The Investment Scientist

ZeekRewards victimized a client of mine

Posted on: August 27, 2012

Was ZeekRewards a pyramid scheme?

A month ago, I paid a regular visit to a dentist client of mine. He excitedly told me about a new business opportunity he was engaged in: a penny auction site. He and his wife excitedly talked for about 30 minutes, and I still couldn’t quite understand what business it was – and I thought I was a reasonably smart guy.

While I was there, my client was busy calling his friends to recruit them. In the end, he told me he gave ZeekRewards $20,000 and just watched his money grow 3% every day! All he needed to do was post some links. This was such an easy way of making money that he wanted to let all his friends know.

That immediately raised a red flag in my mind: if something sounds too good to be true, it usually is. However, they were so excited I did not want to rain on their parade. Instead, I told them I would take the material to read. If it was as good as it sounded, I might put some money in myself.

I went home and began to investigate the company. I became quite alarmed, and I sent my client this email:

I did some research about ZeekRewards, I suggest you don’t put your good name out there to promote the business, since it is at best a gamble and at worst a scam.

Like you said, Zeekler.com is a penny auction site, where a bidder could potentially buy a $600 iPad for $60. But for the price to get to $60, there have to be 6000 individual bids; each person has to pay $0.65, so the site makes $3900. Of course, when somebody makes this kind of money, someone else has to lose. Who loses? Those people who bid but did not win.

Their affiliate program is designed to get all of you to help drive traffic to the site, so more people could be losers. 

The company that set up Zeekler.com and ZeekRewards is called Rex Venture, LLC. They did not even print their address on their promotional material. I was able to look it up; it is 121 W Center St, Lexington, NC 27292. 

Using Google Street View, I was able to see that their worldwide headquarters is in a residential house, with a FOR SALE sign out front. Is the owner of the house ready to the take the money and run?

Being your financial advisor, I am duty bound to discharge prudent advice. If you have already thrown them $20,000, so be it. But you should not put your good name at risk to promote their business.

Recently, I read that ZeekRewards is being investigated by the Securities and Exchange Commission as a pyramid scheme. At the same time, I got an email from my client that simply said:

Michael, I lost all $20k; I should have consulted you earlier.

Get my white paper: The Informed Investor: 5 Key Concepts for Financial Success.

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Author

Michael Zhuang is principal of MZ Capital, a fee-only independent advisory firm based in Washington, DC. He is also a regular contributor to Morningstar Advisor and Physicians Practice. To explore a long-term wealth advisory relationship, schedule a discovery meeting (phone call) with him.



You may also get his monthly newsletter, or join his Facebook page for regular wealth management insights. Michael's email is info[at]mzcap.com.

Twitter: @mzhuang

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