How QNet Pulled It Off

2 comments Written on February 15th, 2014 by
Categories: Articles, Yahoo
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At Yahoo, I write about How QNet Pulled it Off:

"Biophoton light," you are told, will energise liquids faster and more efficiently "via the wave-form produced" by a set of rings imprinted on the surface of a silicone rubber disc. This is a phenomenal 'Bio Disc' whose "flat-base" design allows a glass placed on it to be able to stand "more steadily than before". Just the very act of keeping your glass - full of water - on top of this remarkable disc makes it more harmonized, according to the marketing material at a company called QNet. "The Amezcua Bio Disc was introduced in 2006 as a revolutionary new product which redefines and harmonises the energy of water to maximise its positive effects on the human body. Over the years, numerous independent scientific studies have verified its effects and millions of satisfied customers have testified to the benefits of using the Bio Disc." You can supposedly use this "energized water" in any way to get its "health and lifestyle" benefits: drink it, spray it on yourself, or just place it under your bed at night.

QNet is now shrouded in controversy because, as some of you might have realized, the above claims are too fancy to be true.

But the deal is hardly about the product. Just like fairness creams are allowed to say that the level of skin pigmentation directly influences a woman's acceptance by her mother-in-law, or that certain forms of toothpaste can claim that salt will make your teeth whiter, saying what is not quite true is rampant in ordinary marketing. However, if you combine this with a particularly distasteful method of marketing - multi-level marketing or MLM - you get the combined impact of initial euphoria and eventual disappointment and anger.

MLM is about using your customers as your agents, instead of a traditional distribution network like agencies and wholesalers. The idea is that if your customers like a product, they can refer other customers, and when those customers buy, a referral commission can be paid, thus eliminating the middlemen. In addition, customers are sold the idea that they have to only do this in their spare time, and thus earn a steady stream of "recurring" income when their referrals buy. Those you refer can further refer others, and you form a long "downline" which guarantees you future riches.

This is good in theory. In practice, the kind of sustained effort that is required to sell goods to a large population makes such MLM companies take dubious shortcuts. Each person is required to maintain a certain number of sales every month to be in a "level", without which your benefits might lapse or fall to a trickle. Given that products are expensive, it is more lucrative to enlist new downlines than to get your existing network to buy more; so you spend your time hardselling the brilliant future income concept to unsuspecting friends and relatives. The hardsell eats up good relationships; you find that your friends no longer want to speak with you, and the few that were sold the idea are bitter that the income is next to nothing.

The first few people in such a scheme always make good money because they have the biggest network under them. QNet was no different, and had famous people like Michael Ferreira, India's former billiards champion and Padma Bhushan awardee, endorse and participate in the MLM scheme. The idea, says one article, was for each individual joining the network to buy Rs 500,000 worth of goods that were overpriced - so-called expensive watches, a pendant that aligned energies, a coaster that gave water magical properties and so on. When you buy, your "uplines" - the person that referred you, and his upline and so on - get upto 50 percent of your payment. And then, when you find a sucker who will pony up his five lakh, you get a good chunk of that as his upline, and so on.

The problem with QNet was that it ensnared people who were desperate to make such recurring income, but had to stretch themselves tremendously to make the initial payment. They did it on dreams of great riches that were promised surreptitiously by agents trained to mean exactly that, but not actually say it (because that would be illegal). After the initial euphoria, it dawned on many people that selling voodoo magic to a lot of people with the promise that a lot of other people would buy it is an unsustainable one - eventually, you have suckered all those who can be suckered, and the house of cards comes crashing down.

QNet managed to get to Rs 425 crore in size before it imploded. The company had in its earlier avatars of GoldQuest and QuestNet sold 'limited edition' gold coins at inflated prices, again as MLM schemes and on the premise that the coins would find buyers at even higher prices. These companies eventually closed down in 2009 and slipped out of the limelight, after many cases were filed by 'investors' who felt duped. QNet is just another avatar of a phenomenon that demonstrates exactly why some things are always too good to be true. The Singapore-registered company has already been banned by countries such as Saudi Arabia. Last August, the CBI's Economic Offenses Wing (EOW) finally registered a case against QNet for "duping thousands of investors by selling them plastic and glass products terming them miraculous objects for treating severe diseases like cancer." The Indian authorities are also supposed to be after QNet founder Vijay Eswaran, ranked by Forbes as the 25th richest Malaysian, but Eswaran has denied any involvement. This month, the EOW has issuedlookout notices against 10 people, including Vijay Eswaran and Michael Ferreira. The latter has subsequently claimed to be stuck in Malaysia for "a few tests and medical treatment to address some of my long standing ailments and health issues."

You can't con an honest man. Most people who buy into the "dream" sold to them by QNet are those who want to earn a lot of money without doing any real work. They blindly believe figures of authority like Ferreira, or unreliable certificates by dubious "testing" centres stating the miraculous powers of what is just plastic. In many ways, a sucker is born every day, and companies like QNet just take them for what they're worth. It will be very difficult to establish guilt, and once QNet goes away, another silly scheme will come to take its place.

The best way to avoid being duped by a MLM scheme is to ask yourself:

  • Are you expected to sell a product to other people? Do you need to pay for the privilege of signing up? If so, it's most likely a scam.
  • Is there a refund policy? Can you return products unused to get back your money? If not, it's most likely a scam.
  • Does it use the words "in your spare time"? My vast experience of hearing most of these sucker schemes tells me this is the biggest warning bell of them all.
  • Can you buy alternative products that do the same thing at a much cheaper price? Then you're just being a sucker if you buy into a much more expensive product just to get a small commission back.
  • Are you made to visit a "meeting" where a well-heeled gentleman extols the virtues of this scheme? And you can't ask too many questions? That's a sign of a scam.

QNet sells you many riches, if only you invest Rs. 500,000 and then find other suckers who do the same. The above criteria should sound warning bells, and like many other MLMs before this one, it makes you think more of the money you can earn with it rather than the benefits of the products themselves.

The lesson? It's always easy to mislead someone blinded by that kind of greed.

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About the Author:
http://www.capitalmind.in
The man behind Capital Mind. Deepak is a co-founder at MarketVision, a financial knowledge company. Deepak also provides data research and consulting services, and now lives in Bangalore. Connect with him at deepakshenoy@gmail.com.

2 comments “How QNet Pulled It Off”

Really good article

Deepak, you put it very well. I verymuch liked your sentence about ‘you can’t con honest man’. The TV channels, news papers and Internet is full of fraud stories and it really amazes me that inspite of alerts from everywhere, these fraudsters are able to dupe people and collect multiple crores. We are close to a point to question ourselves whether these ‘suckers’ deserve any sympathy?. Why should tax payers money should go into investigating these frauds? As a result of numerous frauds, these investigation agencies and courts needs more resources consuming tax payers money. As long as these suckers are there, illegal stuff like betting, gambling, MLM and sucker investing would continue.


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