The Securities and Exchange Board of India (Sebi) has forwarded complaints against QNET and its Indian franchise, Vihaan Direct Selling India Pvt Ltd (VDSIL), to state authorities in Karnataka. These complaints relate to the companies’ alleged involvement in multi-level marketing (MLM) schemes and fraudulent practices.
QNET and VDSIL are accused of deceiving investors by offering products like magnetic discs, herbal products, and holiday packages through deceptive practices. The companies are also alleged to have used the banned binary pyramid model, a fraudulent business scheme used in MLM, to attract investors.
Sebi’s Bengaluru office has been receiving multiple complaints regarding the activities of QNET and VDSIL. The regulator has advised those affected by the alleged fraud to submit their complaints to state government or local police authorities for further investigation.
A statement from Sebi confirmed that the activities of QNET and VDSIL align with MLM activities, and as such, the complaints are being forwarded to the state government and the Economic Offences Wing (EOW) of Karnataka. The EOW is tasked with implementing the provisions of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978, which governs MLM schemes of a fraudulent nature.
The Prize Chits and Money Circulation Schemes (Banning) Act grants state governments and local police the authority to take action against MLM schemes operating in their jurisdictions.
In response to Sebi’s action, QNET told PTI that the company believes these complaints are being driven by “vested interests” aiming to create the impression of wrongdoing. The company emphasized that it has clarified its business model to Sebi and noted that the Government of India has issued guidelines governing direct and network marketing. According to QNET, its operations comply with these guidelines and are entirely legitimate, and they are awaiting the adoption of these guidelines by state governments.
QNET further stated that it does not offer investment schemes and argued that its activities do not violate any provisions of the Prize Chits and Money Circulation Schemes (Banning) Act. The company also noted that Sebi has not identified any issues with the complaints, instead directing complainants to approach local police authorities.
QNET mentioned that it has been under investigation for three years based on a false complaint, and no charges have been filed to date.
