The ZeekRewards scandal in the United States unfolded from 2010 to 2012 in Lexington, North Carolina. It involved an online “penny auction” platform masquerading as a legitimate investment opportunity and ultimately defrauded over 900,000 investors worldwide (including more than 1,500 in the Charlotte area of North Carolina) out of approximately US$900 million.
Paul R. Burks, a 65-year-old former nursing home magician and online marketer, owned Rex Venture Group LLC, which operated Zeekler.com—a sham penny auction site where bidders paid up to $1 per bid for discounted items such as iPads, with prices rising incrementally. In January 2011, Burks launched ZeekRewards.com as its “affiliate advertising division,” blending multi-level marketing with Ponzi elements.
Participants bought “VIP bids” (subscriptions from US$10 to US$99 monthly) and invested up to US$10,000 to earn “VIP points” by recruiting others and promoting the site. Investors were promised shares in a “retail profit pool”—up to 50% of Zeekler’s supposed daily net profits, with bogus returns of 1.5% daily (compounding to 125% annually). Burks fabricated daily profit figures without proper accounting, claiming massive auction revenues. In reality, only around 2% of funds came from actual auctions; 98% was new investor money used to pay earlier participants in classic Ponzi scheme fashion. The scheme created the illusion of success through “red carpet events” and its emails and websites. It paid out around US$375 million before collapsing.
On August 17, 2012, the U.S> Securities and Exchange Commission filed emergency charges in Charlotte’s Federal Court, halting ZeekRewards’ operations and freezing around US$225 million in assets across 15 banks. The scheme was on the brink of collapse, with US$162 million incoming but US$160 million in payouts the prior month.
Burks was charged with wire/mail fraud, conspiracy, and tax fraud. After a three-week trial in 2016, a jury convicted him on all counts. Many victims lost their life’s savings. The local economy in Lexington, was materially affected as many locals had lined up for “winnings.”
In February 2017, U.S. District Judge Max O. Cogburn Jr. sentenced Burks to 176 months (nearly 15 years) in prison and ordered him to make US$244 million in restitution. Burks was released early in 2024 after his sentence was commuted by former President Joseph Biden, as part of a large batch of clemency actions announced on December 12, 2024 (for reasons unknown).
Dubbed the “largest Ponzi scheme ever by victim count,” the ZeekRewards scandal affected as many as 1 million people worldwide and spurred scrutiny by the SEC of high-yield investment programs and penny auctions. This case wasn’t included in the book as it didn’t involve a hedge fund or securities markets.
Sources:
Maglich, Jordan (2012), “Up Next For ZeekRewards Ponzi Scheme Victims ... Clawbacks?,” Forbes, August 27:
https://www.forbes.com/sites/jordanmaglich/2012/08/27/up-next-for-zeekrewards-ponzi-scheme-victims-clawbacks/
No author listed (2012), “SEC Shuts Down $600 Million Online Pyramid and Ponzi Scheme,” U.S. Securities and Exchange Commission, August 17: https://www.sec.gov/newsroom/press-releases/2012-2012-160htm
No author listed (2012), “U.S. SEC Says Shuts ZeekRewards.com $600 million Ponzi Scheme,” Reuters.com, August 17:
https://www.reuters.com/article/markets/us-sec-says-shuts-zeekrewardscom-600-million-ponzi-scheme-idUSL2E8JHM8K/
Touryalai, Halah (2012), “SEC Shuts Down ZeekRewards, Calling It $600 Million Ponzi Scheme,” Forbes, August 17:
https://www.forbes.com/sites/halahtouryalai/2012/08/17/sec-shuts-down-600-million-internet-ponzi-scheme/