QNet and Vihaan Fail to Make Entry in the List of Direct Selling Entities in India
QNet, the controversial multi-level marketing (MLM) scheme, and its franchisee Vihaan Direct Selling (India) Pvt Ltd, both of which often try to hide behind the 'direct selling or product company' tag have failed to make an entry into the list of direct selling entities in India. 
 
The list, released by the department of consumer affairs under the ministry of consumer affairs, food & public distribution on 31 October 2018 has names of 327 entities mentioned as provisional direct selling entities.
 
The list has names like Amway India Enterprises Pvt Ltd, K-Link Healthcare (India) Pvt Ltd, and eBiz.com Pvt Ltd against whom there are some cases registered or probe is going on. For Amway, the list states one case is under investigation by the Directorate of Enforcement (ED) under the provisions of the Prevention of Money Laundering Act (PMLA), 2002. 
 
"Several criminal cases against Amway India Enterprises Pvt Ltd and its functionaries are pending or under investigation in the states of Andhra Pradesh, Telangana and Kerala. These are only those cases which have been brought to the notice of department of consumer affairs," the portal says.
 
Moneylife had earlier reported about eBiz.com. As per department of consumer affairs, there is a pending first information report (FIR) against eBiz.com at Hanamkonda Police Station at Warrangal in Telangana, which was registered in the year 2008. (Read: eBIZ.com uses MLM route to dupe students with IT package offer)
 
However, despite trying very hard to establish itself as direct selling or direct product selling company in India, QNet and its franchisee Vihaan have failed to make a cut in the list issued by the department of consumer affairs.  
 
As reported by Moneylife in December 2016, while a few powerful members were not allowing QNet’s entry into the Indian Direct Selling Association (IDSA), its franchisee Vihaan’s application too was rejected by other association, Federation of Direct Selling Association (FDSA). 
 
While rejecting Vihaan's membership application, the FDSA had said, "The Federation is repeatedly being approached by Economic Offences Wing (EOW) of Mumbai Police seeking various information regarding the company (Vihaan). The (Scrutiny) Committee feels it has collected the information about the pending court cases and is serious on the sub-judice status of the company. The Committee feels that the sub-judice status of the company (Vihaan) will jeopardise the faith of the government/ industry bodies in the Federation, hence recommends that the company need to come out clean before being considered by the Federation." (Read: QNet: FDSA too rejects Vihaan's membership application
 
QNet, the Hong Kong-based controversial MLM scheme has been facing backlash from several other countries as well. Earlier this year, QNet had to cancel its high-profile, flagship annual even called V-Con that that was scheduled to be held in Dubai between 8th to 12th September. 
 
In an email response, Zaheer K Merchant, director for corporate affairs at QNet, told Moneylife that, “As stated in the Facebook post, we had to make a decision to postpone the event due to circumstances beyond our control. You will note that several other large events were cancelled or rescheduled in Dubai in recent months, including the Dubai International Film Festival. We have no further comment here.”
 
QNet did not mention what these 'circumstances’ were, for cancelling its prestigious event. According to sources, the V-UAE 2018 was cancelled after Saudi Arabia declared QNet as haram and activities of the MLM company as ‘misleading activity’. On 1 September 2018, the ministry of commerce and investment (MCI) in Saudi Arabia issued a warning against QNet saying that its activities are prohibited in the country. 
 
From India alone, there were about 10,000 independent representatives (IRs) who have booked flight tickets to Dubai and also bought tickets at $350 each for the V-Con event. (Read: QNet Cancels V-Con Dubai Leaving Thousands of Agents in Soup)
 
On 1 September 2018, the Ministry of Commerce & Investment in Saudi Arabia had issued a warning against QNet (https://mci.gov.sa/en/MediaCenter/News/Pages/01-09-18-01.aspx) saying that its activities are prohibited in the country. 
 
Later in mid-September, the MCI from Saudi Arabia raided meeting places of QNet in that country. “QNet marketing activity aims to mislead and deceive dealers and clients with quick profit. Therefore, they try to raise money illegally by claiming that they are investing such money. This kind of activity is considered illegal because it depends on deceiving, cheating, fraud and manipulation,” the Ministry had said in a release. (Read: QNet: Saudi Arabia Raids Meeting Places of the Banned MLM)
 
Back home, there are several court cases and probe going on against QNet, its franchisee Vihaan and many people associated with the MLM scheme. In fact, two year ago, the Bombay High Court, in its judgement has observed "the deceit and fraud is camouflaged under the name of e-marketing and business".
 
While rejecting anticipatory bail applications of five accused in the multi-crore QNet scam, Justice Mridula Bhatkar, in a hard-hitting order on 6 May 2016 had said, "The motto of the company 'sell more, earn more' appears very attractive and innocuous. However, this motto is fully camouflaged. The company stands on a basic statement that people can be fooled. Thus, the true motto is 'sell more earn more' by fooling people. In fact, it is a chain where a person is fooled and then he is trained to fool others to earn money. For that purpose, workshops are conducted where study and business material is provided with a jugglery of words, promises and dreams. Thus, the deceit and fraud is camouflaged under the name of e-­marketing and business." 
 
"The claim that the wellness products i.e., Biodisk and Chi Pendent are medicinal and spiritual products, are after all, a matter of faith. However, the applicants/ accused have launched these wellness products with ulterior motive and with correct judgment of vulnerability of the people. The holiday packages, which were sold or offered, without any choice left to the buyers. The entire business was Internet based and, therefore, the persons who are responsible i.e., the top brass i.e., the applicants/ accused, were not approachable to the persons who were aggrieved. The nature of the business was knitted in the interest of the directors and shareholders in such a manner that the persons who are at the lower level of the pyramid cannot get any access to put up their grievances. The manner in which the persons were contacted, incentives offered, the workshops were conducted, are best examples of inducement," Justice Bhatkar had remarked. (Read: QNet: “It is a chain where a person is fooled and then he is trained to fool others to earn money” says Bombay HC order)
 
Gurupreet Singh Anand, a computer consultant from Lokhandawala, Andheri in his first information report (FIR) stated that his wife was duped for Rs30,000 by some people who had introduced themselves as the independent representatives (IRs) of QNet. 
 
While arguing before the HC in person, he had contended that the illegal money circulation scheme is being conducted in India by changing names from GoldQuest to QuestNet to the current QNet.
 
Earlier, the SFIO in its detailed ‘secret’ report on GoldQuest International Pvt Ltd and Quest Enterprises India Pvt Ltd has called multi-level marketing (MLM) schemes run by overseas operators as “a potential threat to national security”. (Read: QNet: Secret SFIO report says MLM, Ponzi schemes ‘a threat to national security’)
 
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Heera Gold Chairman Nowhera Shaik arrested in Hyderabad
Dr Aalima Nowhera Shaik, chairman of the controversial Heera Islamic Business Group, better known as Heera Gold, has been arrested by Hyderabad Police. Hyderabad Police Commissioner Anjani Kumar told media persons about the arrest of Dr Shaik, who is accused of collecting money as deposits from thousands of Muslim people from several states. Police also conducted searched her residence in the city, the Commissioner says.
 
In a statement Hyderabad Police said, "Central Crime Station (CCS) has taken up investigation, recorded statements of various stakeholders and other victims and collected evidences from different sources and found substantial incriminating evidences against Ms Shaik. Based on available evidences, Ms Shaik was arrested on 15th October at New Delhi and brought to Hyderabad on transit remand."

As per information available, the Police said, Ms Shaik is heading 15 companies under different names under Heera Group of companies. "Many of the companies are involved in collection of deposits and investment in different modes of gold scheme from public, where there companies commit a return of around 36% per annum for the invested amount. While exact number of investors, depositors is not known because the companies have not disclosed complete information before the Police. It is estimated that the number of depositors could be in thousands in different states of the country," the release says.

Hyderabad Police has identified more than 160 bank accounts of Heera group from across India and are seeking more details from the banks. The Police says, "Different properties have been identified and necessary action under the Telangana Deposits of Financial Establishment Act, 1999 and the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, are under consideration."
 
Last month, over a 100 victims of Heera Gold held public protests in Hyderabad along with victims and investors from other parts of India.
 
The protests were led by Shahbaz Ahmed Khan, who had told Moneylife that over 200 investor victims have filed complaint against Heera Gold and its founder Dr Aalima Shaikh Nowhera (Nowhera Shaik). “Every day, I am receiving calls from panicky victims of Heera Gold from across the country seeking my help in recovering their investment. There are many who had invested more than Rs1 crore in Heera Gold and are now facing difficulties. They are neither receiving interest nor getting the principal amount back,” Mr Khan had said.
 
Earlier, in July this year, market regulator Securities and Exchange Board of India (SEBI) told Moneylife that activities of Heera Gold, are in the nature of Ponzi or multi-level marketing (MLM) scheme.   
 
Replying to an email sent by Moneylife with videos of panicky investors, the market regulator’s Hyderabad office wrote to say, "Upon examination into the matter, it was found that the activities of Heera Group are in the nature of Ponzi Scheme. Further, the nature of activities of Heera Group was also discussed in the meetings of State Level Co-ordination Committees (SLCC) of Andhra Pradesh and Telangana, which are headed by Chief Secretaries of the respective states. It was decided in the meetings of SLCC that the activities of Heera Group appear to be beyond the regulatory ambit of SEBI and RBI and the case would be taken up for investigation by relevant authorities such as CID-EOW, and Serious Frauds Office of India (SFIO). Accordingly, SEBI had already referred the case to CID-EOW, Enforcement Directorate, Commissioner of Police-Hyderabad."  
 
On 10 September 2018, Farzanaunissa Mohammad Khaja filed an FIR under Section 406, 420 of Indian Penal Code (IPC) and section 5 of the Telangana Deposit of Financial Establishments Act, in Bajara Hills Police Station at Hyderabad. Ms Khaja has alleged in the FIR that her husband had invested Rs25 lakh in Heera Retail Hyderabad Pvt Ltd, but the company has refused to return her money.
 
Thousands of investors of Heera Gold are in a panic since past several months over payment delays and rumours about financial difficulties faced by the group, which has amassed vast sums of money by specifically targeting the Muslim community by invoking the name of “Allah” in its sales pitch. 
 
The trigger for people gathering to protest at Heera Gold’s plush offices in Bengaluru, Hyderabad, Mumbai and other cities was the decision to 'share profit' once in three months instead of every month. But that is not the only issue.
 
In 2017, Dr Shaik, CEO of Heera Gold formed the All India Mahila Empowerment Party under the banner of justice for humanity. This party even contested 221 out of the 225 seats in the recently concluded Karnataka Assembly elections with a 'diamond’ as its symbol. It is rumoured to have lost large sums of money. This and other rumours has triggered panic among people who want their money back. 
 
Heera Group claims to be a gold trading company with business all over the world. In the past four years, the lack of any enforcement action by investigation agencies has allowed it to grow rapidly and diversify into diverse business. In the past two years Moneylife has raised the issue of Heera Gold's Ponzi operations with two SEBI Chairman — Mr UK Sinha as well as Mr Ajay Tyagi — because it operated like a vast collective investment scheme. Neither of the two SEBI chairmen bothered to respond.  
 
Our communication we said, "We hope SEBI will take note of this and hasten action so that people do not end up losing money. Many women too are being conned into borrowing against property to invest in these companies on the claim that the returns would be significantly higher than the interest they would pay on their loans."
 
Investigations and information by a premier government agency, perused by Moneylife, claim that Heera Gold is involved in hawala activities. The note lists various actions against the group. For instance, on 17 May 2014, the Hyderabad Police apprehended six accused, while Heera Group promoter, Dr Shaik was named an absconding accused. Subsequently, on 21 May 2014, the Enforcement Directorate (ED) searched Heera Group premises and seized documents pertaining to the illegal transfer of money through hawala.
 
In August 2012, Asaduddin Owaisi, member of parliament (MP) from Hyderabad, had registered a case against Dr Shaik for cheating a large number of local investors from his constituency. The Hyderabad Police are investigating this case as well.
 
The Heera Group began its operations in 2010 and since then, claims to have created 25 legal entities. Of these, only 10 were found to be registered on registrar of companies (ROC), Hyderabad and only four are found to have filed balance sheets (FY2012-13), which are being analysed. It is not registered under FCRA, says a government source.
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COMMENTS

Saqib Mohammed

4 weeks ago

What are regulators doing about other Ponzi schemes like IMA (I Monetary Advisory) which runs on similar lines and promised 30%+ return?

Zahir Lala

4 weeks ago

Such Ponzy Scheme Company goes hand in hand with Govt org like SEBI & EOW.
This Ponzi scheme company sets particular financial targets. Once the targets are achieved they gets the offices raided by EOW & SEBI and than all drama follows. owner is now arrested but for how long? nothing will be done against her, just wait and watch.
Time and again, a ponzi scheme company is established and innocent citizen gets trapped.

tanay

1 month ago

This has been possible only due to the untiring efforts of one man, Mr. Shahbaz Ahmed khan

Rajendra Ganatra

1 month ago

Too much. Ponzi scheme for so long. Our regulators are shaken only when crisis occurs when there is nothing to retrieve.

PACL: Refunds up to Rs2,500 each paid to 1.13 lakh investors by Lodha Committee
Market regulator Securities and Exchange Board of India (SEBI) said the Justice RM Lodha Committee appointed by the Supreme Court has paid up to Rs2,500 each to 1,13,352 investors of PACL Ltd (erstwhile Pearls), who had filed the claims in prescribed forms.
 
In a release, SEBI said, "The Committee, in pursuance of its mandate started the process of receipt of claim applications, at the first instance, from investors having claims of not more than Rs2,500. The said process was open till 31 March 2018.
 
"...the Committee has started remitting refunds to investors after verification of the claim applications as received. Till date refunds in respect of 1,13,352 claim applications have been credited to the bank accounts provided by the investors in the claim applications,' it added.
 
Last month, the Australian Federal Court had accepted claim filed by SEBI on assets of PACL in that country. The Australian Federal Court also stated that as per three orders passed by Supreme Court of India, SEBI Act, SEBI Regulations, the Indian market regulator has full right, interest, power and authority to seek relief in Australia in the PACL case.
 
After observing that the money mobilised by PACL from investors was utilised for acquiring certain assets in Australia, as directed by Justice RM Lodha Committee, SEBI had filed a claim petition in the Federal Court of Australia seeking repatriation of the assets or the proceeds thereof on behalf of all the investors in PACL.
 
During September 2018, the Enforcement Directorate had filed a charge sheet against PACL (erstwhile Pearls) and its chief Nirmal Singh Bhangoo in connection with a Ponzi scam involving over Rs49,100 crore, which was collected allegedly by two companies from 5.5 crore investors.
 
Apart from Bhangoo, who is in judicial custody, his three colleagues and other persons have also been named in the ED chargesheet filed in a special court under the Prevention of Money Laundering Act (PMLA).
 
In 2016, a report from The Australian had exposed the Australian connection of PACL and Bhangoo. This was published by Moneylife (Read: PACL Scam: The Australian connection). The report said, in Australia, Bhangoo and several of his family members teamed up with Gold Coast property developers Paul Brinsmead and Peter Madrers. The two Australians had operated the company Resort Corp, which developed large tracts of coastal land in the Tweed Shire in northern NSW before its group of 14 companies collapsed in March 2009, owing about $300 million, it said. 
 
The ED, which started the probe after lodging an first information report (FIR) in 2015 based on the Central Bureau of Investigation (CBI)'s case, had in January attached Australia-based assets of the Pearls Group and Bhangoo worth Rs472 crore. 
 
On the refund claims from PACL investors, in January this year, SEBI has clarified that the refund may not necessarily be Rs2,500 per claimant investor, and would be effected on a pro-rata basis after considering the number of claims received as well as the funds available with the Justice Lodha Committee.
 
Earlier on 27 November 2016, the market regulator, while informing the process to claim refund (for investors of PACL) made it clear that the Committee would initiate refund process only upon realisation of a sizable amount. It had said, "In such case, investors would be required to file their claims only in the prescribed format upon specific notification by the Committee. Till such notification, investors are requested to retain their documents with themselves and not to part with them for any reason whatsoever."
 
The Lodha Committee is supervising the Supreme Court ordered process of selling PACL's assets across the country and refunding Rs49,100 crore collected from over 56 crore investors. The money to be refunded to the investors was allegedly collected by PACL and Pearls Golden Forest Limited - two companies belonging to Nirmal Singh Bhangoo-managed group - in the name of sale and development of agricultural land.
 
Lakhs of investors who put their hard earned money in PACL formerly Pearls Agrotech Corp Ltd, a collective investment scheme (CIS), have been in a panic about the fate of their investment after the company has been ordered to refund their money. It may be recalled that this company has raised a whopping Rs49,000 crore from people across the country, claiming to have bought them a stake in land, like a land mutual fund. PACL has also used India’s slow legal system very effectively to delay regulatory action for several years, while it continued to collect money from people. In fact, it has doubled the money raised, even after SEBI began action against it.
 
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