DAVIDSON COUNTY — Ten years ago an online business operating from a nondescript office in Davidson County offered customers financial returns that seemed too good to be true.
Zeek Rewards operated what remains the largest scam ever dealt with by the Better Business Bureau of Central and Northwest N.C., said Lechelle Yates, director of communications for the regional branch. In fact, federal officials said it was one of the largest Ponzi schemes ever.
A court-appointed receiver filed a series of actions in the U.S. District Court for the Western District of North Carolina to try to recover more than $800 million that investors lost.
This past May, the receivership posted its final report before the civil case was closed. The receiver ended up returning $371 million.
Retired Davidson County small business owner and former state legislator Hugh Holliman saw the Zeek Rewards financial frenzy play out front and center. Holliman had numerous friends and business associates who touted Zeek Rewards as an investment, but he found the situation troubling.
Holliman spent 27 years running Speed Printing in Lexington before retiring in 2013. He knew first-hand about the hard work it took to make a respectable profit and was wary of the lavish returns Zeek Rewards promised.
“A lot of people lost money,” Holliman told The High Point Enterprise. “It’s not something they really want to talk about, to be recognized for that.”
Many of the investors, who were called affiliates, who lost money were people who couldn’t afford to endure a big financial setback, Holliman said.
Zeek Rewards reeled in customers for about two years through its internet promotions of multilevel marketing and auctions, promising quick and hefty returns amid the hardship of the Great Recession.
All that came to an end on Aug. 17, 2012, when the U.S. Securities and Exchange Commission shut down Zeek Rewards while referring to it as a massive Ponzi scheme on the verge of collapse. Investigators said Zeek Rewards’ early investors were paid with money from later investors.
Eventually Zeek Rewards didn’t have enough new investors to keep paying earlier affiliates.
Court documents indicated that Zeek Rewards promised returns on investments of up to 125%, and leaders of the scheme simply made up profit percentage figures that they regularly provided to affiliates.
When Zeek Rewards imploded, more than 700,000 people from each U.S. state and more than 150 countries lost more than $800 million.
Court-appointed receiver Kenneth Bell, then a Charlotte attorney and now a federal judge, said at the time that Zeek Rewards would become one of the largest Ponzi schemes in U.S. history to go through receivership in the federal court system.
Zeek Rewards maintained a pervasive presence on the internet but kept a low profile locally. The business that lured in people from around the world operated from a small, innocuous office in Lexington adjacent to a coin-operated laundromat on W. Center Street near the interchange with Interstate 85 Business.
The first public hint that Zeek Rewards wasn’t what it seemed came in early August 2012, when then-N.C. Attorney General Roy Cooper, now in his second term as governor, requested proof that Zeek Rewards was a legitimate business.
One week later, federal authorities shut down the operation.
Holliman said that to this day people he knows in the community won’t speak publicly about their experience. He knows of people who convinced employees or family members to invest.
Ten years later, Holliman said people should heed one overriding message from Zeek Rewards and the promise of fast money.
“Be very skeptical when you see these kinds of things popping up,” he said.
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