LEXINGTON, N.C. -- The Securities and Exchange Commission has shut down what they call a $600 million dollar online pyramid operation and Ponzi scheme allegedly headed by a Lexington businessman.
NOTICE: The Attorney General's Office has set up a special hotline for Zeek Rewards users and affiliates. The number is (919) 716-6046.
Paul Burks is accused of orchestrating the illegal venture though the website ZeekRewards.com beginning in January, 2011. Now, federal investigators said it was all a scam.
The SEC issued a statement saying, "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."
FOX8 started investigating the company after ZeekRewards.com shut down overnight, posting only that they would update members shortly.
A steady stream of local investors, or "affiliates" as the company called them, stopped by the Zeekler office located at 803 West Center St. on Friday.
Most said they were just confused.
"The internet and website was down so we decided just to ride down and figure out what's going on. Then we got here there's not a soul here and it's locked," said one Winston-Salem man. He and his wife said they have thousands of dollars tied up in Zeek Rewards.
"Boy do we feel like idiots," he said , after hearing his investment was part of the alleged scheme.
The Winston-Salem couple said they also recruited five people into the online program including accountants and doctors.
They are just two of more than one million internet customers worldwide the SEC said invested in the company.
Neal Hendrick of Lexington said he invested $10,000.
"I'm concerned," he said. "But I have faith in the business.”
The "business" was an international penny auction website called Zeekler that allowed users to pay a monthly membership fee and buy bids for the chance to win items.
The related program Zeek Rewards was the recruitment side of the website. Members would attempt to sign up new affiliates who would then invest more money for bids.
Winston-Salem BBB President and CEO David Dalrymple said the business model was so complicated, it immediately raised red flags.
"From our viewpoint we've had concerns about a potential pyramid and Ponzi scheme for a while now," said Dalrymple.
The BBB said they immediately notified the FBI and N.C. Attorney General.
Dalrymple said he has been working with the Secret Service to sort through complaints and inquiries about the company.
The BBB said they have received close to 30,000 inquires about Zeek, Zeek Rewards, Rex Venture Group, and other names of the company associated with Paul Burks within 30 days.
"In twelve years as the President here, I cannot compare that to any level of inquiry for any other business. Ever," Dalrymple said.
They said they've also received 39 formal complaints about Zeekler.
"In recent days, we had a sudden spike in people concerned they were not receiving funds promised and could not get ahold of the company."
The SEC said they shut down this Ponzi scheme just as it was on "the verge of collapse."
Attempts were made to contact Burks at his home in Lexington. People were in the home, but no one answered the door.
A man in a red jeep wearing a black hat reading "security" was parked outside the Zeekler office for several hours Friday morning. He was later seen circling Burks' home repeatedly in the afternoon.
When approached for comment, he declined to speak.
The SEC announced, "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. 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."
The North Carolina Department of Justice encourages anyone with information or questions to email firstname.lastname@example.org
Dawlrymple also encourages anyone involved to file a formal complaint online with bbb.org for their records.