SEC Shuts Down Penny Auction Site Zeekler As A $600 Million Ponzi Scheme
In a move that sent shock waves through the Multi Level Marketing Industry, the Security and Exchange Commission (SEC) shut down Zeekler.Com and its affiliate website, ZeekRewards, on Friday, August 17, 2012. The SEC claimed the company was a $600 million Ponzi scheme, built on a pyramid that paid older affiliates from the revenues of new affiliates.
ZeekRewards had over one million active affiliates, all of whom have been unable to access their funds since the company was ordered to take down its websites late Thursday night. Affiliates will have to depend on the Federal government to recover their funds at a yet unspecified date.
The SEC said the case involved more than $600 million in assets, with nearly $375 million paid to affiliates and $225 million in funds currently held in 15 foreign and domestic banks. All remaining company assets have been frozen by the SEC.
Zeekler is owned by Paul R. Burks, operating under the name of Rex Venture Group located in Lexington, North Carolina. The SEC alleged that Mr. Burks, 65, misappropriated several million dollars of company funds, some of which he is accused of giving to his family members.
Since the first signs of problems surfaced on Thursday night with the shutdown of the company websites, Paul Burks has been unavailable for comment. A guard posted outside of Burks’ Lexington home told local papers that there have been several death threats against Mr. Burks, and there is concern for his safety. Burks has been advised by his lawyers not to discuss the case.
Events moved quickly, and, just hours after seizing the company, the SEC disclosed that Mr. Burks reached a settlement with the agency. Under the terms of the agreement, Burks will give up control of the company, co-operate with a court appointed receiver, and pay a four million dollar penalty. By accepting the agreement, Burks will settle the fraud charges pending against him without any declaration of guilt or innocence.
“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.”
In addition to operating an active Penny Auction website, ZeekRewards allowed affiliates to participate in a revenue sharing plan. The company gave affiliates up to half of its revenues on a daily basis, using a points system based on how many free bids an affiliate gave away to new users of Zeekler’s Penny Auction website. Many recipients of free bids would eventually purchase more bids with cash, and the affiliates shared in the proceeds of those purchases. Each affiliate’s share was determined by the number of points they had accumulated since joining ZeekRewards.
According to Zeekler, affiliates were encouraged to invite friends and associates to participate in the program as long as the invitation was made on a personal basis and no promises of earnings were made. All new affiliates were explicitly warned that they were not making an investment or purchasing securities, and they were required to receive written copies of all documentation and agreements.
The company claimed to have strict guidelines that kept it in compliance with SEC and Federal Trade Commission regulations. According to the company, an affiliate could not participate in the revenue sharing plan until they completed a training program designed by a lawyer, and anyone who violated the federal guidelines was terminated immediately.
It is the revenue sharing plan that is at the heart of the SEC complaint against the company. The SEC addressed their concerns directly in the press release dated August 17, 2012:
“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.”
Many Zeekler affiliates are incensed by the Federal government’s shutdown of the company. They are not angry at Zeekler, but they feel that the SEC is attacking Paul Burks for being too profitable too quickly.
The Inquisitr spoke directly with a highly successful affiliate in the ZeekRewards program, who has asked to remain anonymous due to the investigation. He was quite outspoken in his frustration with the federal government, saying:
“The closing of Zeek Rewards by the SEC… telling everyone that we were investors… and they wanted to protect us. WHO PROTECTS US FROM THE GOVERNMENT! The SEC called it a $600 Million Ponzi Scheme? The SEC said it has frozen the roughly $225 million in “investor” funds that remain in the company’s bank accounts. So far, the agency said, ZeekRewards has paid out some $375 million to “investors”. The Government is the one talking about investment, not us, not Zeek. No one at Zeekler, or any legitimate affiliate ever referred to the affiliate program as an investment. Protect us from what, from who!!!!? Zeek only has done good all around. And the funds paid out and the funds in the bank don’t reflect a Ponzi Scheme.”
“Who benefits from this from this Government travesty… The only winners in this are the attorneys and the government. We all know they need money and they don’t want us to make any. What’s more to say. I’ve been lied to many more times by the government then by private business including Zeek!”
“Mr. Paul Burks and his management team were doing everything that had to be done in order to be in “compliance” and were trying to look out for the affiliates. I believe that it was never Mr. Paul Burks intention to deceive anyone, and he never admitted doing anything wrong, fighting the government always results with the government being the big winner. I feel they take pleasure finding companies that make too much money too fast, seize the funds and do not care who it affects.”
Many other affiliates of ZeekRewards have also been quite supportive of the company. They have, by and large, expressed faith in the honesty of Mr. Burks as well as in the stability and strength of the company. They are extremely disappointed about being shut out of what they felt was an excellent business opportunity.
The opinion of several respected authorities on internet marketing is that this is just the tip of the iceberg. They feel the closing of Zeekler and ZeekRewards is just the beginning of a major federal crackdown with the goal of putting an end to Penny Auctions high on the government’s list of priorities. Then they shrug their shoulders and say, “Well, no one can win a fight with the Feds, so of course, Zeekler had to close its doors.”
What do you think? Have you ever been involved in an internet based business, and, if so, did you make or lose money? In view of the ongoing pressure on small business, do you agree with the comments that the federal government is hostile to entrepreneurs and wants to discourage people from building an independent business?
Update 11:00 pm CST:
The Office of the Attorney General of the State of North Carolina has posted the telephone number — (919) 716-6046 — to take inquiries from “concerned Zeek Rewards affiliates or Zeekler.com retail customers.” The number has been going to voice mail since Friday afternoon. The caller is then informed by a recording that the voice mail box is full, and the call is disconnected.
Tags : affilate programs, FTC, multilevel marketing, Paul Burks, Penny Auctions, ponzi schemes, Rex Venture Group, SEC, Zeekler, Zeekler accused of Fraud, Zeekler called a ponzi scheme, Zeekler seized By SEC, ZeekRewards, ZeekRewards called a scam, ZeekRewards closed by Feds
Posted: August 18, 2012
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Aug 19, 2012
Zeek grew way too fast, that was their problem…customer dissatisfaction and to close to a gambling scheme. Reverse the business model, earn BEFORE you pay any fees, earn BEFORE you pay for product. More than 10 ways of income generation to pay the profit share program…FB me anytime to get your Zeek Rewards Money Back…There'll be no SEC complaints about us
Aug 19, 2012
This hasn't sent shockwaves anywhere. Everyone in the industry knew this was a Ponzi scheme that was doomed. It was just a question of how many would get sucked in and lose their money. Any multilevel business that doesn't have a patented product is a gamble at best and at worst a con like this one.
Aug 19, 2012
quite a statement to say it has not sent shock waves…in fact it has Rod…
Aug 19, 2012
You see, That’s why I use Gifthulk, you don’t need to invest a penny there in order to earn.
You earn by watching videos, searching, completing surveys and a lot of other simple actions.
I haven’t put a single dollar in and already got $135 from them!
http://www.gifthulk.com/refer/join
Aug 19, 2012
You have some nerve saying the things you did if the truth be known your prob the biggest sucker of all. And as far as the shock waves go you sure did read about it the shock waves are world wide. The government is the problem we the people need protection from them Zeek Rewards and its affiliates were making way to much money to fast for the government. So please know what your talking about before you make such stupid replies.
Aug 20, 2012
Emergency Webinar for Zeek distributors.
“Status of Zeek".
For Zeek Distributors Only.
To register you will need CODE:1931291.
https://www2.gotomeeting.com/register/737938874
6 pm Pacific/7pm Mountain/8 pm Central/9 pm Eastern.
==========
Aug 20, 2012
Looking for like-minded people. Family based, home-based business, Independent Reps. Lucrative income. Go to: Jaxonmakesmoney2012.blogspot.com. Click on "ground floor opportunity at bottom of Entrepreneur post.
Aug 20, 2012
My family & friends would like to know if we will be reimmburst our money & hope this gets settled the aunust way.
Aug 21, 2012
Dear Zeek Reward Afliates, So sorry to see another bunch of hardworking individuals have their source of income and dreams crushed. This has happened to me before in the past and I made a great recovery so despair not. To look at replacing lost income please visit w w w paidroyally com. Someone will be in touch shortly. There is light at the end of the tunnel.
Aug 21, 2012
Its a "become a Visalus sales rep" webinar disguised as a meaningful and informative update for Zeek affiliates.
Aug 21, 2012
No, it is a true opportunity for Zeek distributors to begin earning money again. Our team has a large amount of pay it forward that will help you become very successful quickly. We have had many Zeek distributors join us because they see the great opprotunity we offer. We are a legitimate business that truly wants to help and we are providing much more meaningful and informative information than you will be getting from Zeek. If you listen to the webinar you will know that we are sincere and mean business. Zeek has hurt thousands of people. I have absolutely no interest in hurting anyone because Karma will bit you in the butt! Our only interest is to help people build their income back! There will not be a better opportunity. We are featured in the SuccessAtHome magazine this month. We have a product that works….I have lost 40lbs in 85 days and 10.5" from my waist. My reward is helping others with their health and business. If you knew me, knew my heart you would know I am speaking truth!
Aug 21, 2012
One other note, I lost thousands of dollars in another network marketing business and swore I would never do this again. I am and this is nothing like anything else I have ever tried. I have not interest in helping others lose money! I know what it feels like!
Aug 21, 2012
Well, if you want your intentions to seem helpful and honest to others, you may want to consider changing the misleading name of the webinar from "Emergency Webinar for Zeek Distributors", which gives the impression that the hour long webinar is there to provide some latest, unheard, breaking news and answer people's questions about Zeek. The 5-10 minutes at the beginning of the call that is spent regurgitating information that is easily searchable online in regards to the status of Zeek, and then spending another 45-50 minutes selling another company, doesn't really reflect the impression the name of the webinar gives. Whoever is running the webinar should change it to something like "Since you don't have Zeek to market anymore, check this opportunity out!"… My name suggestion could probably use a little fine tuning, but at least its more of an accurate description of what people are in for.
Aug 22, 2012
I have to agree Jessica… That is why I posted that link…. Clearly worded as a bait and switch. I know about 30 people in Vi. A true opportunity doesn't need hype and/or bait and switch techniques or "reload" as the article states. I guess there are ambulance chasers in every business. I lost money in Zeek but I have in 14 other opportunities. 3 others have been real winners…. So like any business choose carefully… Unfortunately in network marketing… you have to fight all the b.s. hype, and poor leadership that is out there. Good luck to you Jerry in your riches.
Aug 22, 2012
You certainly have the right to your opinion but I have offered no bs, no hype, no bait and switch, no poor leadership and I have chased no amublances. Our company and it's numbers speak for itself. If I had just lost thousands of dollars or hundreds of thousands of dollars as some I have spoken to have, I hope that I would have the common sense to recognize a scam and be grateful if someone is trying to help me. None of your statements are fair or truthful about my posting. If I did not have a legitimate business that is thriving….you would have a point. I am very grateful that ViSalus came along to me when it did and it has changed my life. The fact that I want the same for you or anyone else is okay with me!
Jessica – I do understand what you are saying and I will pass this along to those that created the webinar!
I wish you both nothing but the best in life but I still know and believe that what we have is the best!
Aug 22, 2012
You certainly have the right to your opinion but I have offered no bs, no hype, no bait and switch, no poor leadership and I have chased no amublances. Our company and it's numbers speak for itself. If I had just lost thousands of dollars or hundreds of thousands of dollars as some I have spoken to have, I hope that I would have the common sense to recognize a scam and be grateful if someone is trying to help me. None of your statements are fair or truthful about my posting. If I did not have a legitimate business that is thriving….you would have a point. I am very grateful that ViSalus came along to me when it did and it has changed my life. The fact that I want the same for you or anyone else is okay with me!
Jessica – I do understand what you are saying and I will pass this along to those that created the webinar!
I wish you both nothing but the best in life but I still know and believe that what we have is the best!
Aug 22, 2012
So webinar is 98% Zeek info and 2% Vi is that right Jerry? Just checking.
Aug 22, 2012
Everyone who has been affected by Zeek's closing should join for a Class Action Lawsuit on http://savezeek.org/ Please visit the site and let's all come together for getting the company back to the people. Join us on http://savezeek.org/.
Aug 22, 2012
REFUND Update for Zeek distributors!
Do NOT MISS tonight's update.
Webinar WILL MAX out – guaranteed.
For Zeek Distributors Only.
To register you will need CODE:1699160.
https://www2.gotomeeting.com/register/737938874
6 pm Pacific.
7pm Mountain
8 pm Central.
9 pm Eastern.
Aug 22, 2012
Wow, Allen, strong words but appropriate for such an emotionally charging event…my heart goes out to my friends and family especially who bought into it despite my warning…we do have the LATEST updates, however, regarding the refund status for anyone interested – happening tonight:
Webinar WILL MAX out – guaranteed.
For Zeek Distributors Only.
To register you will need CODE:1699160.
https://www2.gotomeeting.com/register/737938874
6 pm Pacific.
7pm Mountain
8 pm Central.
9 pm Eastern.
Aug 22, 2012
REFUND Update for Zeek distributors!
Do NOT MISS tonight's update.
Webinar WILL MAX out – guaranteed.
For Zeek Distributors Only.
To register you will need CODE:1699160.
https://www2.gotomeeting.com/register/737938874
6 pm Pacific.
7pm Mountain
8 pm Central.
9 pm Eastern.
Aug 23, 2012
Jerry Hicks Deceptive practiceslike this means run away!!! ppl like u that trick ppl are sad!!! just offer what ur offering. all of u other big money making businesses look out cause uncle sam wants u working a job and never being free…save ur money im sure they are coming for ur business next. its time for all of us network marketers to stand and fight this BS govt control. they are just doing what they want and we arent doing a thing about it…
Aug 23, 2012
and the sad part they are lining their pockets with 4 million dollars before anyone gets anything…NOW THERES THE REAl SCAM!!!
Aug 23, 2012
Dan Moro trickery runs ppl off. dishonesty and deception gives u and ur scam a bad name…
Aug 23, 2012
Check the ingredients for Visalus products before you go joining. Yes it's a good $$ opportunity but you sacrifice peoples health for the sake of the holy dollarl. The ingredients in this product are low grade cheap crap. GMO soy, sucralose and sodium caseinate: http://www.livestrong.com/article/314067-sodium-caseinate-side-effects/
Aug 24, 2012
I thought i only communist governments did this?? This Company IS not añ insurance company! Well that's why their is no jobs! All the biz owners are leaving the country in droves!! Sad and ashamed of our government taking gestapo action!!
Aug 24, 2012
I was a Zeek distributor. In my opinion, getting involved in any business (both online and brick & mortar) can be a gamble in today's economy. While I am disappointed in the turn of events, I have to say that my sponsor stressed from the beginning that my money was not being invested, but was a subscription fee. No one ever promised me that I would get rich quick or make millions. The system made sense to me and I took a chance on it. I was wrong. My prayers go out to those who had large sums tied up in Zeek. I hope that those people especially can recoup their losses. I have a few friends who have been receiving regular checks from their Zeek funds and have gotten far more than they have put in, so not everyone lost out. Better to have stepped outside the 9-to-5 box and tried than to never have tried at all. Don't let this steal your dreams!
Sep 3, 2012
Too good to be true like i said
Sep 22, 2012
Hello everyone there is a new business coming out that is way better than zeekrewards. I too joined zeekrewards as some of you had and I lost 16,000 dollars. The website that my friend referred me to is called get pre launch. To sign up just go to getprelunch.com/teejames.
Sep 23, 2012
if u love making the money that u was making in zeek u will love this company it is set up better and it is paying more money .u get payed daily in this business too just like zeek if u want to join go to my website http://www.getprelaunch.com/teejames and get sign up the business is new and the one that get in while it new will make the most money. if u have any question leave me a comment i will get back with u..
Oct 6, 2012
Haha another Scam nice 1
Oct 6, 2012
The only way u will get reimmburst if u chop burks in to little pieces and make kebab out of him sell that u will get ur money back
Oct 8, 2012
You know its stories and companies like this that ruin it for the industry! Because there are llegitimate MLM companies, 100% debt free, with actual "exchange of goods" to make it legal and that is PRIVATELY owned.I know I PROUD to say I am involved in one awesome one! But DO do your homework! The system is not the issue nor the products, its HOW those to are handled! Never give up, there's a reason why 95% fail and only 5% succeed! Because this is traditional and against everything we have been taught about business and how to make $. AND REALLY anyone who blasts their email or link on there new business is a read flag! Have you learned NOTHING of "uncontrolled environments". People already run from you as it is with just a hint of MLM! Join a team, real people paying it forward with a heart and just using the MLM system to spread the Good news!
Jan 25, 2013
That waz to good to be true
Feb 6, 2013
How come maddoff gets 150 years amd this dueche gets to payback 4 mill and walk away scott free? I think its because madoff stole from the rich and this dueche from ordinary people!
Feb 8, 2013
today amazon have valentine day sales and gifts hurry up!
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Feb 10, 2013
I new him for over 10 years I can tell u what I Thnk not on fuck book but not so simple burney case plus hue son killed him self last year call or text me I tell u want I know first hand
Feb 12, 2013
ok there ms know it all
Mar 19, 2013
It was too good to be true, should have trusted my instinks. Never ever again, so scanners on here, take a hike, u think I'm going to take another chance after losing $10,000, I don't think so!
Mar 19, 2013
Scammers!