The proliferation of MLM, survey, direct selling companies and websites targeting gullible investors with the promise of easy money, is a worrying phenomena that needs to be dealt with sooner than later

Moneylife Digital Team

Multi-level marketing (MLM), survey or direct selling companies, and websites providing "stock option tips" are rapidly increasing, targeting gullible investors, luring them to make investments with the promise to get easy money in a short time.

Survey schemes promise returns on filing online surveys and enrolling more members. Direct selling involves buying the company's products and selling these to earn commissions. Websites providing "stock option tips" create suggest trading in specific stocks and the Nifty.

Promoters of MLMs are intelligently adapting various business models to attract people to invest. And through the Internet they are reaching a larger number of people everyday.

Direct selling

Direct selling, one form of MLM business, has been popular in India for the easy gains that it has earned many. In this case, one becomes a member by buying the company's products. Subsequently, the member turns into a distributor by selling the product kit to other people, registering them in the chain of business. Enrolment of new members also earns a commission and fixed income. Amway, Tupperware are among the better known names in this business.

The already crowded direct selling space is also getting more competitive. For instance eRecharge Life (ERL) an MLM unit, claims to be a registered company engaged in the business of prepaid mobile recharge, DTH recharge and web builder packages. One can become a member by paying Rs350 and purchasing any of the company's products, like the mobile ERL for Rs1,200 (a minimum range product). By paying this amount, you become an ERL distributor; and can start referring the business to other people and earn up to Rs1,500 daily. ERL payment is based on binary income, and promises a monthly income of Rs45,000 for a single membership. ERL also has plans for DTH and web builder that promise similar high income.

RMP Infotec, another MLM company, has a typical modus operandi. One buys their kit, sells it and earns on this. The products range from energy-saver to clothes to laptops. The commission is calculated on a pair value (PV) binary basis. In this case, the distributor should have at least 150PV in the structure, with a minimum of 50PV on both sides. Thereafter, every package sales of a binary pair will receive 100PV (1PV=Rs10). The maximum payout per week for a distributor will be 13,000 PV (130 pairs).

Online survey schemes

Survey schemes promise huge returns on a weekly basis, merely on the basis of becoming members and filling online surveys. The input from these surveys, it is said, is used as a tool for market research by various corporates.

Moneylife has repeatedly exposed the dubious claims by Singapore-based SpeakAsia Online. But, a simple Google search reveals there are many such online survey schemes.

Nano Excel, for instance, claims to distribute survey income ranging from Rs500 to Rs31,000 on different schemes such as surveyor package, star surveyor package, or mega surveyor package. Then, there is Hollywood Survey, an MLM believed to be registered in the US, which says, "Spend 5-10 minutes in a week and earn a good sum of cash". It promises monthly, fixed income of Rs4,000.
Spidey Survey, another MLM operation, promises a weekly income of $10 for one survey a week. It promises gains through Survey Income, Binary Income, Referral Income and Bonus Income.

Also, there are domestic MLM survey schemes like FLC Online and Ram Survey that operate on similar lines. (Read, 'Competition heats up in online survey space with the entry of domestic MLM companies'.) 

Interestingly, there are some MLM companies that also promise earnings in gold. Unipay2U India guarantees a monthly return of 20%-23% and in addition gold coins. It also promises income on referral and binary basis. It has a presence in China, Nepal and Malaysia and some other countries. Jaipur-based Gold Sukh Trade India Ltd, an MLM company that deals in gold products, promises returns once the cycle of investment is completed. Its office was raided by the income tax department in November last year, and the owners surrendered Rs23.35 crore to the IT department after completion of the assessment of their properties.

There are a number of complaints against both these MLMs, alleging that they have not paid returns promised despite repeated requests.

Stock option tips

The Internet is flooded with websites that boast they give tips, with an accuracy as high as 99%, in Nifty futures and options, and various stocks. These portals lure people to subscribe to various plans, which is nothing but virtual gambling.

There apparently aren't enough MLM schemes to dupe people with dubious claims.  A number of websites have cropped up, which try to lure investors with promises of more than 100% returns. Moneylife recently published an article about such websites. (Read, 'Websites providing 'stock option tips': By all looks, another huge scam in the making')

Many readers have alerted Moneylife about such websites. One of these, http://www.wisemoney.in, offers advisory and trading services in stocks, derivatives, commodities, forex and mutual funds. Its wealth mini account costs a minimum of Rs1,00,000. Another, http://www.ushaconsultancyandsolution.com/index.htm, specialises in tips on commodities. It claims, "Earn 3 lakh per month on MCX TIPS..." and also claims more than 90% accuracy. http://www.moneymatterresearch.com/Services.html is yet another website that claims more than 90 % accuracy on a consistent basis on 3-5 calls per market day.

Many such MLM companies have, in the past, disappeared after duping investors. StockGuru India is one recent example. With such rapid growth of MLMs, its time to have an exclusive regulatory body governing them, otherwise people will continue to fall in the trap.