Zeek Rewards: when an "Advertising Business" turned out to be a $900 million pyramid scheme

The company called itself the advertising division of an ordinary online auction site and promised participants returns that on paper reached 125%. In less than two years, Zeek Rewards drew in more than 900,000 people around the world — and investigators later established that almost every dollar coming in from new depositors was immediately channeled into payouts to earlier ones.

In 2011, Paul Burks launched Zeek Rewards as a supposedly "advertising" product tied to his own penny auction site Zeekler, aimed at the owners of Rex Venture Group. Participants were offered the chance to buy "advertising shares" and receive a portion of the company's daily profit — the model was presented as a byproduct of a legitimate advertising business rather than as an investment offering, which allowed it to avoid registering securities with the SEC.

In reality, as the investigation later established, the payouts to participants bore no relation to the company's actual profits from the auction business. Investigators found that roughly 98% of all funds coming in from new participants were immediately channeled into payouts to earlier depositors — in essence, it was a classic Ponzi scheme disguised as an affiliate program.

By the time the scheme was shut down in August 2012, more than 900,000 people had taken part in it, and total losses were estimated at $850–900 million. The U.S. Securities and Exchange Commission (SEC) filed suit and secured a halt to the company's operations, characterizing it as a pyramid and Ponzi scheme worth hundreds of millions of dollars.

In 2016, a federal jury found Paul Burks guilty of conspiracy to commit mail and wire fraud, as well as tax fraud. He was sentenced to 176 months (nearly 14 years and 8 months) in prison and ordered to pay $244 million in restitution to victims.

Published 20 December 2022