Gov't calls website a pyramid scheme
HOUSTON (KTRK) -- A penny auction website is coming under fire from the federal government. The Security and Exchange Commission claims Zeek Rewards is a pyramid scheme, and now investors want their money back.
The government says Zeek Rewards is one of the largest pyramid schemes in history, but the company says it is a legitimate business and is vowing to fight those claims.
There's not much left of the Zeek Rewards website -- just a note that saying the site is not available and more informational will be posted shortly. The reason the screen is mostly blank is that the company has been put into receivership, and its assets have been frozen. The government says Zeek Rewards is a giant pyramid scheme.
Earlier this month Zeek Rewards was being pitched to Houstonians inside a business center in west Houston. Officials say as many as 70 people a week would come to learn about Zeek Rewards. Now some of those who paid money to the company want it back.
Monica Russo with the Houston Better Business Bureau said, "The company is based in North Carolina and that BBB has received over 300 investors from across the nation."
We've learned local residents have paid the company thousands of dollars. Besides buying bids, the investors advertised Zeek Rewards and got paid to bring new clients to the website.
The Security and Exchange Commission says Zeek paid established investors by using money brought in by new clients, in what the SEC calls classic Ponzi scheme fashion.
Those who earned money from the site could be forced to give some of it back to the court-appointed receiver.
"The receiver has the power to go back and possibly retrieve some of those funds beyond their original investment," said Houston CPA Bob Martin.
The company plans to fight the government's allegations saying in a recorded conference call to investors, "We want to vindicate our name." They added, "This was a legitimate business model and that the government has it wrong."
We spoke to a pair of Houston area Zeek investors who did not want to go on camera. One used her credit card company to stop payments to Zeek Rewards and the other is asking for nearly $1,000 back she sent to the company just days before Zeek Rewards went into receivership
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