Direct selling has a long history, going back to the days of traveling salesmen in the mid-1800s. Direct Selling in its current form, as we know it today was made popular by the likes of Avon and Amway over 60 years ago. But this industry is still in its nascent form in many emerging markets, especially in Asia, the Middle East, and Africa. According to the Direct Selling News, Africa is pitted as the new frontier for the direct selling industry, while the Asia Pacific is today responsible for around 44 percent of the global revenues of the industry.
Despite direct selling's growing popularity worldwide, a sign that this form of business is looking increasingly attractive to aspiring entrepreneurs, especially in countries with high unemployment rates and limited mainstream income opportunities, the industry suffers from a bad rap. One such direct selling company that has built its business on the back of emerging markets comes from the heart of Asia. Despite its explosive growth over the last two decades, QNet, an e-commerce based direct selling company, headquartered in Hong Kong, continues to battle serious reputation issues and allegations ranging from financial pyramiding to cheating and fraud.
In this article, we explore the story of QNet and try to understand if it is the real deal or just an elaborate scam.
1. Who Is QNET?
QNET according to its website is a "global e-commerce based direct selling company that provides customers around the world with unique high-quality products and services while giving them the opportunity to build a sales business by promoting these products." The company utilizes a multi-level marketing (MLM) model in which independent sales representatives sell their products and receive compensation based on their sales volume.
QNET was founded in 1998 by Vijay Eswaran and Joseph 'Japa' Bismark who at the time were top distributors for an American direct selling company building its presence in the Philippines in the mid-90s before they realized the American company folded up overnight and left them with liabilities running into hundreds of thousands of dollars. They decided to leverage on their experience in the direct selling business and set up a new company to help the approximately 2000 strong team they had built, and who had placed their faith in them.
Originally known as GoldQuest because their initial product portfolio included custom-commission collectible gold coins, and then QuestNet as the company expanded its product portfolio and upgraded its e-commerce platform, the company eventually shortened the name to QNet in 2010 as it prepared to enter the digital age.
Starting as a small operation selling limited products, they continued to evolve the product line expanding into new categories rapidly. In 1998, they started out selling commemorative gold coins and were also appointed one of the official distributors of the 2000 Sydney Olympics Commemorative Coin Set and FIFA's Centennial Commemorative coin set in 2004. By 2002, they were selling travel and vacations via their partnership with QVI Club brand holidays. Then in 2006, they began marketing wellness, health, and nutritional products. Today they sell products related to home care, beauty and personal care, holidays and travel, education, wellness, watches and jewelry, and nutrition and have operations in more than thirty countries and customers in nearly 100 countries.
Unfortunately, as their business began to grow, so did the attention of the world around them. Although they utilize a legitimate and well-recognized business model, some countries found their success suspicious. Over the years, multiple authorities in different countries have accused QNet of operating a Ponzi or Pyramid scheme. However, QNet has never been convicted in any court of law. These are different from various cases registered against errant distributors, known as independent representatives (IRs) who act of their own accord in violation of their contractual agreement with Qnet.
2. What Is a Ponzi Scheme, Anyway?
Ponzi schemes are fraudulent investment scams that generate returns for earlier investors with money taken from later investors. Such schemes have nothing to do with direct selling, or multi-level marketing (MLM), a popular form of building the distributor network in direct selling.
In the 1920s, Charles Ponzi invented a scheme involving international postal reply coupons. If you had an international postal reply coupon, you could send a letter to a foreign country without buying a postage stamp.
Millions of Americans had relatives in foreign countries they sent letters to. Their relatives might not have enough money to buy a stamp for return mail. The USA member would send a letter with an international postal reply coupon, and family members in the old country would present their coupons at their post office to get stamps to write them back.
The postal services in foreign countries also sold international postal reply coupons. Ponzi noticed that foreign post offices sold the coupons for less than the equivalent in US dollars. So, Ponzi bought up massive amounts of international postal reply coupons in Italy and offered them for sale in the United States. He made money on each transaction. He started asking investors to give him money to buy even more coupons, promising a 50 percent return in 45 days.
To this point, Ponzi had an arbitrage scheme. He was taking advantage of a quirk in postal pricing. He was simply getting investors to give him money to make even greater profits. But Ponzi got greedy. Ponzi started offering investors a 100 percent return on their money if they just waited 90 days.
That scheme could only work if the international postal reply coupons he could buy in Italy were free. They weren't. So, Ponzi started paying earlier investors with the money he collected from later investors. Eventually, the whole scheme collapsed, and thousands of investors lost a total of $20 million.
This was in an era when the average wage was only $10 to $20 a week.
3. QNET - Long History of Allegations and the Truth Behind Them
Vijay Eswaran and his partners were arrested as a result of an escalated civil dispute. The case was opened in the Philippines due to a disagreement between its original founders. The matter escalated through unethical means, and the Philippines government issued an Interpol notice for Eswaran and his current partner's arrest. At the time, Vijay and his team were hosting a major convention in Indonesia. It was there that they were all arrested by Interpol. They were detained for three months but were then acquitted by the Indonesian court. The court filed that they did not see merit in the Interpol notice. Shortly after, the Department of Justice in the Philippines also acquitted them of all wrongdoing.
Rwanda had banned QuestNet from operating within the country, but the ban that was lifted in 2012. According to reports, the company's operations were banned for contravening tax laws. However, it turned out that QNET simply failed to identify its corporate agent's contact address property in paperwork submitted to the government, which triggered the ban. Once cleared, the Minister of Finance and Economic Planning, John Rwangombw, released a letter that clarified the findings. He stated: "Upon review of your request to lift the ban on your business, and after consultations with different stakeholders, we hereby lift the ban and allow your company to resume operations as long as you abide with the conditions." Conditions included: registering the company in Rwanda, obtaining a physical address, registering as a taxpayer, making monetary transfers in line with the country's laws, declaring members of the QuestNet chain to tax authorities, and storing the items being sold in a warehouse in Rwanda.
In fact, in 2013, QNET launched its first African office in Rwanda, proving that they were in good standing with the Rwanda authorities. At the time, QNET stated it would use the location to manage its proprietary platform, develop a new customer service center, establish an import and distribution hub, and provide marketing support and professional training for Independent Representatives (IRs).
Often, allegations against people affiliated with QNET are falsely linked to the company itself. The simple fact is that QNET representatives are successful. Many of them stand up for the rights of independent entrepreneurs, and sometimes their success generates jealousy. Sometimes freedom is an unpopular aim. As a result, some people associated with QNET, like QNET representative and Egyptian human rights activist Salma Sabahi, have been arrested based on accusations regarding their QNET activities.
In 2013, Egypt was caught up in the Arab Spring. Popular TV personality Salma Sabahi supported human rights in Egypt. And, for the previous two years, she had been very successful with QNET.
Sabahi's father was running for president. She was arrested for "fraud" in her QNET activities, which consisted of showing videos to some friends who were interested in QNET. She was put in jail. When Sabahi's father was no longer running for president, she was found not guilty of all charges.
In 2014, charges against QNET were presented in a shariah court in Tajikistan's former Soviet republic. The Islamic court ruled that QNET violated sharia law by combining two transactions into one, allowing independent representatives to buy a sales kit and simultaneously buy a representative product. QNET changed its business practices and continues to operate in Tajikistan.
Reports claim that QNET lured hundreds of poverty-stricken Moldova into buying $2000 worth of merchandise with promises of earning thousands of euros every week. But if you check the source material published in Romanian, you find that it wasn't QNET that made the promises.
In 2013, an investigation into QNET and its franchisee Vihaan Direct Selling Pvt Ltd (Vihaan) was launched. Gurupreet Singh Anand, a self-proclaimed activist, alleged that his wife, Parmeet Kahur, had been cheated by representatives of the company after she had purchased a product. After three years of investigation, the Supreme Court issued a stay on all proceedings against the company. QNET company records proved Kahur had placed an order for an online education product valued at Rs.30,000, but she had canceled the payment before the order was processed. Therefore, no commercial transaction ever took place.
Michael Ferreira and Malckolm Desai, the Indian shareholders of Vihaan (QNET franchisee), were jailed following allegations that QNET utilized a model classified as a money circulation scheme. The Supreme Court, however, ruled that that model adopted by the company was not a money circulation scheme and, in fact, did not fall under the purview of the Prize Chits and Money Circulation (Banning) Act 1978. They classified QNET and its franchisee, Vihaan, as a legitimate direct selling platform.
In 2019, a young IT professional committed suicide after losing millions of rupees on QNET purchases. However, their own-source document discredits this accusation. "This information is patently untrue and baseless. Based on company records, we can confirm that Aravind had been a distributor of QNET's products since 2014. Over the last five years, he had not only purchased a number of products from QNET but had also successfully earned commissions on product sales, consistently."
FrontPageAfrica released an article titled "Alleged Trafficked Victims from Sierra Leona, Guinea, Senegal & Ivory Coast Stranded in Liberia." The report claimed that QNET had been bringing trafficked victims to Liberia under the guide of job offers. However, the company has clarified that these claims are false and condemns any form of human trafficking. Instead, they are working with authorities to bring justice to the perpetrators of this crime. Any QNET independent representative found to be breaking company policy will also be liable to be terminated for policy violations and professional misconduct. The company stated: "We would like to reaffirm our status as a Direct Selling company, with a 22-year history, and a presence in more than 100 countries globally. We are not an employment agency, do not offer job promises, and absolutely deny any allegations of human trafficking levied against us. Thus, we can summarily declare that QNET did not offer any employment to those stranded in Liberia."
Independent representatives of QNET have been facing arrests by the Cyberabad Police with alleged charges of running a Ponzi scheme. The QNET Distributors Welfare Association then filed a petition with the Telangana High Court. They alleged that state authorities were indiscriminately registering criminal cases against QNET independent representatives and claimed that the police were not following the state's notification on the Direct Selling Guidelines. As a result, the Telangana High Court ordered the State of Telangana, the Commissioner of Police of Hyderabad, and the Commissioner of Police of Cyberabad, to refrain from taking any action against the distributors of QNET. Arrests were not immediately halted, resulting in the Supreme Court issuing a notice to the Cyberabad Police in Telangana for violating its orders of "no-coercive action' and arrests of independent representatives of QNET.
The protection order for the IRs of QNET remains. Unfortunately, authorities continue to disregard the high court orders. In 2020, another notice to the Cyberabad police was issued. According to QNET, "The action taken by the police has no civil and criminal law conformance and is in direct contempt of the order granted by the Supreme Court of India that has directed all states including the state of Telangana to not take any coercive action against the company." QNET continues to challenge these unjustified arrests.
Ongoing False Claims
Journalist Donald Frazier, a reporter for Forbes Asia, attempted to get to the truth about the charges against QNET. He obtained 157 comments from 20,000 Forbes readers about their experiences with QNET. He found zero proof of wrongdoing and zero accusations of misconduct from credible sources. As Frazier puts it:
"The charges against QNET, we found, tend to originate in apocryphal, anonymous or debunked sources. They then find their way into Wikipedia or news blogs, which are then cited as fact."
Dozens of accusations appear on Wikipedia's page on QNET. But if you read them, you will see they are not actually accusations against QNET but are almost always related to individuals who have misused the QNET name to misrepresent the business or the product.
4. What's the Truth About QNET?
QNet isn't an investment or a scam. QNet is a support system for connecting people to products they want and need at prices they are willing to pay because they see the value in it.
Like all commercial enterprises, QNet earns a profit. The people who do the work of selling QNET products also earn their profits.
Even more importantly, QNET's independent representatives form the relationships that can propel them to financial success. Representatives who learn the principles of selling can apply them to other products. Representatives who succeed with QNET can branch out into new ventures on their own, understanding business dynamics with reasonable expectations of return in the real world.