FRANCHISE HERALD
Thursday November 27, 2014

updated - November 27, 2014 Thursday EST

Nearly 100 Zeek Rewards and Zeekler Affiliates File Lawsuit: How Strong Is Their Case?

Aug 25, 2012 02:29 PM EDT

A Zeek Rewards and Zeekler ad that lured many investors into their Ponzi scheme.

A Zeek Rewards and Zeekler ad that lured many investors into their Ponzi scheme.

ZeekRewards.com and Zeekler, the Lexington company shut down by the Securities and Exchange Commission last week after being accused of running a Ponzi scheme, have been handed a class-action lawsuit by nearly 100 Zeek affiliates.

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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.

The state court action, filed in Davidson County Superior Court this past Wednesday, seeks damages for all affiliates and demands a jury trial. The lawsuit claims damages from the company's "fraudulent, unfair, deceptive and illegal acts." Numerous other unnamed individuals could be inserted into the lawsuit at a later date, the filing said.

The SEC's complaint says more than one million people from all over the world invested in the company and according to Forbes magazine, Zeek may be the largest Ponzi scheme in history.

The majority of the affiliates included in the lawsuit are from North Carolina, including numerous individuals from Davidson County. Affiliates claim to have lost amounts ranging from $1,000 to $10,000.

"We need to start the healing process and letting these people know there is somebody in their corner not only with just talking about Zeek but was part of Zeek and feels the pain too," said Earl Harrison, a radio host in Lexington, NC. Earl invested $2,000 in Zeek Rewards.

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.

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.

Zeek Rewards and Zeekler operated as a penny auctions website which allows users to compete for expensive items one penny at a time, often paying only pennies on the dollar for items purchased. However, since each bid costs money, the money for each item usually exceeds the retail price, but is paid by all bidders rather than one buyer.

"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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