Raleigh (US): Federal securities regulators have filed fraud charges and an emergency order to freeze the assets of a North Carolina company officials say operated a USD 600 million Ponzi scheme that is on the verge of collapse.
The action by the Securities and Exchange Commission on Friday is intended to help investors recoup money and avoid devastating losses.
Online marketer Paul Burks is accused in a federal complaint of raising money from more than 1 million customers through zeekrewards.com, a website in operation less than two years.
Burks could not immediately be reached for comment and the website has been taken down.
Clifton Jolley, a Texas-based communications consultant representing the website`s parent company, Rex Venture Group, said Burks had agreed to settle the SEC charges but that he has neither admitted nor denied the allegations against him.
Jolley said Burks will cooperate with federal officials and a court-appointed receiver.
ZeekRewards customers were offered several ways to earn money through the site, including buying unregistered investment contracts that promised a share the company`s profits through rewards points that could be traded for cash payouts.
However, federal investigators say claims the company was extremely profitable were false and that money from new investors was paid to the older investors as in a classic Ponzi scheme.
"The obligations to investors drastically exceed the company`s cash on hand, which is why we need to step in quickly, salvage whatever funds remain and ensure an orderly and fair payout to investors," said Stephen Cohen, an associate director of the SEC`s enforcement division.
"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. In reality, their cash was just going to the earlier investor."
The SEC`s complaint, filed in US District Court in Charlotte yesterday, alleged the scheme is teetering on collapse.