updated - July 22, 2014 Tuesday EDT
Zeek Rewards and Zeekler has had a class action lawsuit seeking damages from the alleged fraud filed against them in the Davidson County Superior Court, according to the Lexington Dispatch.
A U.S. district judge appointed a Charlotte, North Carolina lawyer Kenneth Bell as temporary receiver for Rex Venture Group and ZeekRewards.com. According to officials the bust was part of an ongoing investigation inside a $600 million Ponzi scheme the company is allegedly part of.
The suit, brought by 82 named affiliates of the Zeek web site, names ZeekRewards as well as CEO Paul Burks and Rex Venture Group, the company through which Burks ran Zeek. Lexington attorney J. Calvin Cunningham represents the plaintiffs.
Zeek Rewards and Zeekler's Chief Executive Officer, Paul Burks, is accused of orchestrating the illegal venture through the website ZeekRewards.com beginning in January, 2011. Federal Investigators said it was nothing but a scam.
"I'd seen a lot of folks around the area, local business guys get into it. They had made a substantial amount of money. It looked like a good thing. Everything online checked out. It looked like a solid investment," says an anonymous investor, according to North Carolina's 9 On Your Side team. The SEC alleges that the company operated a $600 million in Ponzi scheme out of Lexington, North Carolina.
"People have lost a lot of money because they saw a good potential to make money. I don't know where my check is right now. I don't know whose hands it's in. It's just out there. It's a scary feeling that somebody can do that to someone else," says another anonymous investor.
Burks agreed to settle the SEC's charges against him without admitting or denying the allegations. He agreed to pay a $4 million penalty and relinquish his interest in the company. The court has appointed a receiver to manage and distribute the remaining assets to investors.
In a statement, the SEC issued a statement said, "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."
It all started with a sign at Rex Venture Group's headquarters on Thursday. On Friday, U.S. Secret Service agents were sniffing around at the company's office in Lexington, NC.
Special Agent Glen Kessler said the Secret Service, in coordination with the U.S. Securities and Exchange Commission, is working a joint case on Zeek Rewards.
Both Zeekler.com and Zeek Rewards had recently come under the scrutiny of the North Carolina Attorney General's office, after dozens of users filed complaints and inquiries in the past six months. The company, which is rooted in its penny auction website, has expanded in the past year to let users buy in through an "affiliates program." Some say the company is a good way to make a little more cash while others condemn it as the makings of a pyramid or Ponzi scheme.
North Carolina Attorney's General office has opened a hotline for concerned Zeek Rewards affiliates or Zeekler.com retail customers. The number is (919) 716-6046.
The company also announced it is canceling its upcoming "Red Carpet" event, scheduled for Wednesday. The announcement, made on zeekrewardsnews.com, also advised readers to continue to monitor its websites for more information to be forthcoming.
Online reports indicate there are more than 700,000 affiliates using Zeek Rewards, however company officials gave the paper a lower estimate of more than 200,000.
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