Maybe you’ve heard of Zeek Rewards. It’s a penny auction site that *was* based out of Lexington, NC. They would flaunt 1.5% DAILY returns on your investment if you help invest in the growth of the company by investing from $1,000 to $10,000. “Wow, 1.5% DAILY on $10,000?!? That would be AMAZING and I could be a millionaire in no time, especially if I keep investing” is probably what you, as well as many, many other thought. Then your next thought would be “sounds to good to be true,” right?
As of August 17th 2012, it was proven that it was too good to be true. The SEC (Securities Exchange Commission) filed an emergency junction to halt business immediately to protect the public. As of this morning (Monday, August 20th) it is estimated to be a $600 Million Ponzi scheme, with over 1 million investors.
You may remember that Bernie Madoff is in Butner consecutive lifetime sentences for the largest Ponzi scheme in history at roughly $68 BILLION. His ponzi scheme “only” effected a few thousand. Because people did not need large dollar amounts to invest the Zeek Rewards scheme quickly effected more people.
What is a Ponzi Scheme?
I think of it as “borrowing” from Peter to pay Paul and when Peter wants his money then “borrow” from Penny and then the borrowing just keeps going. For this example Paul would invest $10,000 into Zeek Rewards. When he would advertise about the penny site and get more people to use the penny site he felt as if he was contributing to the growth of the company and his online account would show $10,000 increasing by 1.5% a day. Paul tells his friend Peter what an AMAZING investment he has and knows his Peter wants the same kind of returns. Peter sees Paul’s account and wants in so he also invests $10,000. The online account shows that you have to be invested a certain amount of time (6 months I think) before you can withdrawal your investment. But if you’re making 1.5% DAILY, why would you take anything out? Wouldn’t you want to make it grow that much faster? Peter tells his girlfriend Penny and she’s skeptical, but trusts Peter who has been doing this for a few months now and decides to invest.
Now you can see how quickly this can get out of hand with multiple investors.
Who’s to blame?
Paul & Peter did nothing wrong. They felt and “saw” that their investment was working hard for them. Remember that it was just a website that would show a digital number. There was nothing physical they could hold until they withdrew their money, and for many, why would they want it not to grow so fast? When they find out they were doped in a Ponzi Scheme they are more than likely going to feel absolutely guilty for telling their friends to invest along side of them.
Some people did their due diligence and looked into the company and did not invest. Some trusting souls were guided by misguided friends, but should not take it out on those friends. They were fooled just like a million other people.
What lessons can we learn from this?
Always do your homework and ask for different opinions. Even if you don’t have a personal financial planner ask friends if they have one and ask a professional. I personally had 5 people ask about it and even before this happened I strongly suggested that they do not invest because it does sound too good to be true.
Check out this Forbes article for the full story
If you or someone you know were an “investor” into Zeek Rewards, please reach out I would love to chat and see if there is anyway I can help. No one knows yet if investors will be able to recoup the money they invested, but I’m crossing my fingers for all of them.
What are your thoughts on the issue?
If you have a personal story I would love to hear it in the comments below.
