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Qnet

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Qnet
wholly owned subsidiary
Industry Direct selling
Founded 1998; 18 years ago (1998)
Founder Vijay Eswaran, Joseph Bismark
Headquarters Hong Kong
Key people
Vijay Eswaran, Chairman
JR Mayer, Managing Director
Dave Osh, CEO
Products Consumer Goods, Watches, Health Devices
Services Travel, life style, Education
Revenue Increase US$ 430 Million (2013)[1]
Number of employees
1500 (2015)[2]
Parent Qi group
Website www.qnet.net

QNet Ltd, formerly known as QuestNet, GoldQuest, and QI Limited, is a Hong Kong based direct selling company owned by the QI Group. The company sells a variety of products including energy, weight management, nutrition, personal care, home care, luxury goods, and fashion accessories etc. on an eCommerce platform.[3] Qnet was founded in Hong Kong by Vijay Eswaran in 1998 along with QN Europe and other companies.[4] It promotes its products on its website using claims "that would not pass official muster in much of the world."[5] Despite claiming to be an e-commerce based business,an ordinary retail customer can only make a purchase of a product from the website if he has of a referrer ID of an independent representative.Unlike other e-commerce websites,purchases without ID are not allowed.[6]

The company's marketing strategy follows a direct selling and multi-level marketing model, depending on independent representatives to refer its products to consumers and receive compensation based on the sales volume of their referrals and the sales volume of other independent representatives in their teams who are arranged in a binary fashion.[5]

The company has operations in 30 plus countries as per its official website and offices in Indonesia, Malaysia, Honk Kong, Philippines, United Arab Emirates, Thailand, Taiwan, Vietnam, Saudi Arabia, Egypt, Côte d'Ivoire and Rwanda with franchise companies in India. Singapore and Turkey.[7][8] It was sued by Egypt,[9] Rwanda,[10][11] and Sri Lanka[12][13][14] for allegedly operating a product-based pyramid scheme. The company and its franchise Vihaan are also being investigated in India.[15] The Bombay High Court denied the anticipatory bail plea of all the directors of Vihaan Direct Selling Pvt Ltd., a franchise of Qnet, which included world amateur billiards champion Michael Ferreira after it was earlier rejected by Sessions Court. They were facing charges of cheating and forgery [16] The court observed that "the deceit and fraud is camouflaged under the name of e-marketing and business".[17] The Serious Fraud Investigation Office, in its report on GoldQuest and QuestNet India has called multi-level marketing (MLM) schemes run by overseas operators as "a potential threat to national security". The Government of India ordered the Serious Fraud Investigation Office to file prosecution against GoldQuest International and QuestNet Enterprise under the Companies Act and Indian Penal Code.[18][19] A brief executive summary of the SFIO report is now available in the public domain.[20] The company has denied the allegations.[5]

History[edit]

Global Support Centre of Qi group (The Qi Tower) in Petaling Jaya

Qnet, the main subsidiary of the QI Group of Companies, was founded by Vijay Eswaran and Joseph Bismark in Hong Kong in 1998. The company, first known as GoldQuest and QuestNet, made custom-commissioned numismatic coins and later began selling luxury jewelry and watches.[5][9][21] In 2000, Qnet was the official distributor of the Sydney Olympic Games commemorative coins and was also a distributor at the 2004 Athens Olympic Games and 2008 Beijing Olympic Games.[22][23]

In 1999, Qnet expanded its operations to Malaysia and Singapore and began a partnership with B.H. Mayer's Mint, a German-based mint coin facility.[22] The company expanded its operations to Dubai, India, Indonesia and Thailand during 2001. Qnet started to diversify its products in 2002 into travel and vacations by partnering with QVI Club brand holidays.[24] During this time, the company also announced that it was the official coin distributor for the 2002 FIFA World Cup and an expansion into Europe, Australia and Sri Lanka.[22][23]

Qnet became a licensed distributor for FIFA in 89 countries with its commemorative coin program in July 2004.[25] In 2005, Qnet acquired QI Comm, a British telecommunications company.[5] The company announced that it had more than 1 million independent distributors during the introduction of the aspIRe Magazine.[22] In 2006, Qnet began marketing energy, health and nutritional products.[9] That same year, Qnet acquired Prana Resorts and Spa, a vegetarian holiday resort in Koh Samui.[24][26] Qnet also acquired the Swiss watchmaker, Cimier.[27] In 2007, the QI Group acquired Down To Earth (DTE), a vegetarian organic health store chain in Hawaii.[28][29]

The company announced an initial sponsorship of Team Meritus, a Malaysian motor racing team, and became a sponsor for the Commonwealth Heads Of Government Meeting Business Forum in 2007.[30] In 2007, Qnet acquired Down To Earth (DTE), a vegetarian organic health store chain in Hawaii.[28][29] From 2007 and 2012, Qnet's direct sales increased by 70%.[5]

From 2009 to 2012, Qnet was an official sponsor of the Asian Football Confederation during the AFC Champions League. In 2010, the company started a partnership with Virgin Racing.[31] Qnet received the TRUSTe Privacy Certification in late 2012.[32] In 2013, Qnet announced its intention to shift its manufacturing operations to India and to open an office in Russia.[33][34] The company's QI Tower in Malaysia received the 2013 Building and Construction Authority (BCA) Green Mark Gold Award.[35] In 2014, Qnet started a three-year partnership with Manchester City football club to become the club's official direct selling partner.[36]

Business model[edit]

A typical MLM binary tree structure. The blue individual will receive compensation from the sales of the downline red members.

The company's marketing strategy is based on a multi-level marketing model which depends on a group of independent representatives who refer its products to consumers and receive compensation based on the sales volume of their referrals and the sales volume of other independent representatives in their teams who are arranged in a binary fashion.[37]

Many governmental entities have described QNet's business model as a simple pyramid scheme: early entrants earn money, and as the number of Independent Representatives (IRs) increases, finding more IRs to join becomes difficult or impossible; IRs that join late do not earn enough to cover their first outlay and the model collapses.[10][38]

The compensation plan operates by the recruitment of customers by existing IRs. An IR is provided an ID that gives access to a 'Tracking Centre' (TC) in its system that tracks sales. A TC has a left and right customer group. A 'direct' transaction (a customer's personal reference or sale) is counted as one transaction. An 'indirect transaction (someone in the customer's TC buys/refers/sells) is also counted as 1 transaction. The company pays $250 each time 3 product sales on an IR's left customer group are matched by 3 product sales on the right.[13][unreliable source?]

Products[edit]

Under the names GoldQuest and QuestNet, the company primarily sold gold numismatic coins.[39] Qnet expanded its products to include travel and leisure vacations in 2002.[24] By 2006, Qnet had transitioned to marketing and selling "aspirational products", which claim to boost energy, health and nutrition for buyers.[9] According to Eswaran, these types of products account for 30% of Qnet's sales through its business model.[5] The company has also introduced "life-enhancing products" such as a portable water filtration system and air purifier, which Qnet claims can fix pollution issues in homes.[40][41]

The Amezcua Bio Disc (also spelled BioDisc and BioDisk) is one of the company's products. Qnet claims that the Bio Disc can "redefine and harmonise the energy of water, greatly maximising its positive affect on the human body".[42] The Amezcua Bio Disc has been evaluated by research facilities in Germany, India and Japan.[43] The product has received scrutiny from various scientists, media commentators and watchdogs.[44][45]

The company partnered with former professional tennis player Martina Hingis in September 2015 and announced her as its Brand Ambassador of Qnet products and representative of the brand in India.[46][47] Eswaran serves as a motivational speaker to those selling Qnet products, holding sessions that feature "lasers, dry ice, [and] pyrotechnics".[5]

Controversies[edit]

QNet has been the centre of various controversies over a period of time.[48] Australian Politician Cameron Thompson, the Nepalese Home Ministry, the Sri Lankan Central Bank, and the Iranian Government have described GoldQuest as a pyramid scheme. In 2002, the Australian Office of Consumer and Business Affairs listed the company as one of 61 alleged pyramid schemes.[49][50][better source needed] The Nepalese Home Ministry banned the company from operating in Nepal in 2003, and Bahadur Manandhar, chief of the foreign exchange department of the Nepal Rastra Bank, said GoldQuest was "a hundred percent fraud."[51] The Sri Lankan government banned GoldQuest in 2005, claiming that the company had caused 15 million dollars to leave the country.[12][14][52][53] In 2005, the Iranian government also banned GoldQuest, after prosecutors found that company activities had "led to the exit half of a billion dollars from Iran."[54]

In 2007, APLI, the direct selling Association of Indonesia, called GoldQuest a pyramid scheme,[55] and Interpol arrested Vijay Eswaran and other company officials for fraud.[56] QNet responded that the allegation is unfounded.[57] After three weeks, Indonesian courts released Vijay Eswaran and dismissed the charge soon afterward.[5] QNet continues to operate in Indonesia.[58]

In 2008, around 3,000 people marched on the presidential palace in Kabul to demonstrate against the government's temporary withdrawal of QuestNet's license to operate in Afghanistan. The business started in Afghanistan with around 600 IRs in 2006 and had expanded to 21,000 when the government temporarily withdrew the license to enable it to write operating laws.[59]

The Rwandan Government's Ministry of Finance banned QuestNet in 2009 for violations of company and tax laws after The National Bank of Rwanda described the company as a pyramid scheme.[60][61] Questnet appealed and was granted relief on condition that it follow the country's laws in the future.[8][62][63]

Also in 2009, the Sudanese government banned QuestNet after allegations were made relating to poor product quality and the non-receipt of products.[64][65] The same year, the Syrian Ministry of Economics shut down QuestNet for violating its commercial registration, stating that the company had operated a pyramid scheme in Syria and withdrawn billions of Syrian pounds from the country, while also paying few taxes.[66] The shutdown also applies to other agencies of the company.[67]

In 2010 Questnet opened in Turkey with 150 distributors; 80 of which police detained in an investigation that charged 42 with gaining an unfair advantage.[68] In 2011, the Turkish Trade Ministry investigated QNet following complaints that it was a rebrand of Questnet.[69] In 2011, QI Group resumed operations in Turkey with the acquisition of the Dögan Hotel in Antalya.[70][71]

The governments of Egypt, Saudi Arabia. Indonesia, and India have accused QNet of operating a product-based pyramid scheme.[72][73][74][75] Dar al-Ifta issued QNet a Fatwā in 2012 stating its business in Egypt is haram (forbidden under Islamic law) and could harm the country's economy.[76][77] In 2010 the Saudi Arabian Ministry of Commerce and Industry banned Qnet, accusing the company of theft, falsification, and failure to register, and warned citizens to avoid involvement in fraudulent schemes, mentioning QNet specifically.[78][79]

In August 2013, the Economic Offenses Wing (EOW) of the Central Bureau of Investigation of India made the first arrest in a case which began in India in 2008.[80] Members of the company were arrested for cheating and were remanded into police custody until August 22. EOW sent teams to Bangalore and Chennai to investigate fraud linked to Vijay Eswaran, considered the prime accused in the QNet case. Six of Qnet's bank accounts were frozen as part of the case.[81][82] A case of money laundering was registered against Qnet, its franchise Vihaan Direct Selling, and a few others by the Enforcement Directorate.[83] In 2014, Mumbai police froze the bank account of Danesh Irani, son of actor Boman Irani, after it was found that he had received lakhs of rupees as an independent representative of Qnet. In February 2014, the MD of Questnet India, previous name of Qnet,was arrested after a lookout notice was issued. MD Pushpam Appalanaidu faced 21 cases of cheating filed by various investors and sections under Prize Chits Money Circulation Banning Schemes Act were also invoked against her.[84] QNet has advocated for the regulation of Indian multilevel marketing companies and for the banning of pyramid schemes in India.[33][85][86] Though there are multiple arrests of the distributors, due to lack of Direct selling regulations and law in India, the court yet can not convict the company and its associates despite of FIR lodged in the year 2013.

Donald Frazier, a writer for Forbes who focuses on Asian businesses, said in 2012 that the charges against Qnet "tend to originate in apocryphal, anonymous or debunked sources".[87] In 2014 the Economic Offences Wing (EOW) of the Mumbai Police filed a First Information Report against QNet and its Indian subsidiary Vihaan and barred them from holding workshops and training sessions.[88][88][89] The Delhi Economic Offences Wing (EOW) also filed an First Information Report in 2016 against Qnet, Vihaan Direct Selling and three independent representatives of the company on the allegations of cheating and fraudulently operating a MLM scheme.[90]

GoldQuest disputed Iran's findings, claiming that their Iranian operations were not a pyramid scheme, but network marketing.[91] In Moldova, the wife of a police officer was found to be the organizer of the largest scams of the nation. Case of Qnet which was closed by prosecution for lack of evidence was again started with fresh investigations after receiving numerous complaints from defrauded people.[92]

See also[edit]

References[edit]

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