Photo Credit: BVI Platinum News
A decision by the The United States Government through the Securities and Exchange Commission (SEC) to shut down the website ZeekRewards.com has left local investors in wonderland.
The SEC said Zeek was a ponzi scheme which attracted over 1 million customers across the globe, including from the British Virgin Islands.
"Earlier this year I got involved. Something told me this was not right, but I continued to invest because the rewards were very good," said one local investor who said that she invested $500 as a test.
She asked BVI Platinum News not to be named, fearing that an investigation will follow.
Her husband said that he too had invested $500 as a test after someone at his workplace told him about the financial rewards. He said that he knew many persons who benefited and he was able to recover his initial investments.
"I have heard that persons formed groups and invested over $5000 into this plan. They must be seriously hurting and I feel sorry for them," the man told BVI Platinum News.
Another man who also said he does not want to be named because the "U.S. is serious about financial crimes", said that he spoke with a couple of persons he knew had invested and they are all shocked.
"Many want to know if there is some way to get back their investment. However, they are afraid to come forward with the questions because it's the U.S. Government that shut down the operations," the man stated.
Asked why he signed up knowing that get rich fast schemes are usually too good to be true, he said it was only $500.
BVI Platinum News was informed that other persons took the scheme very seriously and took bank loans to invest in ZeekRewards, despite repeated warnings from the Financial Services Commission (FSC) about joining similar schemes.
Once others started to cash in, they encouraged others to join and to do so under their account. BVI Platinum News understands that payment was received through personal accounts.
ZeekRewards is the affiliate program section of Zeekler.com, a Rex Venture Group LLC company. Zeekler is owned by Rex Venture Group LLC, a subsidiary of Lighthouse America, a US (NC) company. The company was started on June 24, 1997 and adopted the d/b/a Lighthouse America later that year.
Persons made money by promoting Zeekler.com, the penny auction side of the business. They were rewarded for attracting customers and even other people who wanted to make extra money by posting pre-written text advertisements on classified sites or other places online.
On Friday, August 17, the SEC announced fraud charges and an emergency asset freeze to halt the $600 million ponzi scheme which it said was on the verge of collapse.
"The emergency action assures that victims can recoup more of their money and potentially avoid devastating losses," the SEC pointed out.
The SEC alleges that online marketer, Paul Burks of Lexington, North Carolina 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.
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.
The complaint charged that the 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.
The U.S. contended that 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.
According to the SEC, 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," the SEC pointed out.
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.
According to the SEC, Burks has agreed to settle the charges against him without admitting or denying the allegations and agreed to cooperate with a court-appointed receiver.
The SEC stated that 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.
According to the SEC, 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.