Former ZeekRewards CEO Paul Burks was convicted today of running a massive Ponzi Scheme that at one point included over 1 million investors. The decision concludes a 4 year long investigation and conviction process that began when the SEC filed a complaint against Burks in August 2012. After the conviction was handed down by the jury, U.S. Attorney Jill Westmoreland Rose said:
“For nearly two years, Burks used deceit and dishonesty to engineer an extensive Ponzi scheme that amassed millions of dollars from thousands of victims, many in the Western District of North Carolina. This massive scam is one of the largest in breadth and scope ever prosecuted by this office. I commend the United States Secret Service and the IRS agents who worked closely with our prosecutors to unravel Burks’ fraud and to obtain a conviction against the mastermind of a scheme that has left so many victims with substantial losses. I want to remind the public to steer clear of ‘get rich’ schemes and to follow the old adage that if it looks too good to be true, it likely is.”
Paul Burks and his employees created a typical high-yield investment program (HYIP) scam, promising extraordinary returns in what ultimately turned out to be an unsustainable Ponzi scheme. Victims were convinced to fork over $10,000 to invest in Zeekler.com, a penny-auction site set up by Burks, and were guaranteed returns that were generated from the success of Zeekler.
Unfortunately, Zeekler.com was not a thriving business, and the “returns” were simply investments that were re-routed to early investors from new investors. After an investor explosion growth from about 50,000 in 2011 to over 1 million in 2012, Burks’ Ponzi scheme cratered.
On top of that, Burks filed false tax reports in 2012, claiming that he paid out over $93 million in taxable disbursements. In reality, disbursements only totaled $13 million, leading many victims to file incorrect tax returns.
Details of the ZeekRewards Scam
Paul Burks and his conspirators, leveraging their experience in the multi-level marketing industry, enticed victims to invest in their Retail Profit Pool (RPP) as a means of achieving their outlandish profit claims. Burks promised that those who joined the pool (for a maximum of $10,000 per person, though many victims got around this by investing in their relatives’ names as well) would then earn the right to share 50% of the daily profits from Zeekler.com, a penny auction site.
Burks and his team greatly inflated the revenue and profit being generated by Zeekler.com, and disguised the true nature of the “returns”, which were 99% funded by the investments of victims who joined the RPP after them. This is a classic Ponzi scheme that (ironically) becomes more unsustainable the more successful it is, because you need to achieve almost exponential investor growth in order to meet the extraordinary return promises of previous investors. While Burks and his team were initially successful at convincing victims to continue re-investing their money (a red flag for anyone considering investing in a similar scheme), growing customer demand to cash out their investments ultimately brought down the company.
History of ZeekRewards.com & Zeekler.com
Paul Burks launches Zeekler.com, a penny auction site.
Burks launches ZeekRewards.com at the end of 2010, the marketing front for a Retail Profit Pool (RPP) based on the “profits” from Zeekler.com.
The SEC files a complaint against ZeekRewards.com and Paul Burks, alleging that Burks “fraudulently offered and sold securities in an unregistered offering as part of a Ponzi/pyramid scheme.” All of Zeek Rewards assets are frozen and transfered to a Receiver.
ZeekRewards.com is shutdown after original SEC complaint filed.
Zeekler.com is shut down.
Claims filing period is opened.
Claims filing period is closed.
Department of Justice appoints Kenneth Bell to administer the process of compensating the victims of Zeek Rewards with the company’s remaining assets.
Arraignment hearings for Burks’ co-conspirators. Daniel Olivares (Senior Technology Officer) and Dawn Olivares (Chief Operating Officer) both plead guilty to counts of investment fraud conspiracy for their roles with Zeek Rewards.
U.S. Attorney’s Office files official criminal charges against Paul Burks, including wire and mail fraud conspiracy, wire fraud, mail fraud, and tax fraud conspiracy. 90,297 checks are issued to ZeekRewards claimants, totaling about $134 million.
Federal jury convicts Burks on all counts.
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