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SEC Accuses Atlanta Marketing Company Zhunrize and CEO Jeff Pan of Running a $100m Pyramid Scheme

One week ago today, the U.S. Securities and Exchange Commission filed a civil injunctive action in the Northern District of Georgia against Atlanta-based marketing company Zhunrize, Inc. In the complaint, the SEC accuses Zhunrize and its CEO Jeff Pan of running a pyramid scheme that generated over $100 million.

In addition to the complaint, the SEC also filed a temporary restraining order against the defendants and froze their assets to prevent the alleged investment abuses from persisting.

Zhunrize members allegedly generate commission by recruiting new members. Since 2012, the SEC reports that Zhunrize has solicited near 77,000 investors and generated approximately $105 million.

The SEC accuses the marketing company of deceiving investors by describing its model as "sustainable" and claiming that Zhunrize has the resources necessary to "reach millions of new customers each month."

Another accusation is that Zhunrize failed to disclose that a majority of its revenue didn't come from its products or services, but from signing up new members.

According to the SEC press release:

Indeed, both Pan and a Zhunrize vice-president testified that the company currently derives 80-90% of its revenue from selling online stores and the monthly internet hosting fees for them, as opposed to actual products from these stores. Thus, contrary to the representations to potential investors, Zhunrize is actually a fraudulent pyramid scheme.

To read the complaint that the SEC filed on September 22, 2014 in the U.S. District Court, Northern District of Georgia (Atlanta Division), click here.

Did you invest with Zhunrize Inc.? If you lost a substantial amount of money in this pyramid scheme, contact Investment Fraud Lawyer David Meyer of Meyer Wilson. Our firm's goal is to recover losses caused by investment misconduct, and to date, we have recovered millions.

The information contained in The Firm’s posts on its blog, fraud alerts, investigations or elsewhere on the site is based upon information obtained from other sources including, but not limited to, news outlets and federal, state, and regulatory agency filings. All suspects and subjects of postings herein are presumed innocent until proven guilty in a court of law or administrative action and any and all crimes are alleged until a court or regulatory agency finds otherwise .

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