WASHINGTON, Aug. 18 (UPI) -- U.S. bank regulators have charged Internet company ZeekRewards.com is, in fact, a Ponzi scheme that is close to financial failure.
The Securities and Exchange Commission said the company was run "in classic Ponzi scheme fashion."
"The obligations to investors drastically exceed the company's cash on hand, which is why we need to step in quickly, salvage whatever funds remain and ensure an orderly and fair payout to investors," the agency said in a statement.
CNNMoney.com reported Saturday ZeekRewards began in early 2011 and already had 1 million investors who were told they would share in company profits.
Ponzi schemes, however, are companies that often don't have any profits at all. Sometimes they make modest attempts to look legitimate, but the schemes rely on using money from new investors to pay off older ones.
The Wall Street Journal reported Saturday the company was accused of duping investors out of $600 million and that Rex Venture Group founder Paul Burks of Lexington, N.C., which owns ZeekRewards.com, agreed to pay a $4 million fine and give up his interest in the company to settle the case against him.
Burks did not have to admit to any wrongdoing, the Journal said.