It’s people like Paul Burks, the founder of ZeekRewards, who give MLM a bad name. Paul Burks ran a Ponzi scheme disguised as a multi-level marketing business. Investors were scammed out of $900 million until ZeekRewards was shut down, 20 months after its establishment, by the Securities and Exchange Commission. Paul Burks is now going on trial for tax fraud, running a Ponzi scheme, mail fraud, and wire fraud. An estimated 1 million citizens of the United States were victims of ZeekRewards.
A jury will determine whether or not Paul Burks is guilty of these charges. Burks could be sentenced up to 65 years in prison and fined $1 million. It might take four weeks for the trial to end. Five years ago, he guaranteed investors that they would receive a 125% return. No one can promise that you’ll receive a certain level of ROI because of the chance factor in investment and business. Moreover, it partially relies on the individual doing the necessary work and having a good understanding of the industry.
Burks originally launched an online auction site headquartered in a small brick building in Lexington, North Carolina. Bidders were charged up to $1 to bid on heavily discounted products, such as iPads. In order to send bidders to his auction site, Burks created ZeekRewards in 2011. ZeekRewards offered a share of auction profits to those who invested money, recruited new investors, and promoted the company on other websites.
Investments were capped at $10,000, but ZeekRewards encouraged users to invest on behalf of their families. The money from investors was used to pay other investors and the developers of the Ponzi scheme. ZeekRewards falsified tax returns to the IRS. They claimed to have paid out $96 million to investors, but prosecutors found that ZeekRewards only disbursed $13 million.
So far, $250 million has been returned to 107,000 victims. Attorney Kenneth Bell said he’s attempting to retrieve $225+ million for scammed investors from a bank in Moldova. Based on the evidence already found, such as false tax reports to the IRS and concealed bank accounts, there’s a good chance Paul Burks will be found guilty.
Jaymes Meyer, an executive of a financial firm, already pleaded guilty in March 2016 to association with the Ponzi scheme. He was sentenced for obstruction of justice and had to pay a $4.8 million fine and forfeit the homes he owns in Napa and the Turks and Caicos Islands.
What role did Meyer play in the Ponzi scheme? He helped ZeekRewards hide millions of dollars in offshore accounts, brokerage accounts, domestic and foreign nominee accounts, and in a shell company. Meyer also misled the SEC by implying that Preferred Merchants Solutions didn’t control any Rex Venture Group assets. Preferred Merchants controlled $17.4 million in Rex Venture Group assets. During the trial, Meyer confessed to wiring $4.8 million to a brokerage account from a Rex Venture trust account when he heard about the investigation.
Legitimate multi-level marketing pays commissions to users each time they sell one of the company’s products. They are also rewarded for the sales their recruits make. In contrast, a Ponzi scheme pays users based on how many people they recruit and sales to those recruits. The business model of a Ponzi scheme is designed in a way that people at the top of the pyramid benefit most while the majority lose out. As you look for a good MLM company to join, be careful that it’s not a Ponzi scheme in disguise. Not all victims are lucky enough to receive their money back.
Assuming Paul Burks is found guilty, ZeekRewards’s Ponzi scheme will go down as one of the biggest Ponzi schemes in the United States with almost $1 billion stolen from 1,000,000+ victims. You would think such a scheme would have lasted for a few years to hit such numbers, but ZeekRewards didn’t make it to the 2-year mark before being shut down.
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