SEC wins asset freeze to halt internet ponzi scheme

New York: A North Carolina man agreed to pay $4 million (Dh14.7 million) to settle US regulatory claims that he cheated more than a million Internet customers in a pyramid and Ponzi scheme operated through the ZeekRewards.com website.

Paul Burks, an online marketer who operated Rex Venture Group LLC, lured customers through his site’s rewards programme, which involved the sale of unregistered securities, the Securities and Exchange Commission said on Saturday in a statement announcing a complaint filed in federal court in North Carolina. The SEC obtained an asset freeze against the company and Burks, 65, who agreed to settle without admitting or denying wrongdoing.

The agency moved to freeze the assets to help customers recover money and avoid losses from the program, which was falsely portrayed on the website as extremely profitable, the SEC said. In reality, most ZeekRewards profits consisted of funds received from new investors, the agency 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,” Stephen Cohen, an associate director in the SEC’s enforcement division, said in the agency’s statement. “In reality, their cash was just going to the earlier investors.”

ZeekRewards has paid out nearly $375 million to investors and holds about $225 million in investor funds, which will be frozen under the court order, according to the SEC, which said the action was needed to keep cash outflows from exceeding total revenue. The site brought in $162 million last month and paid out $160 million, the agency said.

Burks, who is accused of siphoning several million dollars of investors’ funds and distributing at least $1 million to family members, agreed to cooperate with a court-appointed receiver, the agency said.

Noell Tin, Burks’ lawyer in Charlotte, North Carolina, declined to comment on the SEC’s actions.