Mumbai/New Delhi: The economic offences wing (EOW) of the Mumbai police on Tuesday said Speak Asia Online was a Rs2,300-2,400 crore fraud and that the notional value of the reward points offered by the company is Rs30,000 crore.
Speak Asia, which conducts online surveys on a variety of products and services, has around two million Indian panellists, or members, who pay money to join the firm’s network and earn reward points for referring its offerings to friends and peers.
“Total money collected by Speak Asia in a span of 18 months (February 2010-July 2011) is more than Rs2,300 crore and the total payouts assured by the company to investors is more than Rs30,000 crore,” said Rajvardhan Sinha, additional commissioner of police. Sinha heads the Mumbai EOW.
Speak Asia, a multi-level marketing firm, is being investigated by multiple agencies such as the Enforcement Directorate (ED), the income-tax department and the Serious Frauds Investigation Office (SFIO), besides EOW, for offences including money laundering, violation of foreign exchange law, tax evasion and not making payments to investors.
SpeakAsia COO Tarak Vajpayee. Photo: HT
The company’s spokesman couldn’t be reached for comment.
On 12 November, Mint reported that the ED is expected to file a show-cause notice to Speak Asia for raising Rs2,400 in India and remitting Rs900 crore to Singapore.
At a seminar in Mumbai, Sinha said, “Till now, Speak Asia is the biggest multi-level marketing fraud which is being investigated by EOW.” He said Ponzi schemes are proliferating, especially in cases where the multi-level marketing model is being used without selling a product and that companies who do this have no financial integrity.
In June, Speak Asia said it uses the collective bargaining power of 1.9 million online consumers to “get unprecedented price advantages” in purchasing goods and services.
When the company started facing problems on many fronts, it stopped making payments to its members, saying its accounts have been frozen. It also gave an exit option to members.
“Until we have a centralized agency like Sebi (Securities and Exchange Board of India) or the Reserve Bank (of India) to look into multi-level marketing companies, this problem cannot be solved,” Sinha said.
There is no provision for registration of online companies and this explains why they can’t be regulated.
In July, the ministry of corporate affairs (MCA) ordered a probe into Speak Asia’s activities under a section of the Companies Act, 1956, that deals with firms not registered in India.
“The SFIO report should be out in December. The ministry (MCA) feels the culprits will be nailed after that,” said a senior MCA official, who did not want to be identified.
EOW’s Sinha said multi-level marketing schemes investigated by the agency in the past include Pinnacle Education and Opportunity Ltd, Gurudev Travel Connection, City Limousine and Kanakdhara Gold.
According to EOW, Speak Asia’s members range from 132 in Lakshadweep to 130,000 in Mumbai, with the maximum members in Madhya Pradesh.