Moneylife » Life » Public Interest » QNet: The “money game” played by MLMs to lure the gullible
QNet: The “money game” played by MLMs to lure the gullible
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| 17/11/2012 02:38 PM |
QNet, the controversial MLM company is luring executives and professionals by promising a weekly income of Rs27.7 lakh. Do the math… this is about the salary that Mukesh Ambani, one of India's highest paid CEOs earns. Yet, this patently exaggerated claim by QNet is ensnaring people to invest their hard-earned money on the fake promise of an enormous wealth. Meanwhile, the company seems to operating under several different names that are designed to hide a trail to its operations
QNet, the controversial, Hong Kong-based multi-level marketing (MLM) operator with multiple names (GoldQuest, QuestNet, QNet, QI Ltd and QI group are the better known names) and identities seems to be working on a clear plan to hide the trail of its Indian operations. Interestingly, worried investors and bloggers or those burned by the pyramid marketing business are doing an excellent job of tracking its operations and publicising them. Here are some such trails gathered through helpful bloggers like Sherwette Mansour from Egypt (http://joinnetworkmarketing.wordpress.com ).
According to Wikipedia, QNet’s business model has been described as a simple pyramid scheme, where initial entrants to the scheme do make money, but as the number of IRs increase, finding more independent representatives (IRs) becomes harder and harder, until those that join late are unable to recover even their initial outlay and the model collapses. QNet counters this explanation as offering a business opportunity that doesn't have the high cost of start up as a limiting factor. When an IR recommends the product, the customer makes a purchase through QNet’s online system and the IR receives a commission based upon QNet’s compensation plan.
The compensation plan operates by the recruitment of customers by the existing IR. An IR is provided with an ID that gives access to a “Tracking Centre” (TC) in its computer system through which the IR’s sales are tracked. A TC has a left and right customer group. Every customer owns a TC which is then placed on the left or right customer side of the IR’s TC. A ‘direct’ transaction (a customer’s personal reference or sale) is counted as one transaction. An “indirect transaction (someone in the customer’s TC buys/refers/sells) is also counted as one transaction. QNet pays $250 each time three product sales on an IR’s left customer group are matched by three product sales on the right,” says Wikipedia.
According to Mr Mansour, the blogger, if you are being paid for every six new people you recruit, by 13th level down you would exceed the population of Earth. He uses example of his home country Egypt. He says, “By level 11, you will exceed the population of Egypt. So, I am assuming that the business flourish and reaches level 10, which will have 60,466,176 (6.04 crore) people. Let’s assume that all these people will join the business, keeping aside the fact that Egypt is a POOR country and not everyone can pay an average of $1,000 to join the business. By level 9, the last level making profit in the country assuming everyone will join, an average of 60,466,176x$1,000 = $60,466,176,000 ($6,046.6 crore) is sent outside the country for all members in level 9 to make profit. Please do keep in mind that this number of people entering the business is almost impossible because a small percentage of Egyptians can actually afford to pay an average of $1,000 to join the ‘business’.”
To read more about QNet on our wesbite, click here.
Here are the repeat sales points (RSP) and its cash and business volume (BV) equivalents provided by QNet in its FAQs for India...
Image source-QNet FAQs for India
QNet says, its IRs can achieve rankings like Bronze Star, Silver Star, Gold Star, Platinum Star and Diamond Star, depending upon, how much he and his network or down lines sells.
Image source- QInfinite Compensation Plan for India
QNet claims that a Diamond Star can earn up to Rs27,73,800 (Rs27.7 lakh) per week while the same for a Platinum Star would be Rs22,39,050 (Rs22.4 lakh) a week. The money earned by a Diamond Star in QNet is almost the same that Mukesh Ambani of Reliance Industries (RIL), India's richest man as per the Forbes list, earns every week as salary (Mukesh Ambani forgoes Rs23.82 crore from his pay package ). We all have heard about Mr Ambani and his wealth. However, nobody knows how many Diamond or Platinum Stars are there in QNet's MLM network. If you know, then please share it.
In India, QNet’s MLM operations were controlled by QuestNet Enterprises (India) Pvt Ltd, a company registered at Chennai till 13 April 2012. From next day, it shifted all its registered agents, database and business to Vihaan Direct Selling Pvt Ltd, company registered in Bengaluru. Here are the details mentioned in the frequently asked question (FAQ) section on QNet’s site…
Image source-QNet FAQs for India
QuestNet Enterprises was operating QNEI eStore, a platform from where IRs, which is how the investor-dealers of QNet are described, could place orders or buy products and also enrol new recruits. After launching Vihaan, the company asked all its old IRs to mandatorily register under the new business name in order to receive their commissions. It is pertinent to mention that the big crackdown on its operations also occurred in Chennai when QNet operated under the name GoldQuest and sold numismatic coins.
You may also be interested in reading about the many other MLM schemes that Moneylife covers. Click here to read about them.
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Comment
Sandeep Patel 3 weeks ago
http://www.scribd.com/doc/114715049/The-....
Refer page 13 and 14 specifically ... I suppose this is the same document we are all referring to..
Is It legal 3 weeks ago
Dear All,
Please visit this link
https://docs.google.com/file/d/1rYH48CJcBgd7a7vBJJ7wSAhx367XT_Ty_24uHLY19dFSKTtkMbculXRI3nfI/edit?usp=sharing
this is an RTI reply by Ministry of Finance to Federation of DSA.
It clearly states the new The Money Circulation Schemes (Banning) Rules 2012 which will put QNET out of businees.
All QNET IRs please provide your opinion......
Sandeep Patel 1 month ago
Dear Sucheta,
Why is your forum not speaking out against QNet ... the latest is the Davis cup sponsorship .... next what ? corporatising money laundering seems to be the order of the day ... Request we RAISE OUR VOICE TO HELP MANKIND ....
Sandeep Patel 2 months ago
All IR's (customer-distributors) in service tax parlance, with an annual income of over 10 lacs should be paying service tax for advertising and promotional services which they provide to Qnet as well as to the common public for promoting and distributing Qnet's products... Is that happening ??? ... needs to be checked by the IRS, RBI, DRI etc and the defaulting parties should be penalised. As one knows and from the various articles and pages published on social networking sites, the income generated from kthe business is huge for the top 20% of the members of the pyramid and there exists the potential of a revenue loss for the Government in case the IR's or Qnet or Vihaan or Vanamaala any of their subsidiaries (with multiple cross holdings) fail to submit / pay the requsite taxes. one needs to understand that all IR's themselves are business entities and need to have certain registrations as mandated by law. The bifurcation (if any) of the TDS for commision payouts to IR's by Vihaan/ Qnet needs to be checked.
Having worked in the area of Excise and Service tax as a professional one basic premise I have learnt - Ignorance of the law is not an excuse for not following the law and the above mentioned rule on service tax applicability for customer-distributors have been in existence since 2006... Lot of money for our Government especially from the top 20% of the earning members of Qnet or could be more ...
I am not saying that the business is illegal, however, within the existing framework of the law the above needs to be checked and Vihaan's financial records and payouts to all IR's should be verified.
The policy and procedures of Qnet clearly state that an IR is a contractor and not an employee of the company... Therefore QNet themselves declare that IR's are outsourced agents who are promoting their products and services via word of mouth ... earning a commision for doing so and are therefore individual business entities ....
Some interesting facts to be noted:
Also a point to note that while Vihaan is registered with the MCA since Oct 2011, they have yet to file their balance sheet with the ROC at Bangalore. While the e-filing status is active, the digital signature certifacates have expired. One of the directors also holds a position of a director in another company where the same phenomena can be noticed. Understand from colleagues who are CA's that while DSC's are not mandated by MCA it brings about a transparency in the manner in which a company operates.
I was also little surprised to see that one of the directors of Vanamaala tourism (as listed in the MCA company master data) is also an employee of QVI club... A first glance seemed to be a conflict of interest... QVI earns money from the services it sells to IR's, the director also earns money from the services rendered by Vanmaala (takes home a neat profit) .... but who pays for it ... all the IR's. After all the IR's are the only customer this company has....
Prana health resorts - a QVI club resort is owned by one of the members of the management team of QNet... So while an IR utilises the package and also pays Prana Health resort for occupancy, also pays Vanamaala (owned by an employee of QVI) for availaing the services and the yearly usage fee ... I am not sure any more as to what pay backs are happening in the entire system ...
All this has been gathered from the internet ... are facts based on actual links and photos from various forums and I have validated the same with a couple of IRS officers who are known to me... I would like to use this forum for the "MOTIVATED IR's" to check and see for themselves as to how deep the water is before making any further comments ... The social media truly is the 9th wonder of the world....
KK 1 month ago in reply to Sandeep Patel
It is your opinion Sandeep..All your statements are wrong
Sandeep Patel 1 month ago in reply to KK
KK bhaiya .. if you have the guts share your IR ID here .. i will refer you to the authorities ...
MDT 2 months ago
Here is an email Moneylife wrote to Steve Forbes, Chairman and Editor-in-chief of Forbes and the reply we received from Forbes' Senior Editor for Asia...
Dear Mr Forbes,
Hope you are doing fine.
This mail is in regards with articles written by Donald Frazier on QNet and published by Forbes.
Despite clearly saying no to the advances made by Mr Frazier, he continues to use the Moneylife name and that of Sucheta Dalal (Managing Editor, Moneylife) in his promotional articles on behalf of QNet. This is nothing but an attempt to defame a tiny publication like us. We had clearly told him that we have no attention to engage with him on the Forbes website when we run our own publication. Also, we were forced to take note of his writing only because scores of QNetters posted links to Forbes on our website alluding to the great "credibility" of the brand. In fact, all of us have held the Forbes brand in high esteem, so we are alarmed to discover the free run that this columnist apparently has to run campaigns on behalf of Multi-level marketing (MLM) companies and to discredit those who are trying to protect people from falling into the trap.
http://www.forbes.com/sites/donaldfrazie...
We have a more serious reason for writing to you this time. Mr Frazier in his zeal to puff up QNet is now wrong on facts as well. For instance in his latest piece he says, Sucheta Dalal runs "paid" workshops. To quote him: "Sucheta Dalal, an Indian financial journalist who crusades against scams and promotes paid workshops on how to avoid them, made the most of our story, flatly calling Eswaran's company a fraud in her Moneylife blog."
The facts are as follows: The workshops are conducted by Moneylife Foundation, a not-for-profit entity registered with the charity commissioner and entitled to tax exemptions. More importantly they are not PAID workshops but FREE for attendees. Moneylife Foundation and Moneylife magazine enjoys high credibility and our seminars too are attended by members of the police and the Serious Frauds Investigation Office (SFIO) in India.
We are also flummoxed that Mr Frazier is offering to mediate between QNet and Moneylife and also the fact that QNET sends responses to our queries to Forbes, rather than to us and they are published on Frazier's blog post. From when has a global brand like Forbes reduced to bad-mouthing and discrediting a tiny boutique publication in India? Surely there is something more to this than meets the eye.
We are writing this time to bring the facts to your attention. We would also like to state that we will be forced to initiate all action that seems necessary to protect our reputation, including recourse to a lawsuit/s if Frazier is allowed to continue in this manner. Forbes has an Indian publication and we believe there is a cause of action in India as well.
At this juncture, we are confident that a magazine of such high global repute will take all necessary action to rectify the situation. We look forward to hearing from you on the action taken. Ms Dalal has already been in touch with two of your editors Mr Indrajit Gupta (on the previous occasion) and Mr Charles Assisi (this time) and has brought these dubious and defamatory blog posts to their attention. Both had promised to look into the matter. We are now escalating this to your level before planning our next course of action.
Thanks & regards,
Here is the reply Moneylife received....
Dear Mr. xxx:
Steve Forbes passed along your note to him. Thank you for bringing this matter to our attention. I am looking into it and I will get back to you as soon as I learn more.
Best regards,
John Koppisch
Senior Editor
Forbes magazine
Forbes Asia