Courtesy U.S. Security and Exchange Commission

Washington, D.C., Aug. 17, 2012 – The Securities and Exchange Commission today announced fraud charges and an emergency asset freeze to halt a $600 million Ponzi scheme on the verge of collapse. The emergency action assures that victims can recoup more of their money and potentially avoid devastating losses.

The SEC alleges that online marketer Paul Burks of Lexington, N.C. and his company Rex Venture Group have raised money from more than one million Internet customers nationwide and overseas through the website ZeekRewards.com, which they began in January 2011.

According to the SEC’s complaint filed in federal court in Charlotte, N.C., customers were offered several ways to earn money through the ZeekRewards program, two of which involved purchasing securities in the form of investment contracts. These securities offerings were not registered with the SEC as required under the federal securities laws.

The SEC alleges that investors were collectively promised up to 50 percent of the company’s daily net profits through a profit sharing system in which they accumulate rewards points that they can use for cash payouts. However, the website fraudulently conveyed the false impression that the company was extremely profitable when, in fact, the payouts to investors bore no relation to the company’s net profits. Most of ZeekRewards’ total revenues and the “net profits” paid to investors have been comprised of funds received from new investors in classic Ponzi scheme fashion.

“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 in the SEC’s Division of Enforcement. “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 alleges that the scheme is teetering on collapse with investor funds at risk of dissipation without its emergency enforcement action. Last month, ZeekRewards brought in approximately $162 million while total investor cash payouts were approximately $160 million. If customers continue to increasingly elect to receive cash payouts rather than reinvesting their money to reach higher levels of rewards points, ZeekRewards’ cash outflows would eventually exceed its total revenue.

Burks has agreed to settle the SEC’s charges against him without admitting or denying the allegations, and agreed to cooperate with a court-appointed receiver.

According to the SEC’s complaint, ZeekRewards has paid out nearly $375 million to investors to date and holds approximately $225 million in investor funds in 15 foreign and domestic financial institutions. Those funds will be frozen under the emergency asset freeze granted by the court at the SEC’s request. Meanwhile, Burks has personally siphoned several million dollars of investors’ funds while operating Rex Venture and ZeekRewards, and he distributed at least $1 million to family members. Burks has agreed to relinquish his interest in the company and its assets plus pay a $4 million penalty. Additionally, the court has appointed a receiver to collect, marshal, manage and distribute remaining assets for return to harmed investors.

The SEC’s investigation was conducted by Brian M. Privor and Alfred C. Tierney in the SEC’s Enforcement Division in Washington D.C. The SEC acknowledges the assistance of the Quebec Autorite des Marches Financiers and the Ontario Securities Commission.

SEC Shuts Down $600 Million Online Pyramid and Ponzi Scheme.

Don’t forget to support the State Bank of Southern Utah Blood Drive!  Enter for a chance to win prizes!

Monday, August 20, 2012

9:30 AM to 4:30 PM.

A new survey by the American Bankers Association shows that for the second year in a row, most bank customers (36 percent) prefer to do their banking online compared to any other method.

The survey tells us that more consumers prefer the speed and convenience of conducting their banking transactions on the Internet.  It also tells us that consumers now have confidence in the accuracy and security of online banking.

Survey results showed that the popularity of online banking was not exclusive to the youngest consumers:  it was the preferred banking method for all bank customers under the age of 55.  Consumers over 55 still prefer to visit their local branch (33 percent).  Online banking for this age group was the second favorite way to conduct banking transactions (20 percent).

Among all consumers, the preference for online banking was followed by visiting branches (25 percent), and using ATMs (15 percent).  The use of mobile banking (cell phones, PDAs, etc.) was preferred by three percent of consumers, primarily among 18 to 34 year olds.  The popularity of ATMs was down in all age groups.

Online banking may now be the most preferred method of banking but we are committed to providing the best customer service to all consumers. State Bank will continue to provide the best service, whether online or in-person. Our job is to make banking convenient.

The annual survey of more than 1,000 consumers was conducted for ABA by Ipsos-Public Affairs, an independent market research firm.