By marrying online shopping with social media, Atlanta-based Zhunrize told investors that by 2020 it could acquire 500 million customers and $10 billion in sales for their online stores, court documents say. In a YouTube video, a co-founder says that Zhunrize (pronounced Sunrise) “will be the next e-commerce giant for saving customers money on products and services that they’re using every day and for products and services they can’t find anywhere else, other than through Zhunrize.”
But federal authorities allege that the multi-level marketing company is a pyramid scheme that has raked in $105 million from investors worldwide since it started less than two years ago. In a lawsuit filed Monday in federal court here, the Securities and Exchange Commission contends that more than 98% of the company’s revenue comes from the sale of memberships and monthly internet hosting fees – not from the sale of products. “The lucrative returns paid to investors come from fees paid by other investors,” the agency alleges.
Also named as a defendant in the case is CEO Jeff Pan, of Suwanee. The civil suit accuses him and the company of three counts of fraud and of offering unregistered securities. SEC has asked the court to freeze the company’s assets and order it and Pan to provide an accounting of investor funds. The company has not filed a response to the suit