In Vietnam, many still blinded by multilevel marketing firms
In Vietnam, many still blinded by multilevel marketing firms
Despite Vietnamese authorities' recent crackdown on a number of multilevel marketing firms that swindled subscribers of money, companies using the same structure to defraud people are still rampant and never short of victims.
Multilevel marketing structures work on the principle of enrolling members to receive large commissions.
People are encouraged to subscribe, via fees or purchase, on the promise that an initial investment will bring a high return.
A large number of Vietnamese people, coming from all walks of life, have been lured by the attractive earning potential of multilevel marketing firms, only to end up losing sleep over possible financial losses once the fraudulent nature of such companies is exposed.
On December 7, more than 100 multilevel marketing investors of the Kim My Co. flocked to the company’s headquarters in Ho Chi Minh City, demanding their initial investments back.
The members included teachers, workers, traders and retired people who come not only from the southern metropolis, but also neighboring provinces such as Tay Ninh and Binh Duong.
Kim My attracts members by encouraging them to buy its ID codes, each of which costs VND8 million (US$357) and is said to bring investors VND8 billion ($357,000) in return.
After luring hundreds of victims with a return ratio as high as 1,000:1 the company abruptly stopped paying the commissions a few months back, causing investors to panic.
C., who comes from the outlying district of Cu Chi in Ho Chi Minh City, joined the scheme by paying the company VND136 million ($6,071) to buy 17 ID codes because “the [promised] returns were incredibly attractive.”
But the woman was only able to recover VND80 million ($3,571) when the company suddenly ceased paying bonuses and commissions, C. said.
“It would be more than enough if I could get back the remaining VND50 million [$2,232],” she said, adding she has no hope of receiving any profit.
T.T.H., another victim, said she paid VND248 million ($11,071) to join the scheme in September and only received commissions twice.
T.T.T., from Binh Duong Province, was paid VND77 million ($3,438) while she had initially invested VND120 million ($5,357) in Kim My Co.
Illegal capital raising
It is clear that the company simply uses part of the money it receives from investors to pay them back in the form of commissions, while the victims believe they have begun enjoying easy profits.
N., who works for a multilevel marketing firm in Tan Binh District, Ho Chi Minh City, said an investor can earn VND1.8 billion ($80,357) with an initial investment of only VND225 million ($10,045).
“It is a profit ratio of eight, which you can never enjoy with other investment methods,” he told a Tuoi Tre (Youth) newspaper reporter, who went undercover as a potential member of the scheme.
Multilevel marketing companies usually operate as distributors of products including cosmetics, medicines or electronics, but in fact they sell nothing.
Members do not receive any products, but only the ‘ID codes’ after paying money, even though such transactions are receipted as payments for goods.
“Such an act is deemed to be illegally raising capital from the public, and in violation of the Vietnamese law on banking,” said Nguyen Hoang Minh, deputy director the Ho Chi Minh City branch of the State Bank of Vietnam.
Credit institutions countrywide have been asked to review any unlawful money mobilizing activities in their localities, and report to the central bank in order to have timely action brought against them, he added.
