to even determine how much cash on hand was available to pay such liability, prosecutors said.

By Aug. 17, 2012, the co-conspirators had only $320 million, or about 11 percent of the $2.8 billion in value they claimed investors had, prosecutors said.

Lexington-based Rex Venture Group LLC owned and operated Zeekler and ZeekRewards.

Paul Burks, 66, who owned Rex Venture and is a former country music disc jockey and magician, was recently fined $4 million by federal regulators but wasn’t criminally charged.

Dawn Olivares was chief operations officer of Zeekler and ZeekRewards and owned 95 percent of Wandering Phoenix LLC, which prosecutors said she used to receive payments from the Lexington-based ventures. Payments totaled about $7.2 million in victim funds, prosecutors said.

Daniel Olivares, Rex Venture Group’s senior technology officer, enriched himself with $3.1 million in victim funds, prosecutors said.

Besides the penny auction scheme, prosecutors said, the Olivareses and their co-conspirators claimed ZeekRewards investors could participate in a “retail profit pool.”

The pool supposedly allowed victims collectively to share half of Zeekler and ZeekRewards’ “massive” net retail profits. Prosecutors said the reported “daily net profit” was illusory and had no relationship to actual penny auction revenues or retail profits.

The Olivareses and their co-conspirators often reused bogus daily profit figures from preceding days to report that new day’s purported profits, prosecutors said. The true revenue from the scheme – about 98 percent of all incoming funds – came from victim-investors, prosecutors said.

The case shows that the appearance of success “can be a mask for a tangled financial web of lies,” said Richard Weber, chief of the Internal Revenue Service’s Criminal Investigation Division. “The underlying structure can fall apart at any time and leave many investors in financial ruin.

“ZeekRewards used the enormous power of the Internet to rip off $850 million from hundreds of thousands of victims in less than two years,” U.S. Attorney Anne Tompkins said in a statement. “We will continue to work with our law enforcement partners to take down greedy scam artists who think nothing of stealing the savings of hard working people.” The Associated Press contributed.

Marusak: 704-358-5067; Twitter: @jmarusak
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