QNet: Ministry of Consumer Affairs says the Ponzi Scheme is Concern of the Finance Ministry
The union ministry of consumer affairs, which had issued guidelines on direct selling, has said the money circulation or Ponzi scheme operated by QNet and its associates in India are concerns of the ministry of finance and it has a limited role in the matter. 
 
AK Pandey, undersecretary from the Ministry, in an affidavit submitted before the Supreme Court, stated, "...the money circulation scheme or Ponzi scheme operated by the private respondents in violation of the provisions of Prize Chits and Money Circulation Schemes (Banning) Act 1978 have concerns with the department of financial services, ministry of finance, government of India."
 
 
The private respondents mentioned by Mr Pandey include, Vihaan Direct Selling (India) Pvt Ltd, Michael Ferreira, Malckolm Desai (both directors of Vihaan), GoldQuest International Pvt Ltd and QuestNet Enterprises India Pvt Ltd, all associated with QNet.
 
Responding to the notice issued by the apex court, Mr Pandey said the consumer affairs ministry had limited role in the case filed by Financial Frauds Victims Welfare Association and its name was added only because it had issued guidelines on direct selling.
 
The Association had filed a criminal petition against various ministries of Indian government as well as against promoters and directors of Vihaan Direct Selling, GoldQuest International, and QuestNet Enterprises. The petition also names agencies like Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) and various state governments where victims have filed a first information report (FIR) against the illegal money circulation schemes operated by the QNet group companies.
 
Vihaan Direct Selling, the authorised franchisee of QNet in India has been claiming that its scheme falls under the direct selling guidelines issued by the ministry of consumer affairs.
 
However, this claim was refuted by the economic offences wing (EOW) of Mumbai police, which is probing several complaints filed by victims against QNet and Vihaan Direct Selling. 
 
In its counter affidavit filed before the Supreme Court, the Mumbai EOW had stated, "The model guidelines on direct selling are not applicable to Vihaan Direct Selling since the definitions 6 and 7 in the guidelines specifically and pointedly state that the marketing, distribution and sale of goods under a pyramid scheme and entity, not being engaged in a pyramid scheme are not covered under the definition of 'direct selling'. It is the prosecution case as per the statements of witness is that the (private) respondents of this petition are doing illegal activities in a pyramid scheme, which is also a Ponzi scheme."
 
 
Earlier in February this year, the Cyberabad police had issued notices to about 500 people including several top celebrities from Bollywood in the multi-crore QNet scam. Those issued notices include Shah Rukh Khan, Anil Kapoor, Jackie Shroff, Boman Irani, Vivek Oberoi, Pooja Hegde and Telugu actor Allu Sirish and cricketer Yuvraj Singh. 
 
QNet, in a statement issued at that time, however had said it does not have any brand association with those who have been issued notices by the police.
 
In January this year, Cyberabad Police had arrested 58 members of the MLM in fraud and cheating cases worth Rs1,000 crore. "The QNet and Vihaan business model is a simple pyramid scheme in which the early entrants earn money and as the number of IR increases, finding more IRs (new comers) to join becomes difficult or impossible. IRs that joins late does not earn enough to cover their first outlay and the model collapses. It works as a binary scheme. Down the line, the number of persons to be joined becomes difficult or impossible. The scheme collapses at a point of time," the Cyberabad police commissioner had said. (Read: QNet: Cyberabad Police Arrests 58 Members of the MLM in Fraud and Cheating Cases Worth Rs1,000 Crore)  
 
On 18 May 2016, Gurupreet Singh Anand, the original complainant in the QNet MLM scam had demanded a detailed probe of the role played by Bollywood stars like Shah Rukh Khan, Aamir Khan, Anil Kapoor, Boman Irani and Pooja Hegde in promoting the company. 
 
There are several court cases and probe going on against QNet, its franchisee Vihaan and many people associated with the MLM scheme. In fact, three 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)
 
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COMMENTS

Thoufiq muhammad

1 week ago

There's even a bigger scam from a Noida based firm...name is BIKE BOT.Unfortunately I am one of the investors with many people below.They have not paid the returns from December 2018 and the firm owner has surrendered to the court.His name Sanjay Bhati

bhuwan chandra

1 week ago

I lost my 10 lakh,, I will die if I will not get back my money,,, anyone please help me out.... 8826812773

sahu

1 week ago

Courts also need to check the internet for evidences.. complaint board ,quora, company reviews need to be taken into consideration...qnet is nothing but a organisation of crooks who try to sell non sensical and magical products in the name of trust and dreams and never by any legitimate sales...All the con men need to rot in Jail

I Monetary Advisory: 7 directors held, grilled in the Bengaluru's ponzi scam
Seven directors of the city-based IMA Jewels were arrested and are being grilled by the Special Investigation Team to know their alleged role in the multi-crore ponzi scam operated by its owner Mohammed Mansoor Khan, police said on Thursday.
 
"On being warned against delaying the inevitable, the directors turned up at the city police commissioner's office and surrendered on Wednesday. They were arrested and produced in a local court for our custody to interrogate them as Khan is still at large," Deputy Commissioner of Police (central) Rahul Kumar told reporters.
 
The accused directors -- Anwar Pasha, Arshad Khan, Dada Peer, Naveed Ahmed, Nazir Hussain, Nizamuddin and Waseem -- were remanded in 10-day police custody to unearth the scam, which swindled the hard-earned savings of thousands of investors from across the state.
 
"As the case is being investigated by the SIT, its head B.R. Ravikanth Gowda is interrogating the accused on what went wrong leading to the IMA (I Monetary Advisory) go bust and Khan fleeing the country last week," said Kumar.
 
IMA's chartered account Iqbal Khan was also arrested on early Thursday after the directors disclosed his name and his alleged role in the scam that has rocked the state and the minority community as majority of investors and depositors in its ponzi schemes are lower and middle class Muslims.
 
Though the police launched a massive hunt for Khan, he is reported to have fled the country after Eid on June 5 along with his family, and huge quantity of gold ornaments, silver jewellery, diamonds and unspecified amount of cash from his posh showroom in the city's centre.
 
"We are on the lookout for Khan and will seek Interpol's help through the Union home ministry to extradite him to India after ascertaining in which country he is hiding," said Kumar.
 
The ponzi scam came to light on June 10 when the IMA showroom did not open for business after a week-long closure for Eid-ul-Fitr at the end of Ramzan last week and its Managing Director (Khan) reportedly fled to Dubai or Saudi Arabia to escape the wrath of his investors as their savings are lost.
 
The SIT team also raided IMA's head office and its main showroom and seized volumes of documents related to properties, assets, collaterals pledged by investors and depositors and bank accounts for investigation.
 
About 20,000 investors have filed a complaint with the local police station, enclosing a photocopy of documents, including passbooks showing their investments in the company.
 
The SIT has directed the banks to freeze the accounts of the company, Khan and his relatives to prevent any transaction.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
 

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I Monetary Advisory: If Only SEBI Had Acted Upon Moneylife's Warning 3 Years Ago
In continuation with our fight against all multi-level marketing (MLM) and Ponzi scams, Moneylife had sent emails to market regulator Securities and Exchange Board of India (SEBI) warning them about the Hyderabad-based Heera Gold and Bengaluru-based I Monetary Advisory Pvt Ltd (IMA). However, no action was taken by the market regulator. In fact, while referring the case to the CID- Economic Offences Wing (EOW), the Enforcement Directorate (ED) and the Commissioner of Police in Hyderabad, the market regulator claimed that the activities of Heera Gold were beyond the ambit of SEBI and the Reserve Bank of India (RBI).
  
Both Heera Gold and I Monetary Advisory have now gone bust. The tragedy is that they have both targeted one particular community by taking advantage of their sales pitch that this is an investment blessed by their religious norms.
 
In the past three years Moneylife has raised the issue of Ponzi operations of Heera Gold and IMA with two SEBI Chairmen—Mr UK Sinha as well as Mr Ajay Tyagi—because these firms operated like a vast collective investment scheme (CIS). Neither of the two SEBI chairmen bothered to respond. 
 
In our communication on 22 February 2016, we had 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."
 
This was followed by another mail on 3 April 2017.
 
 
This is really sad, since people have sold their homes to invest in such schemes—especially Heera Gold and I Monetary Advisory. When there is a high powered coordination committee of regulators comprising RBI, SEBI, Insurance Regulatory and Development Authority of India (IRDAI), ministry of finance and others, it is a pity that these fraudsters manage to carry on with impunity.
 
Both the controversial and shady groups have specifically targeted the Muslim community with a promise of high returns and constant references to ‘Allah’ to project themselves as a devout and god-fearing organisations. In addition, both these Ponzi schemes have support from state level politicians. 
 
Heera Group has deep ties with politicians from Andhra Pradesh, which may have allowed it to flourish and expand investor network across the country. In December 2017, its central office at Hyderabad was inaugurated by Mohammed Mahmood Ali, the then deputy chief minister of Telangana. 
 
In 2017, Dr Aalima Nowhera 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 have triggered panic among people who want their money back.
 
IMA too had its share of political support. An audio-clip, claimed to be from Mohammed Mansoor Khan, managing director and chief executive (MD&CEO) of IMA, alleged that senior Congress leader and Shivajinagar's member of legislative assembly (MLA) R Roshan Baig had refused to return to IMA the Rs400 crore he had borrowed. However, the same Mr Baig was present at almost every big function or event organised by IMA in Bengaluru.
 
 
Congress legislator Mr Baig, who represents the Shivajinagar Assembly segment in which the IMA Jewels office and showroom are located, however, denied asking Mr Khan to pay up Rs400 crore.
 
 
(Photo: Roshan Baig, MLA, Shivajinagar with Mansoon Ahmed Khan of IMA)
 
Following continuous protests by investors, there is at least some action in the case of Heera Gold. However, in the case of I Monetary Advisory, the protests are taking place since Monday only. 
 
After reports that Mansoor Ahmed Khan of IMA had fled to Dubai or Saudi Arabia along with his family to escape the investors' wrath as their savings were held up by his firm, investors found that the posh showroom of IMA Jewels in the city centre did not open after a week-long closure for Eid-ul-Fitr at the end of Ramzan last week.
 
 
After a meeting with top police officials on the IMA scam, Karnataka home minister MB Patil told reporters that a special investigation team (SIT) is being set up to inquire into complaints by hundreds of investors that IMA Jewels has stopped returning their deposit money and paying hefty interest on them.
 
In July 2018, Moneylife had reported about the panic among investors of Heera Gold over payment delays and rumours about the financial difficulties faced by the group, which has amassed vast sums of money from the Muslim community. Heera Group claimed to be a gold trading company with business all over the world. In the past five years, the lack of any enforcement action by investigation agencies has allowed it to grow rapidly and diversify into diverse businesses. 
 
Earlier in July 2018, while replying to an email sent by Moneylife with videos of panicky investors from Heera Gold, the market regulator’s Hyderabad office wrote to say, "Upon examination of the matter, it was found that the activities of Heera Group are in the nature of a 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, and Commissioner of Police-Hyderabad."
 
“As the matter is presently being handled by Central Crime Station-Hyderabad, SFIO-Telangana, and Enforcement Directorate-Hyderabad,” the regulator has forwarded the videos sent  by Moneylife to its Mumbai office to these respective agencies. SEBI has also 'marked a copy' to the Reserve Bank of India (RBI), which is the nodal office for the state-level coordination committee. 
 
Last year in October, Hyderabad police had arrested Dr Shaik, chairman of the controversial Heera Islamic Business Group, better known as Heera Gold. As per the 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 the public, where these companies commit a return of around 36% per annum for the invested amount. While the exact number of investors and depositors is not known because the companies have not disclosed complete information to the police, it is estimated that the number of depositors could be in thousands in different states of the country," the release says.
 
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.
 
You may also want to read…
 
 
 
 
 
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COMMENTS

G Ravishankar

4 weeks ago

It is disheartening that despite flagging to the authorities no action was taken. But Moneylife direct outreach through Investor Awareness programs is the long term answer. Our babus hanging to the coat-tails of their political bosses have no time to do anything else worthwhile...

B. KRISHNAN

1 month ago

This scam has its root in the greed and gullibility of the investors. This is not the first case where fraudsters have conned greedy public with high returns and scooted with the loot, nor will it be the last such case! The only way such frauds can be prevented is by educating the public. RBI and other money watchdogs can issue periodic ads in vernacular media warning people to beware of fraud when unsustainable interest is promised.

P S SHANKAR

1 month ago

Keep up the vigilance and honesty ML team. You are the best.

Ramesh Poapt

1 month ago

Great ML!

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