Dubai: Under fire over alleged fraud, controversial direct selling company QNet on Saturday said it has terminated over 400 independent representatives (IRs) in 22 countries for violations.
QNet said they “have a zero-tolerance policy towards anyone found to be using their name to promote any form of illegal, misleading or professional act.
The Hong Kong-based company said “bad practices by a small group of people has eroded the brand equity built by the company over the last 22 years.”
“This type of unacceptable behaviour impacts the livelihood of thousands of distributors who have built a legitimate direct selling business by putting in years of hard work and have done so by abiding by the regulations of the company and the laws in their country,” QNET said in a statement published in the form of a full page advertisement in an English daily in Dubai on February 29.
QNet blaming its representatives for wrongdoings is like the pot calling the kettle black. Their representatives have doing exactly what they have been taught by the company over several years. QNet cannot suddenly wash its hands of them.
In order to inspire investor confidence, the company also announced changes in its registration and business activation process.
A spokesperson for QNet in the Mena region admitted facing reputational challenges. “Yes, we are facing some issues but we are taking them seriously. The crackdown on unethical independent representatives in the first step in this direction,” the spokesperson told Gulf News on Sunday.
Whistle blower remains cynical
But Gurupreet Singh, 47, a self-styled Indian activist and relentless crusader against QNet described the move as an eye wash.
“This is just a desperate to save face,” the software professional said over the phone from his hometown Mumbai.
“QNet blaming its representatives for wrongdoings is like the pot calling the kettle black. Their representatives have doing exactly what they have been taught by the company over several years. QNet cannot suddenly wash its hands of them,” said Singh who runs the Financial Frauds Victims Association for those allegedly duped by QNet.
Singh was also a whistleblower in the QNet racket in India which is estimated to have impacted nearly half a million people across the country.
Celebs under scanner
Following his complaint, former world amateur billiards champion Michael Ferreira was arrested in September 2016 and charged with cheating and forgery. Ferreira was a director at Vihaan Direct Selling Pvt Ltd., a franchise of QNet in India.
Bollywood actors Shah Rukh Khan, Anil Kapoor, Jackie Shroff, Boman Irani, Vivek Oberoi and cricket Yuvraj Singh are among many other celebrities who have been served notices for promoting the company.
“QNet is a chain where a person is fooled and then he is trained to fool others to earn money” Bombay High Court said in its 2016 order while rejecting anticipatory bail applications of accused.
For the uninitiated, QNet uses a compensation plan that calculates commissions payable to people based on the sales volume generated through their referrals.
Crackdown on Indian franchise
As many as 70 people were arrested by India’s Cyberabad police for their role in the Vihaan Direct Selling (QNet) racket in August 2019.
VC Sajjanar, commissioner of police at Cyberabad issued a statement to Gulf News after the arrest. It read: “Promoters of QNet or Vihaan target software employees, unemployed youth, and homemakers stating that there is a business project which will yield huge profits to them. They give motivational speeches to the people whoever comes to the meeting and make them believe it is a good opportunity to earn quick money.”
Sajjanar described QNet/Vihaan business model as a simple pyramid scheme in which the early entrants earned quick money.
Following the crackdown, the ministry of corporate affairs (MCA) in India and the country’s the department of consumer affairs initiated winding up proceedings against Vihaan.
Qnet has operations in more than 30 countries with offices in Indonesia, Malaysia, Hong Kong, Philippines, UAE, Thailand, Taiwan, Vietnam, Saudi Arabia and Egypt with franchise companies in India, Singapore and Turkey.
Banned in Saudi Arabia
In 2017, network marketing was banned in Saudi Arabia after complaints about companies like QNet. The following year several QNet representatives were arrested following a raid by the
Ministry of Commerce and Investment (MCI). “The defendants were involved in making arrangements for QNet activities, such as reserving hotel halls and sending invitations to clients to attend the training on QNet marketing activities,” the MCI said.
“QNet marketing activity aims to mislead and deceive dealers and clients with quick profit. Therefore, they try to raise money illegally by claiming that they are investing such money. This kind of activity is considered illegal because it depends on deceiving, cheating, fraud and manipulation,” MCI said in a statement in September 2018.
V-Con that never was
The Saudi government action had a direct fallout on QNet’s high profile flagship event V-Con, scheduled to be held at Dubai’s Hamdan Sports Complex between September 8-12 that year.
Without warning, the company cancelled the conference, leaving thousands in the lurch
Around 20,000 independent representatives (IRs) or agents were supposed to attend the Dubai event. More than two-and-a-half years later, many are still seeking a refund of the $350 they had each shelled out to attend the event besides paying for tickets.
On its Facebook page, QNet said, “Due to circumstances beyond our control, unfortunately, we had to make the difficult decision to postpone V-UAE 2018.”
QNet said they have three offices in the UAE, one each in Abu Dhabi, Dubai and Sharjah but declined to reveal the size of their customer base in the country. The company also hinted at efforts to have the Saudi Arabia ban lifted. “We are trying to resolve the issue in both India and Saudi Arabia,” said the QNet spokesperson.
Victims recount anguish
Meanwhile, several people have contacted Gulf News detailing how they have been cheated by QNet. Indian Ayyan Sunil who worked as an HR manager said he came to Dubai believing QNet would brighten his future but got trapped in their web of deceit.
Maheshwar, also from India, said he took a bank loan to invest Dh18,500 in the company last year. “I want my money back. I send them several emails but haven’t heard back from the company,” he said.
Cyberabad police commissioner VC Sajjanar said a former software professional in Hyderabad committed suicide after losing money to QNet
“Two other persons, associated with QNet, one from Chennai and other from Maharashtra have also lost their lives in similar circumstances. We are ascertaining the details,” he said.
It was founded in 1998 in Hong Kong by Malaysian businessman Vijay Eswaran. Initially the company made custom-commissioned commemorative coins before branching into jewellry and watches business.
The company expanded its operations to Dubai, India, Indonesia and Thailand in 2001.
Qnet’s business model
According to wikipedia, QNet employs a multi-level marketing (MLM) model whereby a group of independent representatives refer its products to consumers and receive compensation based on the sales volume of their referrals and the sales volume of other independent representatives on their teams. Customers can choose to become “independent representatives” (IRs) by paying $10 for a starter kit and an online office. IRs receive $250 commission after they introduce the products to six people.
Many government entities have described QNet’s business model as a pyramid scheme where early entrants earn money. As the number of Independent Representatives (IRs) increases, finding more IRs to join becomes difficult as a result IRs who join late do not earn enough to cover their first outlay and the model invariably collapses.