Hyderabad : The sleuths of Enforcement Directorate (ED) have moved the court against pyramid fraud perpetrator Pawan Malhan who is accused of money laundering Rs 277.89 Crore.
The investigating agency booked 'Ebiz.com private limited' represented by Pawan Malhan and 26 others for allegedly cheating clients in the name of 'multi-marketing'. The officials were acting on a FIR registered by the economic offences wing of Cyberabad police.
Pawan Malhan and his associates were running a multi-marketing level scheme, in which clients can directly purchase products like -Computer Education packages (which in reality were downloaded freely from the internet), cheap suit lengths.
The primary purpose of the members joining the scheme was to get commission from enrolments and not for the products. They extensively advertised their commission model in which a very high commissions were paid to sponsoring members for enrolment of new members.
This means, if A brought B & C to purchase products, A was paid a high commission. Similar to a chain system where the primary subscribers gets a high commission if he or she gets new members.
During initial days, the company held large conventions in which top rung members of the pyramid scheme would give lofty speeches and display their new found wealth earned from commissions and encourage thousands more to join this scheme.
"They used to advertise the scheme through social media platforms like Facebook pages and groups. The enrolment fee paid by new members was used to pay commission to older members. The balance was being siphoned off by the Malhan family. Such schemes are inherently unsustainable and collapse as soon as there is a run on the business. In such ponzi schemes only the top members make sizable profit leaving lakhs of members at the base of the pyramid poorer of their investment" ED advised.
The lid blew off when Cyberabad police received several complaints against Ebiz.com, based on which the FIR was registered. Investigation under prevention for money laundering revealed that funds were fraudulently collected from the subscribers as membership deposits through a chain of agents spread across India.
Later, these deposits so collected were 'illegally diverted' into the personal accounts of the Directors, their family members and other associates under various heads - dividend, salaries/incentives etc and were utilized to purchase properties for themselves or their relatives. The directors also cheated the public by falsely claiming that their fraud pyramid scheme was a legitimate Direct Selling Network Scheme by introducing sub-standard products like suit lengths.
In 2019, ED sleuths conducted raids across India and attached immovable properties to the tune of Rs 277.97 Crore of Pawan Malhan, his son Hitik Malhan and others. A year later, ED filed a prosecution complaint against the company, its directors and 26 others.