Sucheta Dalal :Coin Game
Sucheta Dalal

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Coin Game  

February 17, 2009

An international network marketing scheme hawking expensive limited edition coins is attracting a huge following. Sucheta Dalal examines this strange quest

Over the past few decades, one has seen a variety of chain marketing schemes capture people’s imagination but each of them has either collapsed or vanished with public money. There was the Sheregar gold-chain scheme, which did so well that it spun off diamond and kuber schemes. When it collapsed in 1998, nearly 5,000 investors lost their money and an agent was found murdered.
Then there was the JapanLIFE scheme, which sold magnetic mattresses for a stupendous Rs one lakh plus and was apparently started by a businessman from Shenzhen. Congress MP Jaipal Reddy had raised the issue in parliament and called it a scam. But its politically-connected promoter R.V. Pandit - or rather his son, who was the main operator - was arrested only a couple of months ago. This scheme ran for well over a decade and again thousands of people have lost money or are stuck with really expensive mattresses.
A third one that we exposed in the 1990s, while I was at the Times of India, involved some time-share schemes, sold by a bunch of people who claimed they were non-resident Indians (NRIs). They targeted bankers and wealthy businessmen, held meetings only in five-star hotels and flashed visiting cards with only a mobile numbers. They vanished when we began to expose their clandestine operations.
The latest scheme that has captured public imagination for the past few years is ‘GoldQuest’ or QuestNet. Call it network marketing, or multi-level marketing (MLM), a pyramid or ponzi - you will find endless debate over its pros and cons on the Internet. Of course, QuestNet executives will provide you an elaborate distinction between MLM schemes and pyramids and claim they belong to the former category.
Is networking marketing a scam? Let me start by pointing out that several developed countries ban multi-level marketing companies altogether. Even Iran threw out GoldQuest. Their functioning and structure confuses people. After all, any scheme that is not marketed openly but propagated only through quiet networks, promises instant riches and sells products at a huge multiple of their intrinsic worth certainly attracts suspicion. This is evident in the numerous emails that I have received over the past two years asking about Goldquest. As usual, people want ready answers, which are not always available. It is for each individual to decide, whether to be lured by the quick riches that the scheme promises and the implications of persuading family and friends to cough up the money to participate.
What exactly is GoldQuest or QuestNet? Its corporate communication executives wrote to say that GoldQuest International, Hong Kong, is part of the QI Group ( and QuestNet , the marketing arm of the group, is also headquartered in Hong Kong ( GoldQuest International has 18 wholly-owned subsidiaries engaged in a wide range of activities including time-share resorts, retailing, education marketing, finance and corporate investments. In India, it registered GoldQuest International India Pvt Ltd., in 2001. Elsewhere we are told that QuestNet Enterprises has been registered in November 2004 in Chennai. Between them, they have offices at Bangalore, Mumbai and Hyderabad. The communication is interesting, because the communication executives sometimes refer to both companies with India in the name and at other times without it.
The wife of a finance company chief, who attended a marketing seminar, says that the organisers claimed to have Reserve Bank of India’s permission to operate the scheme and that the Finance Minister’s wife Nalini Chidambaram is the legal advisor to the company. Although QuestNet’s claims about its legitimacy are an important part of its sales pitch, government agencies are uncomfortable about its operations and the Intelligence Bureau has sent out a report questioning its activities to several government agencies.
The company sells a pair of limited edition, numismatic medallions for around Rs30,000 that are made in Germany. These have images of Indian deities, the ka’ abah, Bhagwan Mahavir, the Pope and Mother Theresa; it also has coins for major world sporting events-in fact, it has coins for every interest group. It sells through closed-group presentations led by influential people - doctors, lawyers, sports stars - and the products are pitched at those who can cough up Rs30,000 for a pair of medallions of doubtful value (limited edition coins don’ t necessarily appreciate in value). The emphasis at these meetings is on establishing the apparent legitimacy of the scheme by displaying documents about its tax filing, apparent government permissions and its ISO 9001:2000 certification.
However, the selling point is not the value of the coins or their potential appreciation. Each buyer of coins, who puts down 30 grand, is supposed to persuade two others to join the scheme and purchase coins. When that happens, the originator gets back a part of his money in line with a detailed matrix which is spelt out on its website without indicating the exact returns earned. The company has three posh offices in India, but when I called a number listed on the Net, I was told that the person who informed me about QuestNet alone can give me information about the scheme. However, they offered to tell me about a couple of forthcoming seminars that I could attend for more details.
Last week, Prof Agashe from Pune wrote to say, that Michael Ferriera, the former world billiards champion, is at the forefront of marketing the scheme and a former cricketing great and a national tennis player are also cheer-leading the sales and lending credibility to the scheme. Over the past few years, the scheme has apparently reached even farmers from Sangli. A doctor proclaims that he has been earning several lakh rupees every month from GoldQuest - apparently selling some limited edition coins is more profitable than practising medicine!
Anand Desai, an investment banker, changed his mind about joining the scheme, after having paid Rs30,000 because of the long delay in sending him the coins. This started a protracted battle, with Mr Michael Ferreira communicating with him on behalf of the group. After much wrangling, Desai got his coins but was flatly told that the company has no policy of returning anybody’s money if they choose to opt out of the scheme. There are many such cases posted on the Internet and, in Chennai, there was even a raid on the company.

Several months ago, in an email to me, Ramya Chandrasekaran, the communications manager at QI Limited wrote that network marketing is a much-misunderstood business - “perceptionally challenged”, is how it was described. She also sent me a long presentation to highlight differences between pyramid schemes, which she portrays as a scam and multi-level marketing schemes, which are claimed to be legitimate. Another GoldQuest executive, K. Preetha, head corporate communications, replied to my queries saying, “We would like to further reinstate (sic) that as asked by yourselves (sic), Mrs Nalini Chidambaram was engaged by the company on the legal side. She is not in the management team as perceived. Our legal advisor is Mrs Senthamarai who handles all our legal sundry issues.” She says further: “We need not have to have any RBI approvals/sanctions to run our business.” Well, the Reserve Bank of India is currently looking into this claim and, as I said earlier, the Intelligence Bureau is not very comfortable with it either. At the same time, there are people who claim to be raking in the moolah by hard-selling coins to friends and relatives. Only time will tell whether the smart ones are those who joined the gold quest or were too prudent to be lured by quick riches.

-- Sucheta Dalal