By Jonathan Stempel and Basil Katz

(Reuters) - The U.S. Securities and Exchange Commission said it shut down a $600 million online Ponzi scheme on the verge of collapse and won a court ordered emergency asset freeze to protect some of the more than 1 million investors it had attracted.

ZeekRewards.com, created in January 2011 by Paul Burks and touted as a "private, invitation only, affiliate advertising division" of penny auction website Zeekler.com, promised investors up to 50 percent of "daily net profits" through a system based on rewards points, the SEC said.

The regulator said this created a false impression of "extreme" profitability, when in reality 98 percent of revenue and so-called net profits paid to earlier investors came from newer investors.

U.S. District Judge Graham Mullen in Charlotte, North Carolina issued an emergency freeze on Friday on the $225 million of investor funds that ZeekRewards still holds at 15 U.S. and non-U.S. financial institutions, and which were at "imminent" risk, court records show.

The SEC said Burks, 65, lives in Lexington, North Carolina, and is the sole owner of co-defendant Rex Venture Group LLC, which controls ZeekRewards and Zeekler.

Burks agreed to settle without admitting wrongdoing and agreed to cooperate with a court-appointed receiver, the SEC said.

Noell Tin, one of the lawyers for the defendants, declined to comment.

According to the SEC, ZeekRewards took in $162 million last month while investor cash payouts totaled $160 million.

It said that, if more customers chose to receive cash payouts rather than reinvest to boost rewards points, ZeekRewards' cash outflows would eventually exceed total revenue.

"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," Stephen Cohen, an associate SEC enforcement director, said in a statement.

"The obligations to investors drastically exceed the company's cash on hand, which is why we need to step in quickly, salvage whatever funds remain and ensure an orderly and fair payout to investors."

The case is SEC v. Rex Venture Group LLC, U.S. District Court, Western District of North Carolina, No. 12-00519.

(Reporting By Jonathan Stempel and Basil Katz in New York. Editing by Andre Grenon)