From Bombay to Goa and Chennai, the noose is finally tightening around QNet, the global Ponzi scheme that has been allowed to raise several thousand crores of rupees for 16 years (upward of Rs8,000 crore, according to estimates) from gullible people, luring them with fake promises of high returns or an attractive business opportunity. If Kirit Somaiya raised the issue in parliament in early May, then another BJP leader thundered against the scheme and its political links at a press conference at BJP’s headquarters in Mumbai.
QNet’s roots run deep into India’s powerful elite: politicians, bureaucrats, the police, investigative agencies, defence services as well as film and sports stars. It also enjoyed strong media clout as big advertiser and sponsor of popular television shows. But what next? Will the recent bursts of outrage and police action, finally, halt the steady and unrelenting march of a scheme that has successfully trapped people for over a decade? Let’s take a dispassionate look.
QNet flourished during the United Progressive Alliance (UPA) and touted its connection with Nalini Chidambaram, wife of the powerful finance minister. This happened even though an investigation by the serious frauds investigation office (SFIO) was ordered way back in 2010, 10 years after the company was set up in Chennai in the name of Gold Quest (Quest Net is another of its avatars), to sell numismatic coins, figurines and travel packages.
In March 2012, SFIO signed off on a bulky ‘secret’ report, which remained buried for four years until Gurpreet Singh, a whistleblower and relentless crusader against QNet, who has faced untold persecution by the company, presented it in the Bombay High Court. The SFIO report rips apart every pretension that QNet runs a legitimate business. In fact, it calls QNet a threat to national security. The report also reveals how QNet, while running a pyramid scheme, has itself used petitions and lawsuits in various courts, including the Supreme Court of India, to obtain relief from investigation; invariably, it has had the most expensive and powerful lawyers in the country to argue its case.
Even in 2010, the Supreme Court appointed a one-man commission to settle complaints against QNet but allowed it to continue doing business because the question of its legality was left open; it has not been settled as yet, says the SFIO. In effect, like hundreds of other Ponzi schemes, QNet had mastered the art of gaming the legal system to ensure that its operations were allowed to continue undisturbed by merely settling the few hundred formal complaints lodged against it.
The most startling part of the SFIO report is the categorical assertion that the QNet group is “not only conducting an illegal business contumaciously, but is also keeping and submitting falsified documents to the regulatory agencies.” Further, that its business operations and conduct are “totally unfair and prejudicial to public interest. They are also a potential threat to national security,” since the persons enrolled include large numbers from defence services and ministries. The report also establishes, with facts and figures, how a majority of people enrolled by QNet as participants in a big business opportunity have not been paid their commissions and have lost money.
If the SFIO report were not explosive enough, the government has a detailed study on Ponzi and pyramid schemes by the standing committee of parliament on finance, headed by Veerappa Moily, which was presented in October 2015. This report provides a macro perspective by pointing out that “huge amount of money has been transferred out of Ponzi schemes to multi-state cooperatives” which have become a “shelter for illegitimate funds due to their weak regulatory regime.” More shockingly, it says, such cooperatives, operating under the agriculture ministry, have increased 100-fold since 2010.
With these two reports in hand, we should have witnessed a nationwide crackdown against QNet and thousands of other Ponzi schemes that are looting ill-informed and gullible people. Instead, we have some shouting and name-calling in parliament and at press conferences and a few hundred orders by the Securities & Exchange Board of India (SEBI) asking money circulation schemes to stop raising funds or to refund the money. We have no clue if these orders are being obeyed and whether SEBI even has the capacity to enforce them. Meanwhile, each law enforcement agency uses a different law to initiate action against specific Ponzis. We do not see any attempt as yet to act on the standing committee’s recommendation to frame a single comprehensive law that will actually protect people from this rampant loot through pyramid and multi-level marketing schemes.