August 18, 2012 -- On Friday, The Securities and Exchange Commission shut down Zeek Rewards and its parent company, Rex Venture Group, filing a complaint in federal court in Charlotte and freezing the approximately $225 million in investor funds in the company's bank accounts.
According to the SEC's complaint, Zeek Rewards affiliates were offered the oppportunity to make money by purchasing securities in the form of investment contracts. These securities were not registered with the SEC as required by federal law. Zeek Rewards affiliates were collectively promised as much as 50% of the company's daily net profits through a system in which they accumulated rewards points that could be exchanged for cash payouts. The SEC complaint alleges that these profit-sharing payouts to affiliates (referred to as investors by the SEC) did not come from the company's profits at all but instead came from the funds of new investors. The SEC also stated that Zeek Rewards' obligations to investors exceeded its cash on hand, which prompted the emergency closure of the company and freezing of its assets.
The SEC has also accused Rex Venture Group head Paul Burks of siphoning off millions in investor funds for himself and members of his family. Burks has agreed to settle the SEC case and relinquish his interest in the firm and its assets, plus pay a $4 million penalty. The SEC can only pursue civil charges against Burks, but he could still face criminal charges from other investigations.
A receiver has been appointed to collect and distribute Rex Venture Group's remaining assets to affected investors.
