Some 77,000 investors worldwide bought into an Atlanta-based company that said it would be the next e-commerce giant. Now the sun has set on Zhunrize, which federal officials said was nothing more than a pyramid scheme. A judge last week ordered the company to shut down and to repay what the courts called its "ill-gotten gains." Zunrize had attracted $105 million from investors since it was founded in 2012, but the court order says it and CEO Jeff Pan, of Suwanee, are also on the hook for pre-judgment interest and civil penalties. The court later will determine the amounts.
Zhunrize (pronounced sunrise) billed itself as a legitimate multi-level marketing business. It told members that it could earn commissions by purchasing online stores and selling merchandise and by selling stores to other members, and Pan traveled to China and Korea to solicit investors. What it didn't tell them was that more than 98% of its revenue came from membership sales and the related monthly internet hosting fees - not from the sale of products. And what product sales that did take place were overall not profitable, the government alleged.
The court order freezes assets of Zhunrize and Pan and any entities owned by Pan that received investor funds. By the way, just months prior to founding Zhunrize, Pan had filed for bankruptcy, court records show. The filing shows he previously had an international consulting business with no assets and no value and an importing business, but that no product was ever imported or sold in the U.S.
