Real Penny Auction Scams

by admin on August 23, 2012

If you’ve been following us here at Beezid Scam, then you already know that penny auction sites like Beezid frequently get a bad rap…usually from people who don’t properly understand the business model and think it all sounds a little too good to be true.

Beezid Scam and sites like it exist to educate people on the facts: how penny auctions work, what the real risks are, and how people can use strategy to minimize those risks and be successful.

But that doesn’t mean there are no penny auction scams out there.

Case in point: just last Friday, the U.S. Securities and Exchange Commission brought fraud charges against Paul Burks, owner of penny auction site Zeekler, alleging that his company Rex Venture Group was running a $600 million Ponzi scheme.

For those unfamiliar, Zeekler offered a unique profit sharing system to its members through a sister site, ZeekRewards. Members could invest money and earn reward points redeemable for cash payouts. Theoretically, investors were entitled to up to 50% of the company’s daily profits.

This system, however, turned out to be a Ponzi scheme: the company massively misrepresented its value, with virtually all returns paid out to investors coming not from company profits, but from new investors wanting to buy into the program.

Schemes like this are ultimately unsustainable, because as more and more investors participate, ever larger amounts of money are needed to meet obligations to them. When the company can no longer bring in enough new investors to pay the current ones, the whole scheme collapses.

And this is what nearly happened with ZeekRewards. Last month, the company made $162 million while paying out $160 million to investors—outflow that could easily exceed revenue if investors continued to redeem reward points for cash payouts rather than reinvesting their money.

“ZeekRewards misused the power of the Internet and lured investors by making them believe they were getting an opportunity to cash in on the next big thing,” said Stephen Cohen, of the SEC’s Division of Enforcement. “In reality, their cash was just going to the earlier investor.”

As a result, the SEC has frozen nearly $225 million in investor funds under an emergency asset freeze granted by a federal court in Charlotte, North Carolina.

As part of a settlement—in which he has neither denied nor admitted to the charges—Burks has agreed to pay a $4 million penalty and cooperate with a court-appointed receiver to ensure that ZeekRewards’ remaining assets are properly managed and distributed to investors.

The moral of the story, as we’ve said before, is that you always need to be informed before you start spending money.

Penny auctions are an amazing opportunity to save, and there are legit sites out there—Beezid, BidCactus, Quibids, and others. But you need to do your homework and know what you’re getting into first.

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If one thing can be said about human being’s it’s that we worry a lot.

It’s our “fight or flight” instinct, ultimately. It’s very easy for us to experience fear, especially when faced with the unknown, or with something we don’t understand fully. Whenever something feels out of our control, we tend to worry about the possible outcomes.

Examples of this are numerous throughout history. Consider, for instance, Orson Wellles’ infamous radio broadcast of War of the Worlds, which people mistook for actual news reporting. Mass hysteria ensued.

Or even consider popular stories, like the tale of Chicken Little. Struck with a pebble, Chicken Little believes the sky is falling, and stirs all the other birds into a panic. Unfortunately for them, the cunning fox knows just how to take advantage of their fear, and ends up eating all of them.

And when you hear people going on and on about how Beezid is a scam, you can be sure that a lot of the time it is this same instinct of fear at work.

The reality is, thousands of people have discovered a unique way to save money and have fun while shopping online. It’s no real secret. You can go on Beezid right this very minute and check out the Winner’s Circle there. You’ll see pages and pages of pictures of big Beezid winners and the amazing deals they scored.

It’s easy to fake testimonials when all you have is a few sentences signed by some guy named “Mark B.” As if “Mark B.” made something trustworthy just by putting his name and last initial on it.

But there’s no way to fake hundreds of unique photographs of users from so many walks of life. Because Beezid is truly open to everyone. It doesn’t take special skills or a certain level of education or having a lot of money to win huge at Beezid. All it takes is knowledge, strategy, and a little resolve.

Now, I know what you’re thinking. If you go on YouTube, you can find videos of other people, too…people who claim that Beezid is a scam. But watch those videos. What are they really saying?

“Beezid doesn’t deliver items!”

False! They say clearly on their website that they ship as quickly as possible, but in rare occasions it can take a little longer to arrive. I live in a remote area, so a few times it has taken a little longer than I wanted to get my winning items. But I have always gotten them.

“Beezid uses a timer to keep anyone from winning auctions!”

People who say this don’t know how penny auctions work. Period. The timer is like the auctioneer at a live auction, who “counts down” the moments in which bidders are allowed to keep bidding. Without the timer, auctions would just go on forever, and nobody would win. When it resets, all that means is that someone else has placed a bid.

“There are bots placing bids! Beezid has employees place bids, too! No one can win!”

Wrong, wrong, and wrong.

Other penny auction sites have been shut down for doing these very things. And there’s a simple reason why: it’s ultimately easy to tell when a site employs such methods. And since that amounts to flat out fraud, it’s no surprise the site owners get busted hard.

But Beezid has been in business for several years now. They have advertisements all over TV, the radio, and the Internet, as well as numerous celebrities who endorse them.

You just don’t get that strong and keep growing stronger when you’re engaged in cheap, shady scam tactics. Period.

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Can I Win On Beezid?

February 6, 2012

With so much talk about a Beezid scam, there are a lot of people who are asking the same question: “Can I win on Beezid?” And the answer that I give is always a resounding “Yes!” Not only can anyone win on Beezid, but from my experience, they are making it very easy for you [...]

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The Truth About Beezid’s “Pre-Game Blitz”

February 3, 2012

I’ve said it before: if you’re looking for proof that Beezid is a scam, then look for ways in which they’re making a fast buck without offering any real value. Which is pretty hard to do, considering how much money they just give away. Case in point: Beezid’s Pre-Game Blitz, which starts less than 24 [...]

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Beezid Lures New Members With Free Bids

February 1, 2012

If you’re still wondering whether or not Beezid is a scam, one of the best ways is, quite simply, to win something and have it delivered to you. That is just the easiest way to alleviate your fears. The best way to win that item is either with your free bids, or during a risk-free [...]

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How Is Beezid Still Up?

January 19, 2012

I was doing some Google searching to look for what people are saying about Beezid lately, and have found so many people who say that Beezid is a scam. Unfortunately, they seem to have been misled by others, or were completely unable to grasp the concept of Beezid…or how they can use it to their [...]

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How Not To Get Scammed On Beezid

January 13, 2012

One of the reasons why people feel like they have been scammed by Beezid or other similar sites is that they were not able to win anything. What people need to understand is that on a penny auction site, much like in life, one does not always win. Yet, just like in real life, if [...]

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800 Auctions A Day? Are You Kidding?

January 12, 2012

According to a press release I read last week, Beezid has now upped its auction schedule to 800 auctions a day. This is insane! Why? Because I’m looking at their listing of closed auctions right now and I’m seeing that many many of the recent auctions have closed with final prices of less than one [...]

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BBB Says Penny Auctions A Scam

January 9, 2012

I have to say, I’m a bit confused by the Better Business Bureau. They’re confusing in general, as they seem to change their minds about certain businesses regularly (depending on how much the business in question has contributed to its membership). But that’s another story. For now, let’s take a look at the BBB’s “biggest [...]

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Strategy: Does It Really Work?

January 3, 2012

If you have spent any time investigating all the rumors surrounding Beezid–and if you’re here on this blog reading, you almost certainly have–then you will no doubt be familiar with the claims that winning on Beezid is “all about strategy.” That it’s not just about bidding the last, but bidding the smartest. That coming up [...]

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