Suspected Ponzi scheme mastermind due in court
The alleged mastermind of what prosecutors are describing as one of the largest Ponzi scheme in U.S. history appears in federal court in Charlotte on Thursday to face an array of charges.
Paul Burks, 67, of Lexington, a former nursing home magician and country music disc jockey, is accused of an online investment scheme that ran up hundreds of millions of dollars in losses for victims in Charlotte, across North Carolina and around the world.
The numbers are staggering.
In just 20 months, Burks’ company ZeekRewards attracted about 840,000 investors from more than 150 countries. About 50,000 of the victims lived in North Carolina; 1,500 came from Charlotte.
Their losses: more than $800 million.
Based on its number of victims, ZeekRewards is the largest Ponzi scheme on record, says Charlotte attorney Ken Bell, who was appointed by the court to recover money for the bilked investors.
“It’s the power of the Internet,” said Bell, a former federal prosecutor.
Thursday morning, Burks will be arraigned on charges ranging from wire and mail fraud to conspiracy. He faces up to 65 years in prison and a $1 million fine.
Two of his assistants have already pleaded guilty to related charges and await sentencing.
Other recent Ponzi cases
Burks’ indictment last month capped off a rash of Ponzi schemes throughout the state. Most operate the same way: First, they promise high rates of return attributed to some novel product or service; operators then use the new investments to pay the old investors’ dividends.
Last December, federal investigators charged Daniel Williford of Statesville with defrauding more than 200 investors of $44 million.
In September, U.S. Attorney Anne Tompkins’ office sentenced three hedge fund managers connected with the $40 million “Black Diamond” investment scheme. The mastermind, Keith Simmons of Ashe County, was sentenced in 2012 to 50 years in prison and ordered to pay $35 million in restitution for what prosecutors described at the time as the worst financial crime in memory for this part of the state.
In all, the Secret Service has investigated up to 15 Ponzi schemes operating in North Carolina this year, said Glen Kessler, assistant special agent in charge.
“The Secret Service is seeing more of these types of cases every year,” Kessler said. “The Charlotte Field Office has cases that range from gold investment out of California to fake coal mining investments out of Tennessee.”
The missing millions
Burks’ group, according to Bell, offered returns of more than 1 percent a day for investments into sham penny auctions. During regularly scheduled “Red Carpet Events,” victims were wowed by reports of massive profits, documents say.
By August 2012, Burks was telling his investors that he had $2.8 billion in assets. The actual amount was slightly more than 10 percent of that, prosecutors say.
According to his indictment, Burks pocketed more than $10 million.
Meanwhile, the search for the money continues. Bell says investigators have recovered $320 million so far and have sued 9,000 people to collect about $200 million more.
Bell says he has also sued lawyers who advised Burks and his assistants. Investigators also are targeting some of the financial institutions involved.
Authorities could not say if the apparent uptick in Ponzi schemes is tied to the uncertain economic times, when many salaries are frozen and saving accounts and other traditional investments offer little return.
Kessler, based in Charlotte, said the Secret Service often learns about the cases the same way:
“One person, one consumer comes into our office and says, ‘Can you look at this paperwork? I think I’ve invested in something that’s too good to be true.’ ”
This story was originally published November 12, 2014 at 7:03 PM with the headline "Suspected Ponzi scheme mastermind due in court."