The Cyberabad police have arrested 70 people from Hyderabad in connection with an alleged Ponzi scheme run by QNet, a multi-level marketing company and its Indian franchisee Vihaan Direct Selling Private Ltd.
The Ministry of Corporate Affairs (MCA) has initiated actions against Vihaan and Qnet for defrauding its investors by running Ponzi and binary schemes. Cyberabad police busted the fraud, amounting to Rs 5,000-crore, and have registered 38 cases against the company.
Cyberabad Police Commissioner VC Sajjanar told reporters that many cases had also been registered against Vihaan (QNet) and its promoters from several states. He said that it is a simple pyramid scheme in which the early recruits earn a quick buck.
"As the number of independent representatives (IR) increases, finding more IRs (newcomers) to join the scheme becomes difficult or impossible. IRs who join late does not earn enough to cover their first outlay and the model collapses. It works as a binary scheme," The Indian Express quoted Sajjanar as saying.
The police have issued lookout notices against 12 directors and promoters of QNet. They have also sought help from the Registrar of Companies (RoC), Bengaluru, and other investigation agencies for shutting Vihaan/QNet's operations. RoC has also filed a petition against the company in Bengaluru Bench of the National Company Law Tribunal (NCLT) and has launched prosecutions over various violations of the Companies Act, 2013.
The Economic Offences Wing (EOW) have served notices to actors Shahrukh Khan, Anil Kapoor, Boman Irani, Jackie Shroff, Allu Sirish and Pooja Hegde for participating in QNet events. Shahrukh Khan, Anil Kapoor and Boman Irani have responded through their advocates and their replies are being studied by the officials.
The police are awaiting responses from the other celebrities. Earlier this year, QNet had denied having any association with the celebrities and other personalities who appeared for its events.
QNet has also denied the scam allegations and has challenged the report by MCA claiming that it is baseless, fallacious and without a proper understanding of the business model. Rishi Chandiok, the Regional Director of QNet (South Asia), said: "Vihaan is fully compliant to Indian laws. Any commission earned by our distributors is based on the sale of products and the effort put in by the distributors."