Fraudsters will lure gullible people with attractive schemes but end up pushing them into a debt trap in the long run. So, beware of such scams and scamsters, writes M Srinivas

By | Published: 12:55 am 7:47 pm

The next time when someone comes up with an offer of doing an easy business that will change your fortunes, think twice!

Or else, it will land you in trouble resulting in debts as fraudsters involved in multi-level marketing (MLM) are targeting employees, students and middles-class families in the name of direct market selling business and duping innocent people, the police cautioned.

The Cyberabad police, who cracked the whip on major MLM fraudsters for cheating people, warned that the MLM companies first create greed among people saying that they can buy a swanky house or a car of their choice once they start getting benefits of the MLM business or binary pyramid scheme within a few days after investing in it.

The companies try to gain the confidence offering them commission, additional perks in the name of health-related products and foreign trips. They create such an atmosphere that will force an individual to take a decision to invest in the company.

Once a person invested some amount, the MLM companies’ representatives inform that they will get profit along with the commission only after enrolling three or more people. Left with no other option, the investor will enrol three people who, in turn, must join three more people and the enrolment continues without any end to it.

A few companies would attract people by giving advertisements in newspapers while others would directly come in contact with people with the help of their strong agents’ network. To woo people, they would conduct meetings in hotels and explain about the scheme, Cyberabad Economic Offences Wing (EOW) Inspector G Gopinath said.

During the marathon meetings, the representatives from the MLM companies mainly focus on commission and attempt to attract people through motivational speeches. Giving power-point presentations, they would give certain examples of those who became rich within months after investing in the business.

However, the representatives would not reveal about enrolling more people at the time when a person is investing the amount. Some companies target employees as they would get loans easily from the banks for investing in the business while a few other firms attract students and middle-class families and trap them.

The representatives would exert pressure on the investors to contact the people known to them through Facebook, WhatsApp, etc., and ask them to join the business. However, the sad story of the investors would start when the companies stop paying commission.

The investors’ problem turns from bad to worse when pressure starts mounting on them from those who were enrolled by them for failing to get commission. This would eventually land investors in debts.

The debts forced a 31-year-old software engineer A Arvind, who quit his job from a leading MNC and became a distributor of a MLM company, to end his life in Madhapur. “The MLM companies are only cashing in on the weakness of people and exploiting them,” he explained.

According to sources, as many as 200 small scale MLM enterprises that are still functioning in twin cities. Of them, 30 are major companies. “We request the people to be more careful before investing their hard-earned money in any company or else it will lead to problems to them,” he advised.

Gopinath asked them not to fall trap to easy money business offers with beauty, personal care and holiday trips along with education packages and computer courses training.

A ‘nutty’ affair

The crackdown on multi-level companies (MLM) started in Cyberabad with the ‘Chebulic Myrobalan’, known as ‘Karakkaya’ nuts fraud case that gave a fillip to the police, who gave sleepless nights to fraudsters including those from companies that have clientele across the country.

It was the first-of-its-kind fraud that took place in Kukatpally Housing Board (KPHB) Colony in August 2018 in which 36-year-old kingpin Muppala Mallikarjuna hailing from Nellore was arrested by the Cyberabad police along with his five associates.

As many as 650 people, especially housewives, were duped of more than Rs 8.16 crore by Mallikarjuna, the police said.

The police said Mallikarjuna bought 81 tonnes of ‘Karakkaya’ nuts for less than Rs 40 a kg in Begum Bazaar and convinced people that he would give them Rs 300 a kg as a commission for processing, for a deposit of Rs 1,000 a kg.

He claimed that he was supplying ‘Karakkaya’ powder to herbal companies. He also returned more than Rs 5.8 crore to clients to assure them that his company Soft Integrate Multi Foods Private Limited in KPHB Colony was genuine, and duped clients.

Mallikarjuna fled after the police booked a case against him. However, the police traced and nabbed him.

Giving hope to victims

The busting of multi-level marketing (MLM) companies fraud by the Cyberabad police resulted in freezing of Rs 550 crore in bank accounts.

This is in addition to the attachment of properties worth Rs 539 crore belonging by two MLM companies by the Enforcement Directorate (ED), which works under the supervision of Ministry of Corporate Affairs, recently.

The crackdown launched by the Cyberabad police and the ED gave hope to victims of these companies to get their claims with the court’s consent.

Apart from arresting those involved in cheating gullible people through MLM schemes, the police ensured that cash in the bank accounts belonging to the accused was frozen.

After receiving complaints against the companies, the police booked cases and conducted a detailed probe before arresting 30 people from half-a-dozen MLM companies.

Net cash of Rs 6 crore and other documents were also recovered from the arrested persons, said Cyberabad’s Economic Offences Wing (EOW) Assistant Commissioner of Police T Anand Reddy.

He said action was taken against Future Marker Life Care (FMLC) Private Limited, eBiz.com Private Limited, QNet, Soft Integrate Multi Foods Private Limited and two other companies for duping people.

More than 50 lakh people fell prey to the easy business tactics of the MLM companies and lost their money.

Even as investigation into the MLM companies fraud is on, the ED took up investigation and attached properties of eBiz.com Private Limited and FMLC worth Rs 277.97 crore and Rs 261 crore, respectively, under the provisions of Prevention of Money Laundering Act (PMLA).

Based on First Information Reports (FIRs) issued by the Cyberabad police, the ED chipped in and attached the properties of eBiz.com and FMLC.

In eBIZ.com company’s case, residential plots, apartments, farms houses and commercial buildings in Delhi and Noida along with balances in bank accounts belonging to the company’s directors and other associates were attached.

Assets such as residential plots, agricultural lands and houses worth over Rs 261 crore belonging to directors of FMLC, along with their family members and other associates were also attached.

ED’s crackdown

Rs 277.97 crore properties of eBIZ.com Private Limited attached

Rs 261 crore properties of Future Maker Life Care Private Limited attached

Attached properties include residential plots, commercial buildings and farmhouses

Crackdown was based on FIR issued by police

The ED has sought details of QNet MLM Company

Cyberabad police crackdown

30 people were arrested for cheating innocent people

The arrested persons belong to Future Maker Life Care Private Limited, eBiz.com, Soft Integrate Multi Foods Private Limited, QNet and other companies

As many as Rs 550 crore in bank accounts were frozen

Net cash of Rs 6 crore was also seized

More than 50 lakh people fell prey to the MLM fraud and lost their money

Cyberabad Police Commissioner VC Sajjanar cautions people

Money circulation schemes are banned in India under the provisions of Prize Chits and Money Circulation Schemes (Banning) Act.

Product is only camouflage but the backend is completely money circulation. People should be careful while investing money. Whether it is an investment of Rs 200 or Rs 1 lakh, they should not believe in money circulation schemes, said Cyberabad Police Commissioner VC Sajjanar.