SEBI Refers Investor Complaints Against QNET to Karnataka Govt Over Alleged MLM Fraud
 

India’s market regulator, the Securities and Exchange Board of India (SEBI), has escalated complaints against QNET and its Indian partner Vihaan Direct Selling India Pvt Ltd (VDSIL) to Karnataka’s state authorities. The firms face allegations of operating multi-level marketing (MLM) schemes involving magnetic discs, herbal products, and holiday packages through fraudulent practices.

Complaints Overview:

SEBI’s Bengaluru office flagged QNET and VDSIL for allegedly employing a banned binary pyramid model to lure investors. The regulator has advised affected individuals to file grievances with local police or state authorities, as MLM activities fall under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978.

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Regulatory Action:

SEBI clarified it lacks jurisdiction over MLM-related frauds but forwarded complaints to Karnataka’s Economic Offences Wing (EOW) for further investigation. The Act empowers state governments to act against illegal money circulation schemes.

QNET’s Defense:

QNET denied wrongdoing, claiming compliance with India’s new direct-selling guidelines and stating its business model “does not violate” the Prize Chits Act. The company accused “vested interests” of fabricating complaints and highlighted that no chargesheet has been filed in ongoing three-year investigations.

Legal Context:

The 1978 Act prohibits MLM schemes disguised as money circulation plans. Karnataka authorities will now assess whether QNET’s operations breach these provisions.