Paul Burks, $900M Ponzi Scheme, North Carolina 2016

CHARLOTTE, N.C. – U.S. Attorney Jill Westmoreland Rose announced today that U.S. District Court Judge Max O. Cogburn, Jr. has sentenced the former CEO of ZeekRewards to 176 months in prison for operating a $900 million Internet Ponzi scheme.

Paul Burks, 70, of Lexington, N.C. was also ordered to serve three years of supervised release and to pay $244,000,000 as restitution. A federal jury convicted Burks in July 2016 of wire and mail fraud conspiracy, wire and mail fraud, and tax fraud conspiracy following a three-week trial.

According to filed court documents and evidence introduced at trial, Paul Burks was the owner of Rex Venture Group, LLC (RVG), through which he owned and operated Zeekler, a sham Internet-based penny auction company, and its purported advertising division, ZeekRewards (collectively “Zeek”).

Burks and his conspirators induced more than 900,000 victims – including over 1,500 victims in the Charlotte area – to invest in their fraudulent scheme by falsely representing that Zeekler was generating massive retail profits from its penny auctions, and that the public could share in those profits through investment in ZeekRewards.

Burks and his conspirators claimed that investors would be guaranteed a 125% return on their investment. However, the true revenue from the scheme did not come from the penny auction’s “massive profits.” Instead, approximately 98% of all incoming funds came from victim-investors, which were then used to make Ponzi-style payments to earlier victim investors.

The scheme was promoted through various means, including weekly conference calls, Red Carpet Events, and electronic and print media. The conspirators made false representations about the success of Zeekler to recruit victim investors and convince them to continue investing.

As the Ponzi scheme grew in size and scope, it became unsustainable and eventually began to unravel. By August 2012, Burks and his conspirators had only $340 million available to pay out investors, despite fraudulent representations that their investments were worth nearly $3 billion.

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