About 8 months after federal authorities closed the penny auction website ZeekRewards on fraud allegations, Lexington, N.C., has yet to recover from its devastating impact.
U.S. Securities and Exchange Commission (SEC) said that the owner Paul Burks masterminded a $600 million Ponzi scheme, defrauding about one million investors including 50,000 from within North Carolina. Many were recruited by friends and family in Lexington, a quintessential small town where neighbors look out for each other.
Caron Myers was one among many who were caught in that which has been dubbed “one of the biggest Ponzi scheme in American History.”
She heard about ZeekRewards in a local hardware store. For a small investment, she was told, she could make a fortune. The man who told her that said he, too, had invested. So had his grandsons. And so were more and more people in Lexington, including doctors, lawyers and accountants.
Myers confesses she was skeptical at first. Nonetheless, she drove a few blocks to the company's one-story, red-brick office and spotted a line of people circling the building. She was sold, and plunked down several thousand dollars. But months later, Myers, like hundreds of thousands of others, was hit by the hard truth: ZeekRewards was a scam.
"I was duped," Meyer said. "We trusted this man. The community is still in shock."
The once-thriving furniture and textile town of Lexington woke up to a nightmare.
Many investors lost everything. However, what some didn't know was that regulators had received nearly a dozen complaints about ZeekRewards and the related site Zeekler.com, but failed to take action for months, leaving the company free to recruit tens of thousands of new victims.
SEC said Burks was selling securities without a license. The Ponzi scheme was using money from new investors to pay the earlier ones.
The owner of ZeekRewards agreed to pay a $4 million penalty and cooperate with a federal court-appointed receiver trying to recover hundreds of millions of dollars.
Investigators say Burks, a former nursing home magician, siphoned millions for his personal use. But he has not been charged.
