Two held for multi-level marketing fraud in Hyderabad

Raids E-Cash Trade Securities at Red Hills; seize Rs 6 lakh, gold coins and bank accounts

By Author  |  Published: 4th Mar 2018  12:13 am
multi-level marketing
Commissioner of Police VV Srinivas Rao displaying the seized cash on Saturday.

Hyderabad: The West Zone Task Force on Saturday raided E-Cash Trade Securities at Red Hills in Nampally and arrested two persons on charges of cheating people after promising to make them rich overnight through money circulation schemes. Police seized Rs 6 lakh, gold coins and bank accounts, altogether worth Rs 2 crore from them.

The arrested persons were identified as J Shyam Sundar, 48, the director of the firm and a native of Suryapet district. He earlier worked as a constable in the Andhra Pradesh Special Police of 6th Battalion in Mangalagiri; and P Vaasu Deva Naidu, 26, managing director and is a native of Rajahmundry. He earlier worked as an assistant director in the cinema field.

Addressing the media, Hyderabad Police Commissioner VV Srinivasa Rao said Sundar, after being removed from service in 2003, had turned a realtor. Earlier, he floated two firms operating in multi-level marketing, ‘Ocean Blue’ and ‘Multi Max’, collected money and duped people. However, there were no complaints lodged against him. The duo met a year ago and plotted to cheat people.

“They started multi-level marketing and enrolled nearly 400 members with 6,500 accounts into the scheme by offering four different packages – Silver, Gold, Platinum and Diamond – with high returns in 100 days, besides a plot in Alair,” the Commissioner said.

They also maintained a website and opened four bank accounts.

“Last month, they collected about Rs 4.5 crore and repaid some as commission to enrolled customers. The first 50 members benefitted, while the other 350 were cheated,” Rao said, adding they had plotted to collect Rs 50 crore out of the scheme in the next three months.
The suspects along with the seized property were handed over to the Nampally police for further investigation.

Police issue note of warning to citizens

With a number of these multi-level marketing cheating cases being reported, wherein people are cheated into paying huge amounts on the pretext of enrolment into schemes for high returns, the Hyderabad Cybercrime police have issued a note warning citizens.

Cybercrime police said in most of these schemes, after some time, there is no return on the investment and investors are left with material with no value, unusable holiday schemes and so on.

“Most of these schemes are based on a money circulation model, where investors are promised a return not only by selling holiday packages, goods, etc., but also on enrolment of new members. They are also offered a percentage if they, in turn, enrol others,” officials said.

This model of business is not only unsustainable but also illegal as per the Prize Chits and Money Circulation Scheme (Banning) Act, 1978, police said, adding that the uniqueness of this model was that it would turn every investor into both a victim as well as an offender. They are victims because they lose their money and offender because they get others enrolled in the scheme too.

Guidelines to avoid MLM frauds

*Promoters of such schemes float companies with attractive names and are likely to start in one area and keep shifting base

*The promoters very well know that the scheme is not practical

*While promoting schemes, they invite celebrities and honor them by organising parties with fanfare to convince public

*They give attractive slogans like ‘work from home’, ‘work four hours and earn Rs 50,000 per month’, ‘You are the boss of your business’

* Victims in such schemes are mostly poor, middle-class women and retired persons

*Complaints against such companies and promoters can be lodged at the nearest police station