Investors wake up as 'dream' firms collapse

Several local 'multi-level marketing' companies which had collected crores of rupees from gullible investors promising them dream returns of up to 331 per cent have now started collapsing, leading to arrests of many promoters.

Investors on Tuesday queued up in front of the office of Asmma Network Marketing Company's office at Indora Chowk demanding refund.

Things went out of control when the promoter Ashwin Jawade and his staff said they couldn't pay up as they had run out of money.

Jawade summoned the police and an embarrassed police inspector, M V Motey, who had earlier inaugurated Asmma's office, arrested Jawade.

Director of Cosmo Networking Family, Sunder Rao, has also been arrested while another director Jaspal Singh was detained on Monday night.

Another company, Kranti Super Market, has already collapsed and its promoters Prashant and Dyaneshwar Khapre vanished allegedly duping investors.

Investors started breaking furniture and carrying away computers at Advance Business Concepts (ABC) last week when the police intervened.

Director Vijay Khairkar had asserted that the company was in a position to meet all its liabilities, but couldn't answer where it was going to procure the money from.

Interestingly, there are over 200 such firms in the city which have mobilised huge funds promising fabulous dividends.

When contacted an RBI spokesperson at Mumbai had earlier maintained that multi-level marketing companies were out of the apex bank's purview.

"They cannot be categorised as banks or non-banking finance companies on which the RBI has control. It is the state government which is supposed to control such operators under the Prize Money and Chitfunds Act," said the spokesperson.

Under a scheme from Cosmo Networking Family, a Rs 29,000 deposit was expected to earn a return of Rs 8,000 per month "till the company exists". There was no satisfactory answer on how long the business would survive.

Asmma Networking Family said it accepts Rs four lakh and promises a monthly return of Rs one lakh.

The investment can be recovered in four months while incentives of Rs one lakh would be given to the investor during the next four months. The scheme can be renewed after 8 months.

Some of the operators said they have a simple method of sourcing funds for paying such high returns.

"We are re-cycling funds. Those who join first get their money from those who join later," said an operator not wanting to be named.

End of a run

Local 'multi-level marketing' firms in Nagpur had collected crores of rupees from investors promising them returns of up to 331 per cent.

They have now started collapsing, leading to arrests of many promoters.

An RBI spokesperson at Mumbai says these companies are out of the central bank's purview.

There are over 200 such firms in the city which have mobilised huge funds promising fabulous dividends.