Many people in Eastern North Carolina found themselves victims of an alleged $600 million Ponzi scheme.
The company behind the alleged scam was ZeekRewards.com. The Securities and Exchange Commission shut the North Carolina-based company down on Friday, stating it was on the verge of collapse.
The SEC filed fraud charges against the company in a federal court in Charlotte. According to the civil complaint, customers were offered several ways to earn money through the ZeekRewards program, two of which involved purchasing securities in the form of investment contracts. These securities offerings were not registered with the SEC, as required under the federal securities laws.
Stephen Cohen, an Associate Director in the SEC’s Division of Enforcement, said “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.”
David Melvin is the owner of Against the Grain barber shop in Jacksonville.
"It's interesting because I had some friends that were involved who actually tried to get me involved," said Melvin. Melvin said it sounded too good to be true.
SEC officials say the scheme has fooled more than one million internet customers in less than two years. David Melvin tells us that includes some of his friends.
"I was told that I could put money into an account it would build for me. I have to do some work for it to build everyday, but I'm able to pull out of it whenever I needed to," said Melvin.
In court papers, the SEC states that most of ZeekRewards’ total revenues and the “net profits” paid to investors had been comprised of money 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 Cohen.
The man behind the alleged scam, Paul Burks, has agreed to settle the SEC’s charges against him. He has also agreed to cooperate with a court-appointed receiver.
The SEC states the court-appointed receiver will collect, manage and distribute remaining assets to be returned to victims of the scheme.
If you were a victim, you can get more information about that HERE.
The company's funds will be frozen under the emergency asset freeze granted by the court at the SEC’s request.