I come into today's blog post with mixed emotions.
There's a part of me that is overjoyed that the mighty Zeek penny auction empire, headquartered right here in little ol' Lexington, has crumbled under its own weight (with a little help from the Security and Exchange Commission, the Federal Trade Commission, the FBI, the Better Business Bureau and the North Carolina Attorney General's Office).
On the other hand, a fair number of my friends, some of whom urged me to join in the apparently get-rich-quick program, were participants in what has allegedly turned out to be a massive global Ponzi-slash-pyramid scheme and stand to lose small to large amounts of money. (Some folks might get reimbursed for their losses from the receivership, but larger cash rewards recipients might suffer clawback, which really means payback. Don't spend your Zeek earnings yet.) I feel badly because I don't want my friends to be hurt, even though I do feel a need to suppress the urge to scold them and make them stand in a corner for an hour. Or a week. A Zeek week.
Massive? Zeek's assets were said to be something like $600 million, which is peanuts compared to financier Bernie Madoff's famous $65 billion theft back in 2009. But Zeek (where did that name come from anyway, and what does it mean?) reportedly involved more than a million people worldwide, making it perhaps the biggest encompassing Ponzi scheme ever, if not one of the largest.
Oh my. In the 35 years I've lived here, Lexington has been put on the national map by the kissing first grader (see here), former Sheriff Gerald Hege and his pink jail and Spider car, and now the world's biggest Ponzi scandal. Kinda brings a tear to the eye, doesn't it? Well, we do have the Barbecue Festival...
Let me say right here, before I go any further, that I did not join Zeek. I was told long ago that if something sounds too good to be true, it probably is. That old saw is going to be bounced around a lot in the next few weeks, as it should be because no adage has ever been worth more than it is now. In the list of maxims, it should be classified "1-A" right under the Golden Rule (which, curiously, seem somehow connected to each other right now).
The scheme allegedly designed by Zeek owner/operator Paul Burks is complicated. Even after reading about it in The Dispatch (see here), it's still a little beyond me. Which was another reason not to join. Complication, knot-tying, and misdirection are all Ponzi red flags. If you don't understand it, or even if you think you do, it's best not to join it. But a lot of people did.
(The Dispatch, of which I served as a sports writer/editor for 30 years, has done an outstanding job reporting this fiasco. Although it didn't break the story, once it was handed the ball it ran with it, moreso than any other media outlet in the Piedmont. Reporter Nash Dunn has been superlative and his writing has been crisp, extremely readable and informative. This goes way beyond what you expect from a small community newspaper. Well done, Dispatch).
While I feel badly for my friends who were involved, and a little embarrassed that this whole thing has been hatched right here in Davidson County, I am more than a little put off by the continued Zeek defenders who seem to think the program was untouchable. Just glance at all the reader comments at the end of nearly any online story about Zeek's troubles. Holy smokes.
When the NC AG first confirmed that Zeek was being investigated for fraud, many Zeekers welcomed this because surely the office would find Zeek to be legitimate. When the SEC stepped in and closed the doors, charging that it was a Ponzi and a pyramid, and that Burks allegedly skimmed millions for his personal use, the yammering began: the SEC is corrupt, the BBB is corrupt, your mother is corrupt, this is another instance of too much government intrusion and it's another government conspiracy to keep you from being wealthy, that Social Security and Medicare are Ponzi schemes and why not investigate them (SS is not, see here), ad nauseum. The Zeekers' arrogance is both amusing and disturbing.
Any pyramid scheme is destined to fall eventually. Some people will make money off them, but it's money coming from those following behind. Eventually, people do get hurt. The trick, I guess, is to know when it's a pyramid in the first place. That indicator usually happens when you're encouraged to bring in others behind you. Another clue is that if all the money to be made sounds too good to be true in the first place.
My corrupt mother told me this years ago. I'm glad I listened.