Cyberabad police bust Rs 1,000 cr multi-level marketing scam

The Police sealed eBiz offices in Delhi and froze bank accounts that had Rs 70 lakh worth of deposits.

By Author  |  Published: 12th Mar 2019  11:49 pmUpdated: 13th Mar 2019  1:41 am

Hyderabad: A multi-level marketing money circulation fraud, operating from Delhi, which preyed on gullible students and the unemployed across the country under the pretext of quick returns on investments and looted to the tune of Rs 1,000 crore, was busted by Cyberabad police.

The economic offences wing of the Cyberabad police arrested Hitik Malhan (31), son of Pawan Malhan, the Managing Director and Anitha Malhan, the Director of eBiz Private Limited. The Police sealed eBiz offices in Delhi and froze bank accounts that had Rs 70 lakh worth of deposits.

The Cyberabad police said that Hitik looks after company affairs, which has about seven lakh representatives as its members and the amount of cheating was close to Rs 1,000 crore. The promoters of eBiz.com gave motivational lectures to gullible students and unemployed youth stating that there is a business opportunity scheme which will yield huge profits, police said.

Once the customer joins by paying money, a user name and password will be generated for them to continue in the system. At first, the promoters trap students stating that they will be a part of the eBiz kingdom where they can build their own future. The promoters maintain that if newcomers who paid money don’t like eBiz business packages, they can claim their refund within a month. But in fact, the promoters will drag the one month period by giving motivational classes, training sessions and also provide motivational books.

“Once the newcomer joins eBiz business by paying money through a promoter, he becomes a ‘Representative’ and gets some products, e-learning courses and holiday package and the promoter gets a commission. The promoter then says to the representatives to get the money they have to enrol three other persons. As the number of a person increases down the line, the up liners get more money as commission,” said Cyberabad Police Commissioner VC Sajjanar.

The eBiz business model is a simple pyramid scheme in which the early entrants earn money and as the number of representatives increases, finding more newcomers to join becomes difficult or impossible. A representative who joins late does not earn enough to cover their first outlay and the model collapses.

“In pyramid schemes, the primary seller at first does not get any commission but as the pyramid beneath him grows, he gets massive commissions far in excess of the primary seller. This motivates persons to recruit rather than to sell directly to earn huge money,” Sajjanar said adding that all payable incentives are exclusive of service tax as applicable.

The members will reach the target by enroling as many as members and various ranks will be assigned to them ranging from Silver, Gold Diamond to Diplomat, Ambassador and Circle Chairman. The Cyberabad police started probing after a complaint was lodged at the Madhapur Police Station and arrested Malhan. Efforts are on to nab the absconding persons, they said.

How they do it
• Adding a product to the pyramid scheme is the latest trend in the evolution of such money circulation schemes
• They target the most vulnerable sections
• The products are mostly unbranded; sourced from mostly unscrupulous agencies
• This huge exaggerated margin enable the promoters to pay commissions to some extent
• The members will reach the target by enroling as many as members and various ranks will be assigned to them
• It works as a binary scheme in the ratio