EoW from Mumbai registered an FIR against QNet, the MLM company, for allegedly duping thousands by selling them plastic and glass products as miraculous objects
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) has finally come under the radar of Mumbai police.
According to a report in Times of India, the economic offenses wing (EoW) of Mumbai police has registered against QNet, for allegedly duping thousands of investors by selling them plastic and glass products terming them miraculous objects for treating severe diseases like Cancer.
"The firm (QNet) posed as a marketing firm which would sell bio-disc, watches, chiPendants, gold coins, herbal products, e-education packages and holiday packages. They even claimed that by using the bio disc one can cure cancer and brain related diseases," the report said quoting a police officer.
UPDATE: According to a report from Times of India, the EoW has arrested Bandra-based Manjunath Hegde for cheating in the QNet case. He was reminded to police custody till 22nd August. "Hegde, who is an advertiser by profession, was arrested from his Bandra residence. We searched his house and seized computer hard disc and several incriminating documents, which will be produced in the court. There are some payment/commission receipts among the documents," the report said quoting an investigator.
The complainant, Gurupreet Singh Anand, 40, a computer consultant from Lokhandawala, Andheri stated that his wife was duped for Rs30,000 by some people who had introduced themselves as the independent representatives (IRs) of QNet. Anand told the police, "They (IRs) had said that one of the bio-products my wife bought could be used to treat my 12-year-old son's brain related diseases".
The first information report (FIR) names five accused, including QNet's Hong Kong-based founder Dato Vijay Eswaran, a Malaysian by birth and an Indian by ethnicity, who is photographed hobnobbing with the Prince of Saudi Arabia, in order to enhance its credibility in the Gulf.
(Vijay Eswaran (circled), the founder of QNet along with Dev Wadhwani (in blue shirt), VP of QNet Source: facebook.com/QNETIndiaOfficial)
"One of the wanted accused Vijay Eswaran, had earlier floated two firms; Gold Quest and Quest Net Enterprises, in India and duped thousands of people. These two firms were also popular in Egypt, Afghanistan and Malaysia. We are trying to zero in on Eswaran and will soon arrest him," the newspaper said quoting the officer.
While QuestNet and GoldQuest, which mainly sold numismatic gold coins (they claimed they were limited edition coins that whose value would increase over time) in 2009 were forced to shut shop in India, their new avatar QNet offers a broader range of lifestyle ‘enhancing’ products (holiday packages, diamond watches, bio-discs, Chi-Pendants and herbal products for anything between Rs30,000 to Rs7 lakh), which promise fabulously high returns so long as new distributors are enrolled rapidly. Its product brochure says, “With 8 ways to earn and up to 50% of the sales paid out in commissions, QNET offers the most dynamic and innovative compensation plan in the direct selling profession.”
(Suresh Thimiri, MD & CEO, QNet India (circled) with Indian Tennis stars at the Davis Cup Source: facebook.com/QNETIndiaOfficial)
The last time around, QNet was being evangelised by former World Billiards champion Michael Ferriera, as well as some former international cricketers. QNet even sponsored the Indian tennis team for Davis Cup. This time, it is being hard-sold by senior corporate executives, including heads of multinational companies, who have been forced to quit in the 40s and 50s, having fallen off the career ladder. Moneylife has received emails from several worried readers asking us to bring the “QNet scam” to the attention of regulators before it dupes their friends and relatives already ensnared by the hard sell.
(Muttiah Muralitharan, the greatest Test match bowler from Sri Lanka at QNet event. During 2005, the GoldQuest scheme spread across Sri Lanka, marketing gold coins for double their worth. This forced the country to frame new law to ban MLMs, especially GoldQuest. Image Source: facebook.com/QNETIndiaOfficial )
Manoj Arora (name changed), a chartered accountant and management consultant tells us how he decided to string along a QNet ‘operative’ to understand its modus operandi which promises to make you a millionaire in two or three years.
He was scandalized at what he discovered and says, “QNet is just not about Amway-esque MLM but a Stockguru-type pyramid scheme. The premise is to get more and more people to invest Rs1 lakh to Rs6 lakh in an 'e-commerce' venture. They make you owners of QI group by selling three shares for every Rs1 lakh. How does that generate returns? The victims who are enrolled into the scheme, in turn hunt for newer victims to buy into the Ponzi. They are entitled to get 14% of share capital they or their victims raise. The scam is proliferating through social media like Linked-in to find newer targets. This reader had stored names and screenshots of people canvassing QNet from their profiles on Linked-in.
Well, the company had a chequered past. In 2008-09 it was making waves like it is today. At that time, it flaunted powerful political connections (at that time a GoldQuest executive, K Preetha had said that Nalini Chidambaram was a legal advisor. This was after we pointed out that the connection was highlighted at its meetings to recruit/ensnare new agents). However, QuestNet virtually folded-up after the Chennai police arrested several employees and the business was in complete disarray.
QNet claims that a Diamond Star can earn up to Rs27,73,800 (Rs27.7 lakh) per week while the same for a Platinum Star would be Rs22,39,050 (Rs22.4 lakh) a week. The money earned by a Diamond Star in QNet is almost the same that Mukesh Ambani of Reliance Industries (RIL), India's richest man as per the Forbes list, earns every week as salary (Mukesh Ambani forgoes Rs23.82 crore from his pay package ). We all have heard about Mr Ambani and his wealth. However, nobody knows how many Diamond or Platinum Stars are there in QNet's MLM network. If you know, please share it.
There are several people who are now demanding their money back from QNet. Few of them even posted such messages on QNet India's page on Facebook. On 20th May, Suryakant Kaushik, posted: "Even after a month of filing for the cancellation, I am still waiting for the refund. Adding to this, I have dialled the customer care numbers-+91 99 0006 3901 & +91 96 8668 9974.10-15 times a day but nobody responded. I am very frustrated by the way my case is handled. Never thought that the refund process could take more than a month and still nothing can be said about the status."
CA Abhishek Sahay wrote this message: "hi CHIEF Pathman...on 1st AUG 2013 I bought QVI Club membership from QNET for Rs2.61 Lakh and on 2nd August, I requested to cancel it and refund full amount, QNET official assured initially to refund full amount but now they are not responding my call or email. I request you to please look into the matter and get my full refund as soon as possible. My IRship is IN*****9 and email is [email protected]; Please do not let me feel cheated by your Company QNET. Please do not check my calmness. Refund my money ASAP."
Bala Kavassery posted this message: "I have been requesting since last 5 days with QNet support team India for cancellation of my IR IN*****4 and refund of vacation package ordered earlier. No support or response forthcoming till date. Once again request for my IR cancellation and refund of vacation package amount."
As Moneylife wrote earlier, Ashu Dutt, a well-known television journalist shared how he and his family became a victim of QNet. He said, "QI/ QNet/ QuestNet/ GoldQuest/ Faith Network is not just a fraud, but they lure women to break away from their families and then go after the family money. My own wife fell into this trap. Once this was done, they got her to put money from our house and relatives. Once they trap the women, they go after their wealth. My wife has now gone on to take over our assets by changing directors and doing all kinds of illegal corporate stuff guided by QI kingpins. This is my story. I can tell you that there are hundreds of Indian families that have been ruined by these people. In Mumbai, they use hypnotism and cult-like practices (wearing white clothes with blue pendants)."
In India, QNet’s MLM operations were controlled by QuestNet Enterprises (India) Pvt Ltd, a company registered at Chennai till 13 April 2012. From next day, it shifted all its registered agents, database and business to Vihaan Direct Selling Pvt Ltd, company registered in Bengaluru.
Moneylife has done extensive work on all MLMs and come to the conclusion that all of them fall foul of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978. We have also made representations to the Prime Minister’s office to ban MLMs altogether or allow them to operate under a clear regulatory framework under a designated regulator.
Today, while tens of thousands MLMs and Ponzis are cheating people no ministry or regulator is in charge. The ministry of corporate affairs (MCA) does not even require these companies to be incorporated in India. This ludicrous situation persists at a time when there is such heated debate about legitimate foreign direct investment in retail and insurance.
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As the US Treasury yields soared to their highest in two years yesterday, foreign investors sold off bond and equity, pushing rupee to an all-time low of Rs62/$
The Sensex today fell by a huge 769 points, a selloff that has no apparent reason except that the rupee weakened a bit more. Rupee has been weak for the past two months and today it weakened by 0.77% to 61.99. What caused this massive selloff, when Rupee had already closed at Rs61.54 on August 6th?
One of the most important reasons lies in little-discussed US bond market. Yesterday, August 15th, the 10-year US Treasury yield touched 2.823%, its highest level since August 2011. The US Labour department on the day reported that the total number of Americans filing for unemployment benefits for the first time last week fell to a near six-year low. A week back we had mentioned to keep an eye on US Treasury yields (Read: Rupee Weakness: Its not just CAD, keep an eye on US 10-year yield). US Yields are rising because of fears that the Federal Reserve may start tapering its bond-buying programme of $85 billion a month. As US economic data continues to improve, this has led to a sell-off in the US treasury market, on expectations that the Fed will pull back its monetary stimulus program. What does this have to do with Indian market?
In the Indian market, over the past five trading days, foreign institutional investors (FIIs) have sold over Rs6,500 crore of bonds in the debt market. The 10-year Indian Government bond yield was up by 36 basis points from 8.14% as on 8th August to close at 8.50% on 14th August.
The Indian economy has become too dependent on foreign capital. In the past few months we have seen a heavy outflow from the debt markets because of rising US yields, weakening the rupee. The central banks efforts to tighten liquidity in order to boost the rupee have turned out to be fruitless in the face of such huge outflows. In the past two and a half months there has been an outflow of over Rs50,000 crore of foreign investments from the Indian debt market. As seen in 2007-08, the rupee appreciation happened mainly due to FII inflows into the capital market in India.
What next? US Treasury bond yields are near their lowest levels in the last two decades. With the recent uptrend in yields and with signs that the Fed may end its stimulus programme, will yields continue to trend higher? Rising US yields would make emerging market bonds look even more unattractive leading to massive sell-off from bond markets of these countries, leading to a further weakening of rupee. That is the worry for FIIs, making them sell.
Unlike equity markets, where investors look for the long term rise in value thanks to rising corporate profits, in debt markets a few basis points difference could inflict losses with little chance that holding the bonds for the long term would turn a loss into a profit.
Also, given India’s current economic situation with a high current account deficit, rising inflation and depreciating rupee it would be highly unlikely for the Reserve Bank to cut interest rates soon and bond yields would fall. FIIs have a total investment of $28,700 million as on 14 August in the Indian debt market. This has come down from around $37,400 million as on the end of May 2013. There is still a huge amount of assets of FIIs in the debt market and this leads fears if they continue to sell their investments. This has caused fear and panic in the minds of investors, especially the FIIs and this is one of the reasons there has been a massive sell-off in the equity market as we have seen today.
The inefficiency of the UPA-2 government does not give any hope. Exports are weak, foreign investment has slowed down and India is mainly dependent on FII capital inflows for equity and debt. There is no immediate solution to India’s fundamental problems of a wide current account deficit and funding this deficit in an uncertain global economy through capital account. As long as US bond yields keep rising on better US economic data, we may see further outflows from the Indian debt market which would lead to a weaker rupee and weaker stock prices, under the current correlation. Conversely, a weakening of US bond yields will set up a corrective rally.
Nifty crashed through 5,635 and headed sharply lower. More decline may be in store
As the Dow Jones Industrial Average crashed yesterday by 226 points and US 10-year treasury yield crossed 2.8%, a 2-year high, the Reserve Bank of India (RBI) measures to control the rupee fall by imposing selective capital controls on outward remittances, failed hopelessly. In the face of such global headwinds, a massive selloff hit the Indian market on Friday. The Sensex and Nifty both opened in the negative and soon they hit their respective intra-day high. After this, both the indices slid continuously and closed deeply in the negative.
The Sensex opened lower at 19,297 and hit a low of 18,560 and closed at 18,598 (down 769 points or 3.97%). Nifty opened lower at 5,705 and hit a low of 5,496 and closed at 5,508 (down 234 points or 4.08%). The percentage loss of 3.97% on the Sensex is the maximum since 22 September 2011 while for the Nifty, the loss has been the maximum since 17 August 2009. The National Stock Exchange (NSE) recorded a volume of 68.12 crore shares.
All the major indices on the NSE except for India Vix (up 26.42%) and Nifty Dividend which ended flat, closed in the negative. Lix 15 was the top loser, down 5.65%.
All the other indices ended in the negative. Realty (down 6.66%); Bank Nifty (down 5.74%); Metal (down 5.47%); PSU Bank (down 5.38%) and Finance (down 5.27%) were the top five losers.
Of the 50 stocks on the Nifty, three ended in the in the green. The top gainers were Hero MotoCorp (up 2.17%); Power Grid (up 1.13%) and HCL Technologies (up 0.20%) while Jaiprakash Associates (down 11.09%); BHEL (down 10.92%); Axis Bank (down 9.36%); Bank of Baroda (down 8.63%) and Reliance Infrastructure (down 8.52%) were among top losers today.
The RBI on Wednesday increased efforts to stem the rupee’s plunge by cutting the amount local companies can invest overseas without seeking approval to 100% of their net worth, from 400%. Among other measures, the RBI has also announced reduction in the limit for remittances made by resident individuals, under the Liberalised Remittance Scheme (LRS Scheme), to $75,000 from $200,000 per financial year. The present set of measures is aimed at moderating outflows. However, any genuine requirement beyond these limits will continue to be considered by RBI under the approval route.
Also on Wednesday, the banking regulator banned import of gold coins and medallions. Now importers of gold will have to pay upfront before getting any of the yellow metal with the condition that at least 20% of the gold imported will have to be re-exported and the balance for domestic use.
US market fell sharply on Thursday. The better-than-expected data of jobless numbers heightened fears of imminent tapering of the Federal Reserve's bond-buying program. Market now awaits the reports on US housing starts and consumer confidence.
Except for Taiwan Weighted (up 0.48%), all the other Asian indices fell. Jakarta Composite fell the most, 2.49%. Indonesia is in the same situation as India – of rising interest rates and inflation.
China’s stocks had a torrid day today ending in a negative territory apparently due to a computer glitch. The Shanghai Stock Exchange (SSE) said this afternoon that the department of investment strategy of Everbright Securities Company encountered a problem in its arbitrage system when it was operating on its own funds during the morning trade on the bourse.
So far, there is no official conclusion as to whether there is a direct correlation between Everbright’s trading error and the market’s sudden surge, state-run Xinhua news agency reported.
European indices were trading mostly in the red while US Futures were trading in the positive.
TVS Motor Company has dis-invested 7.35 crore shares of its unit TVS Energy Ltd, constituting 90.46% of share capital of TVS Energy to Green Infra Ltd. Consequently, TVS Energy and its subsidiaries, viz., TVS Wind Power Ltd and TVS Wind Energy Ltd, cease to be subsidiaries of the TVS Motor from 16th August. TVS Motor fell 4.67% to close at Rs30.60 on the NSE.