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TheStreet Open House

Authorities: $600M Scheme Incubated In NC Town

"We started getting a lot of complaints," he said.

In August, a North Carolina employees' credit union warned customers not to invest in ZeekRewards because it was a "fraudulent company."

But regulators received complaints long before then.

In a Nov. 23, 2011, complaint filed with the North Carolina Attorney General's office, Wayne Tidderington of Florida called ZeekRewards an "illegal" Ponzi scheme. He said a relative had invested $8,000 and the company guaranteed a return of 125 percent every 90 days.

The attorney general's office can ask a judge to shut down a business because of deceptive trade practices. But it forwarded Tidderington's complaint to the secretary of state's office because it looked like it might involve securities. The secretary of state's office, however, declined to take action because it didn't believe it had the jurisdiction, spokeswoman Liz Proctor said.

The complaint died.

"I put it all together," Tidderington told the AP. "I gave them the roadmap. I said, 'Here's a snake. Here's the gun. Here's the bullets. Shoot the snake.' But they ignored me."

Over the next seven months, the attorney general's office received nearly a dozen more complaints.

But it wasn't until July 6 that it issued an order giving Burks until the end of the month to turn over all Zeek-related documents. He missed that deadline.

Kevin Anderson, senior deputy attorney general for consumer protection, insisted his agency correctly handled the case, saying his office receives thousands of complaints a year.

"We have to have more concrete evidence than a couple of consumer complaints before we go to court," he said.

Securities complaints from consumers are entered into a national database, which the SEC can access. The database would have included Tidderington's complaint.

The SEC said it opened an investigation in March.

SEC spokeswoman Christina D'Amico declined to comment on the investigation, except to say the agency took action "as soon as we believed we had sufficient evidence to obtain an emergency court order to halt the fraud."

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