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)