Raleigh, NC – Federal securities regulators have filed fraud charges and an emergency order to freeze the assets of a North Carolina company officials say operated a $600 million Ponzi scheme that is on the verge of collapse.
Subscribe to our Daily Roundup Email
The action by the Securities and Exchange Commission Friday is intended to help investors recoup money and avoid devastating losses.
Online marketer Paul Burks of Lexington, N.C., is accused in a federal complaint of raising money from more than 1 million customers through ZeekRewards.com, a website in operation less than two years.
Burks could not immediately be reached for comment Friday and the website has been taken down.
Clifton Jolley, a Texas-based communications consultant representing the website’s parent company, Rex Venture Group, said Burks had agreed to settle the SEC charges but that he has neither admitted nor denied the allegations against him. Jolley said Burks will cooperate with federal officials and a court-appointed receiver.
ZeekRewards customers were offered several ways to earn money through the site, including buying unregistered investment contracts that promised a share the company’s profits through rewards points that could be traded for cash payouts.
However, federal investigators say claims the company was extremely profitable were false and that money from new investors was paid to the older investors as in a classic Ponzi scheme.
“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 of the SEC’s enforcement division. “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, filed in U.S. District Court in Charlotte on Friday, alleged the scheme is teetering on collapse. Federal investigators said ZeekRewards brought in approximately $162 million last month while paying out about $160 million. If customers continue to increasingly elect to receive cash payouts rather than reinvesting their money, ZeekRewards’ cash outflows would exceed its total revenue, according to the complaint.
All told, ZeekRewards paid out nearly $375 million to investors and holds approximately $225 million in investor funds in 15 foreign and domestic financial institutions, according to federal officials.
Those funds will be frozen under order of a federal judge.
Meanwhile, officials said 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.
As part of his agreement with the SEC, Burks is to relinquish his control over the company and its assets, as well as pay a $4 million penalty. A court-appointed receiver will distribute remaining assets to harmed investors.
There are many frum people in Israel who are involved. Some are making alot
of money. Here in the US there are also frum people but not as many. Good luck
to all in getting their money back.
Moral of the story: If it’s too good to be true… it’s too good to be true.
I’ve done my research with ZeekRewards after a friend tried to convince me to join. They claim to make 1.5% ROI (Return on investment) an average every day! So by just putting in $5000 you can pull out after a year a total of around $17,500. and that’s if you don’t get anyone to join. But if you do, you get 20% commission etc… so yo can end up pulling out $30k or $40k…
However from my research it appeared to be really a ponzi / pyramid scheme as has been confirmed by the SEC.
Bottom line: There hasn’t been a business claiming to give you 1.5% Daily ROI that hasn’t turned out to be a ponzi of some sort.
Don’t be fooled. Work hard and Hashem will find a way to give you your parnassa (and may it be a lot!!).
First Zeek was not an investment company
It was a home based BUSINESS selling and buying ads
Zeek themselves claim that they where not closed, they just need to make some changes required by the government and they plan to reopen there site with some changes on Aug. 22
The Government is the same Ponzi scheme , they sell bonds and the only way to pay the interest for the bonds is selling more bonds and paying up the old ones, isn’t this exactly the same thing as this Ponzi scheme, also with social security funds same Ponzi, so why is the Government allowed to do it more then the private sector ?
#4 Because one is legal and one is not.
It does sound a bit like social security……..
I still remember posting during the “debt ceiling” debate….
When an institution says “We need to be able to borrow more money so we don’t default on our payment schedule to previous investors….”
That is intrinsically what a Ponzi scheme is….
#6 That’s exactly my question both doing the same thing , why is government legal and private sector not ,
#8 Government has an income but its not covering they are in deficit in Trillions they Don’t make money to repay the bonds and interest , the only way they could is selling more Bonds and that’s exactly definition of Ponzi Scheme
I dont like big government, but governments are not a ponzi schemes; anybody who says otherwise is ignorant of accounting economics, and civics. They do not take capital investments from taxpayers in exchange for equity, but rather taxes that do not promise net positive cash flow returns. They do not promise more returns to taxpayers than taxes paid. I’ve never said this in past postings but some of you people commenting here are total idiots and conspiracy theory nut-jobs.