Need to monitor ad expenses of ponzi schemes, says top official
Alekh Angre 15 November 2011

Authorities also ask for a separate regulator for MLMs like Speak Asia

“Move should be made to monitor advertising expenses of ponzi schemes like Speak Asia and for schemes that try to lure gullible public and a central regulator should be established to curtail these multi-level marketing (MLM) and ponzi schemes,” said Rajvardhan, additional commissioner of police, Economic Offences Wing (EOW), Mumbai. He was speaking at a National Seminar on Economic Offences, organised by Mumbai Police.

Identifying MLM and ponzi schemes as a ‘social menace’, Mr Rajvardhan said, “If advertising expenses of such schemes are monitored then advertising agencies themselves will be more cautious about the kind of client they are working for. He said that now, even gold is becoming the focus of some MLM schemes, and the Reserve Bank of India (RBI) also recently issued a warning to people for not falling for such money multiplier schemes.

Endorsing the stand taken by Moneylife, that there should be a separate regulator for MLMs, the additional CP said it would ensure that the promoters would not get away by cheating people easily. “In case of City Limousine, the promoters ultimately got away. The difficulty with ponzi and MLM schemes is that they are neither regulated by RBI nor by the Securities and Exchange Board of India (SEBI),” he said.

Many times the police face a dilemma about the timing to intervene into the MLM schemes. Mr Rajvardhan said that authorities find it difficult. “If we intervene before the scheme goes bust people involved say that there is nothing wrong as they are still getting their money. On the contrary, if we do not interfere before the scheme collapses, people say that Police failed to take any action,” he said.

He said that generally, these MLM or ponzi schemes are run by promoters who collects all the money. They appoint a director and when the scheme collapses, he is made the scapegoat, while the promoters go to some other place and start afresh.

Speaking about Speak Asia, Mr Rajvardhan said that the company had accumulated around Rs2,300 crore between February 2008 to 2011; and if the reward points collected in the ‘e-wallets’ of the panellists is considered, the total amount goes to almost Rs30,000 crore.

“Entire population of Raigarh appears to have invested in Speak Asia and when we continued our investigation, we discovered that the scheme has even spread to places like Lakshadweep,” said Mr Rajvardhan.

1 decade ago
The department of Income Tax is not doing anything to curb the menace of chain marketing.
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