MLM / Chain Money
Finally, MCA sets up special task force under SFIO to probe MLM menace

After keeping mum for all these years the MCA has finally decided to hand over the probe of chit-fund, MLM, Ponzi and pyramid schemes to a special task force under the SFIO

After the collapse of Saradha group, the ministry of corporate affairs (MCA) in a face saving measure has decided to hand over probe of such chit-fund, MLM, Ponzi and pyramid scheme operators to Serious Fraud Investigations Office (SFIO).

 

“…in view of the larger public interest involved in these cases, and concerns regarding misuse/ laundering by such companies of the ill-gotten wealth, and the possibility that the promoters of these companies may strip these companies, it has been decided by the MCA to set up a Special Task Force in the SFIO to investigate the affairs of such companies. Accordingly, all investigations into such companies are being entrusted to SFIO with immediate effect,” the ministry said in a release.

 

The ministry said the probe has been ordered in view of a larger public interest involved in the issues, although the state governments are the appropriate authorities for regulation of such chit fund companies and schemes under the Chit Fund Act, 1982.

 

Moneylife has been continuously writing about the inaction by government and regulators regarding MLM companies, money circulation schemes, pyramid-marketing schemes and other similar companies that swindle the unwary public by offering them misleading inducements and depriving them of their hard-earned savings.

 

Here are some of the important stories written and representations made by Moneylife over the years…

 

Moneylife Foundation’s representation to PM, FM and RBI on MLM schemes

In May 2011, following the exposé by Moneylife on Speak Asia Online Pte Ltd and its MLM scheme, Moneylife Foundation sent a representation to prime minister Dr Manmohan Singh, (the then) finance minister Pranab Mukherjee, finance secretary Sushama Nath and Reserve Bank of India (RBI) governor D Subbarao urging them to ban all MLM companies and their schemes in the country, or to bring all MLM companies under the regulation of either the RBI or the Securities and Exchange Board of India (SEBI), to stop them ensnaring gullible people.

 

West Bengal’s ‘chit fund’ mess and inaction of MCA

The massive money, which is raised surely shows somewhere on the balance sheet of the company, filed regularly with the MCA. The primary recipient of the information about these companies is the MCA, and surprisingly the MCA is the least proactive in the entire process of bringing these perpetrators to regulatory focus, sooner before tonnes of money vanish.

 

Chain Game

Dubious pyramid schemes or money-circulation schemes are looting Indians across economic strata, finds Sucheta Dalal. This will continue since Central and state governments seem unconcerned.

 

Pyramid schemes: Daylight robbery

Pyramid marketing companies are looting the public easily, while the government watches. Many countries have banned them outright.

 

Ponzi Scheme: Is RBI Passing the Buck?

A strange deposit scheme that is proliferating in the states of Orissa, Chhattisgarh, Karnataka and Maharashtra has already collected almost Rs1,000 crore and is expanding virtually unchecked. The scam has elements of money-laundering and possibly the use of fake and forged currency as well; however, the banking regulator would like to pass off the investigation to the respective state governments for investigation under the antiquated Prize Chits and Money Circulation Schemes (Banning) Act.

 

Coin Game

An international network marketing scheme hawking expensive limited edition coins is attracting a huge following. Sucheta Dalal examines this strange quest.

 

Ponzi schemes: Free for all

Moneylife readers know how MLM schemes ensnare lakhs of people by promising extraordinary returns. We learn from the ministry of consumer affairs that the government is now waking up to the need for better regulation of MLMs and ponzis. At the same time, the powerful Direct Selling Association of the US is lobbying hard for an amendment.

 

‘Beware of deception by pyramid schemes, MLMs trying to lure people with promise of high returns’

Pyramids are pure fraud. Their business is unsustainable-they promise payment for goods or services of dubious value. The hallmark of these schemes is the promise of sky-high returns in a short period of time, for doing nothing other than simply handing over your money to them, and getting others to do the same.

 

Ponzi schemes: The fraudulent art of chain game

Even as India bans pyramid schemes under a statute called the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, the country continues to be a happy hunting ground for pyramids because our legislation is deliberately unworkable.

 

Dubious Ponzi & MLM Schemes

Investors losing money, or falling for dubious Ponzi schemes, is not a recent phenomenon; this has been happening for decades and it is not restricted only to India. Why is it that people repeatedly fall prey to such schemes in spite of being aware of the frauds perpetrated by conmen under different guises?

 

Set up inter-departmental group to curb MLMs

EAS Sarma, former power and finance secretary, said the ministry of finance, Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), and the investigating agencies should collectively tackle this problem without any delay, as every day of procrastination will only result in thousands of hapless families cheated by the promoters of these schemes.

 

How MLMs wave an annulled letter to claim legitimacy of their operations and con people

Spokespersons and dealers of multi-level marketing (MLM) schemes or network marketing schemes respond to questions about their legitimacy by brandishing a 2003 letter issued by the then secretary, ministry of corporate affairs (MCA). What they omit to mention is that the letter was subsequently annulled following complaints about its misuse. This means, the letter used by these scamsters is no more valid.

 

Pyramid and MLM schemes are scourge on people

While there are existing laws such as Indian Penal Code (IPC), the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 (PCMCS Act) and others under which concerned agencies could prosecute the culprits, there is no effective mechanism in place to ensure a coordinated approach to identify the fraudulent operators in advance and book them well before they destroy the livelihoods of thousands of households and launder the ill-gotten funds to unknown destinations.

 

MLMs now want to ‘invest’ money in India, really?

A set of powerful MLMs, which are part of an exclusive closed club, called the Indian Direct Selling Association or IDSA (on the lines of the Direct Selling Association of the US) has been lobbying hard to make a distinction between their operations and those of others, who they call, fly-by-night operators such as SpeakAsia and Ad Magnet.

 

QNet, the MLM company, has no answers to Moneylife’s simple questions

QNet, the controversial Hong Kong-based multi-level marketing (MLM) operator with multiple names (GoldQuest, QuestNet, QNet, QI Ltd and QI group are the better known names) refused to answer simple questions like how much money their independent representative (IR) earns on an average every month and why their products are priced so highly. Instead, it sent us a threatening and defamatory mail that raises more questions as to their real motive.

 

2011: A year dedicated to MLM and Ponzi scheme frauds

If 2010 was the year of great Indian scams, 2011 was rather of ponzi and multi-level marketing (MLM) frauds. SpeakAsia managed to top the chart, but soon many others joined the bandwagon, duping gullible investors for several thousand crores.

 

How to avoid 'get-rich-quick' schemes and scams

Nothing comes free in this world, especially money. The universal truth is you need to earn your money by hard labour all the time and there are no shortcuts to double it in the shortest span of time. Therefore, even if your near and dear ones tell you he/she will double, triple, quadruple your money within a few days/months, politely reply to them that it is not possible and what they are advocating is a pure 'get-rich-quick' type of scam.

 

Herbalife is a pyramid scheme worth zero dollars: Bill Ackman

Herbalife, a global MLM scheme also prevalent in India, is believed to be worthless according to hedge fund manager Bill Ackman, who made a detailed presentation on why consumers should avoid buying the company’s products and stay away from the MLM.

User

COMMENTS

Dipakkumar J Shah

4 years ago

MCA search for MLM and all Chit Fund now. But fails to inquire in to a case where illegal provisions of profit entry in books of account , mere book entry of profit and paid dividend out of this profit. For last 18 years have been passed but no action in any part on any Directors ?? In tax Audit Report the same auditor as Tax Auditor excluded the same mere book entry of profit . This document is on record of Regional Director, M C A , Registrar of Companies , Official Liquidator!!! What kind of action they may take is very apparent and clear from all scams!! It is very well known to all How MCA department is working for compliance ? How the accounts are scrutinized by R O C ?
Shah D J

CA PRADEEP AGARWAL

4 years ago

Congress is an artist in deferring problems and minting money out of the same.

CA PRADEEP AGARWAL

4 years ago

Will enquiry be partialor a method to defer a problem.

CA PRADEEP AGARWAL

4 years ago

MR VKJ, Mr Virendra Jain, Mr Vinay Joshi etc. this is forum not to slug out but give your independent
opinion on topics being discussed.

V K JAIN

4 years ago

Sorry. My mail is addressed to Mr. Vinay Joshi and erroneously addressed to Mr.Pai.Inconvenience is regretted.

Virendra Jain

V K JAIN

4 years ago

Mr.Pai , it appears you are confused regarding Midas Touch Investors Association, its voluntary status and working and my association with it. It is a non-profit organisation, having its R.O. at Kanpur since inception, of which I am one of the founder and currently President also. My full name is Virendra Kumar Jain. The photograph you are referring to is of “Investor Helpline” office at New Delhi which was closed on completion of the project someimes during 2011. I fail to understand import of your statements in this regard.
I stand by my comments posted earlier regarding SFIO and do not wish to debate with you regarding their track-record or accountability/conduct of any of the ministries. Midas Touch takes up issues which it considers important and has the resources to do it. The rest does not relate to us. Frankly, i find such mails and their content a waste of time and big deterrent in participation in discussions.

Virendra Jain .

REPLY

Vinay Joshi

In Reply to V K JAIN 4 years ago

Dear Mr. Virendra Kumar Jain,

Noted.Thanx.

Regards,

CA PRADEEP AGARWAL

4 years ago

Actually the Govt. and its institutions have lost all confidence the public had in them. So they have to find out a way to bridge the gap.

V K JAIN

4 years ago

SFIO is merely an investigative department which can recommend action since it has no powers to take action on its own.
For expeditious action, post investigation by SFIO, it may be desirable to put a detailed action plan well in advance so that precious months/years are not wasted after the SFIO submits its report to the ministry/appropriate authorities.

Virendra Jain

REPLY

Vinay Joshi

In Reply to V K JAIN 4 years ago

Virendra K Jain.

I was closely associated with Mr.T. A Pai, if you know who he was & what he stood for.

You write as VKJ, Prez, the site shows different VJ with his photograph on PC, of Delhi, you were empanelled in Arnab's telecast as from Mumbai Prez.

Kindly clarify the same & as well answer why you've not answered my earlier posts to you.If not answered it amounts to no answers. No must! you can trash it including this.

The fundamental aspect you miss is that SFIO is under which ministry? What teeth can it have? Which ministry can initiate action under financial scam?

You're investors association Prez, [no idea of Delhi or Bombay - Midas!] CAN YOU NAME ONE SINGLE SFIO case who has got culprits to book? Even if, monies evaporated apart from foot soldiers no one hanged.

Center has no role to play, it's the states subject, with sufficient legal provisions to monitor the schemes.

When the state politicians with their clout bless the swindlers why you can't highlight it? You only come to know when swindled & then say 'the swindlers had political backing'!? What you & the administration was doing?

You have never ever raised your voice about 'credit societies'duping in Maharashtra. Have you? Have you got relief for them?

With more than 20/30kCR at stake, the WB proposed laws [Bill to be introduced on 30th]will have positive impact, if model a law other states should also immdly enact the same. The 2009 aborted bill is now retrieved. The new provisions will encompass MCA aspects also. Further it will be with retrospective effect.

Now the center can't be just a spectator.

On Friday, the finance ministry in its reply stated that 27 co's were probed from the real estate sector across the country.SEBI found nine entities not involved in CIS, 2 are probed, other being probed by different agencies. It has not stated the amount lost & people duped in numbers!

Await your reply if any?

Regards,

CA PRADEEP AGARWAL

In Reply to V K JAIN 4 years ago

ACTUALLY IF YOU SEE IT THE OTHER WAY, THE GOVT. WANTS TO LINGER IT FOR BARGAINING PURPOSES.

CA PRADEEP AGARWAL

4 years ago

ek chor ne doosre chor ko baton pakadaya, PUBLIC ACTUALLY HAVE LOST ALL CONFIDENCE IN THESE SO CALLED PROTECTORS, were they blind when these things were happening/going on-(What about AP in which MR NARAYAN MURTHY is involved) they have got so called local intelligence unit, what were they doing.

Investor

4 years ago

Fraudulent companies/ so called I'll and sick business group like rosevally,shardha and sahara, trying their best not to get new company bill passed in parliament by pocketing members of standing committee.

Not only this now shifted operations to multi state cooperative society to continue to loot people and promote money laundering together.

Proposed ammendment in multistage cooperative society act is also isn't to cold storage by standing committe on agriculture headed by Acharya,all visible how all are participating to allow loot in the country.

Did registrar multi state cooperatives had taken any survey or study or investigation on the model on which multistage cooperative society are registered recently in last three years and their financial results are with registrar office.

By making member of multi state cooperative society money laundering and loot should not be allowed.

Money life may take lead to expose such societies to stop loot and money laundering.

REPLY

CA PRADEEP AGARWAL

In Reply to Investor 4 years ago

I DO AGREE MLF should certainly come forward, desh mein bahut loot maari ho chuki, now it should stop.

Sandeep Patel

4 years ago

This is super duper news !!! Hopefully now some action will be taken against Qnet representatives ... and the company as well ... finally some light at the end of the tunnel hopefully !!!

Dipakkumar J Shah

4 years ago

There is one case , a case of dividend paid out of capital, illegal payment of capital, by mere book entry of profit, not leaglly received from any body, contravening the provisions of the Companies Act reported in 1994/1998. On record they have all the information . In action for all these years. R O C and other offices defending , hid many facts. What is the Law abiding. Ordinary persons are prosecuted for nothing!!!

CA PRADEEP AGARWAL

4 years ago

What about pygmy schemes in AP, where farmer's committed suicide

Sensex, Nifty may see the upmove continuing: Thursday Closing Report

We mentioned that a strong upmove was possible above 5,870. Today the Nifty closed at 5,916. The upmove will continue as long as the benchmark does not close below any previous day’s low

The market settled in the green for the fourth day on gains in auto and healthcare stocks in late trade today. We had mentioned that a strong upmove possible above 5,870. Today the Nifty closed at 5,916. However if the benchmark closes below the previous day’s low, it may the first sign of trend reversal. The National Stock Exchange (NSE) reported a higher volume of 75.09 crore shares on account of the expiry of the April derivatives contract. The advance-decline ratio was 720:612, which is not very encouraging for the bulls.

 

The market opened in the positive after a day’s break tracking its Asian peers, which were in the green in morning trade today. Positive earnings from Axis Bank also added support to the market sentiment. US markets closed flat on Wednesday as corporate earnings came in below expectations.

 

The Nifty opened 19 points higher at 5,856 and the Sensex resumed trade at 19,192, a gain of 13 points over its close on Tuesday. While the opening figure on the Sensex was its intraday low, the Nifty’s low was at 5,853, which was also recorded in initial trade.

 

Buying in banking, IT, metal, oil & gas and healthcare sectors led the market higher as trade progressed. The benchmarks remained firm in morning trade. However, the market pared some of its gains after a soft opening of the key European indices. The market witnessed some degree of volatility in the last hour on account of the expiry of the April derivative contract.

 

Buying support from auto and healthcare sectors, which surged over 2% each in late trade, helped the market hit its intraday high towards the end of the trading session. The Nifty rose to 5,925 and the Sensex climbed to 19,435 at their respective highs.

 

The gains saw the market closing near the highs and in the green for the fourth consecutive day. The Nifty closed 79 points (1.36%) higher at 5,916 and the Sensex finished at 19,407, a jump of 227 points (1.19%) over its previous close.

 

Markets across Asia closed mixed as banks loans to China’s property sector rose 16% in the first quarter of 2013 raised fresh concerns about a property bubble. Besides, worries about the new bird flu virus also weighed on the sentiments.

 

The Hang Seng surged 1.11%; the Nikkei 225 advanced 0.60%; the Straits Times rose 0.45% and the Seoul Composite gained 0.84%. On the other hand, the Shanghai Composite dropped 0.86%; the Jakarta Composite declined 0.34%; the KLSE Composite fell 0.06% and the Taiwan Weighted shed 0.02%.

 

At the time of writing, the key European markets were mixed with a negative bias but were off early lows as UK’s first quarter GDP growth better than expected. At the same time, the US stock futures were marginally in the green.

 

Back home, foreign institutional investors were net buyers of shares totalling Rs226.21 crore on Tuesday. On the other hand, domestic institutional investors were net sellers of equities amounting to Rs528.29 crore.

User

Persistent Systems put on Hold by SBI Cap Securities

De-growth in its intellectual property division coupled with a challenging market caused revenues to steady down and the company has been put on Hold by SBI Cap Securities

SBI Cap Securities has recommended its clients to put Persistent Systems on hold after valuing the company at Rs600 per share. The report said, “Considering challenging demand environment, the management’s commentary remains upbeat, backed up by strong growth in IP business, healthy pipeline and strong client additions. We have fine tuned our EPS estimate for the March 2014 fiscal after factoring in FY13 results, higher ETR and recent acquisitions. We maintain a Hold recommendation with a target price of Rs600.”
 

The company’s latest results were found to be disappointing, with its intellectual property (IP) business declining, on a quarter-on-quarter (q-o-q) basis. The chief result was a 1.7% q-o-q de-growth in its IP business. It contributed to 17.5% of the revenues in the March 2013 quarter compared to 18.2% for the previous quarter. The management expects IP-led business to drive growth in F14 and targets it to grow to 25% of overall revenues over the next two years, however, it expects quarterly volatility in revenues, the report said.
 

Persistent’s revenues increased 23.4% y-o-y in rupee terms, from Rs270.6 crore to Rs334 crore. On the other hand, its revenues increased only 14.6% y-o-y in dollar terms, from $54.2 million to $62.1 million. Net profit increased 25.9% y-o-y from Rs41.2 crore to Rs51.9 crore.
 

In its bid to boost IP revenues, the company acquired NovaQuest which contributed $1.07 million in the March 2013 quarter. The acquisition also added 40 clients to Persistent’s roster, out of which 10 clients are ‘large’ clients. According to the report, growth was driven by top client that grew at 4.7% QoQ and other than top 10 clients also grew 5.3% QoQ.
 

Other developments included a tie up with Hewlett-Packard for an automation software, which will supposedly buffet the income stream more. The report said, “During 4QF13, the company acquired licensing agreement with Hewlett Packard for HP Client Automation (HPCA) software. The acquisition further strengthens its offerings in PC Lifecycle Management (PCLCM), Virtual Desktop Infrastructure (VDI) and Mobile Device Management (MDM). The revenues from the acquisition would start accruing from 1QF14. The management expects gradual uptick in revenues as the customer agreements are transferred to Persistent Systems as and when deals come up for renewal”.
 

The company has even made a splash into the venture capital space and set up a separate division to be an angel investor to certain startups. The report said, “Persistent Ventures will focus on innovations and new technologies and invest in early stage ventures building intellectual property relating to platform solutions. The board has earmarked an investment of Rs350-500mn for the initiative”.
 

The company operates three divisions: telecom & wireless, life sciences & healthcare and infrastructure & systems. The majority contributor of revenues is infrastructure & systems, which showed Rs222.1 crore (a 21.3% y-o-y increase over corresponding period last year) of gross revenues out of the total gross revenue of Rs334 crore. Much of their revenues (85.1%) of their fourth quarterly revenues come from North America while 5.7% comes from Europe and the remainder comes from Asia Pacific.

User

COMMENTS

damodar biswal

4 years ago

It companies will under perform in the near term.

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