Purna Basnet

After making handsome savings from years of hard work in Hong Kong (HK), Bishnu Kumar Damai of Pokhara had moved to the UK three years ago to plan a good life there. His dream would have come true had he not succumbed to the temptation of making a million rupees every month from a network marketing scheme. 

Lured back to HK and into the network marketing scam by his friend Lalit Rai, Damai said the easy-money temptation eventually caused him to lose Rs 7 million. Worse still, a significant chunk of that money had come in the form of loans from near and dear ones in HK and Pokhara. “Sadly, I and my wife Yami are working day and night these days to repay those loans,” he said.

Mala Pun, who came to HK from Dharan, also lost Rs 7 million in the scam, and has already attempted suicide three times. She was lured by a friend. She and her husband also work overtime to repay loans they took from their parents back home.

Damai and Pun are just two out of some 1,500 Nepalis who have lost Rs 540 million in a networking business run in HK by Digital Crown Holding Limited (DCHL). 

Moreover, the victims said only about 10 percent of the money lost was earned in HK. Some Rs 500 million was siphoned out to HK from Nepal.The victims further informed that DCHL has lately opened offices in India. “As Nepalis feel a greater temptation to make easy money, we fear this could lure many more of them into the trap,” said Pun.

The scheme

The scam that ripped off over half a billion rupee from gullible Nepalis is a pyramid-style marketing scheme. 

DCHL uses French products such as hair oil, cosmetics, red wine and whiskey priced in a range of HK dollars 500 to 10,000 for operating the scam. Clients were offered handsome commissions, which multiply multiple-fold with the entry of new members into the pyramid. 

The company assures that the investment made by the clients is safe, and that it will refund the money in the form of products. By selling those goods, one can easily recoup the investment, it says.

“But therein lies the catch. The products supplied by the company are priced 10 times higher than in the market. You will not find any buyer for them,” said Anu Rai, who lost Rs 4.3 million in the scam.

Modus Operandi

To enroll in the pyramid, a client needs to pay HK dollar 5,000 (about Rs 55,000) in the first stage. The company tags this amount as 20 percent of the client´s total investment. It then asks the member to pay HK dollar 68,000 (about Rs 750,000), saying this will raise the investment to 38 percent.

After that, the company motivates the client to raise his or her share to 41 percent. For such a raise, the client is required to induct nine new members, each investing Rs 750,000. “But finding a new client is not easy,” said Damai. 

Once cornered, the DCHL agents then get the clients to buy into the scheme in the names of family members, relatives and friends, among others. “This is when you will lose everything,” he added.

Of around 1,500 Nepalis who fell prey to the scam, 44 had raised their investments to 41 percent. Another 404 had invested to the level of 38 percent. Each of them lost around Rs 800,000 in the process. 

Reality about DCHL

The DCHL website says it has offices in countries like Australia, Indonesia, Japan, Philippines, Singapore, Malaysia and Thailand. But reports show that it faced a ban in Australia two years ago. 

Macau, a Special Administrative Zone of China, had shut down DCHL operations in 2008. European countries too have not allowed it to enter their markets. Quoting members of the HK Legislative Council, the South China Morning Post newspaper last month ran news about tens of thousands of Chinese being cheated by DCHL.

The company has appointed Nepali agents to expand business in the Nepali community. Nepali victims said the most active Nepali agents were individuals like Lalit Rai, Hema Rai and Asha Dahal. 

“Lalit and Hema came to my workplace and took away Rs 5 million after they managed to win my trust,” said Rajendra Gurung, a victim from Pokhara. “Now, when I approach them to refund my money, they claim that they too have been cheated by the company.”

Lalit also professed his innocence to Republica. “I am just like any other DCHL member. I have been cheated also,” he stated. Asha Dahal, the other active agent, has now moved to the UK, fearing possible trouble. 

Ban business

Following growing complains, the HK Legislative Council last December enacted a law imposing a ban on pyramid-style network marketing businesses.

The law came into effect from January 2012 and provisions stringent punishment for perpetrators operating such scams and compensation for the victims. However, DCHL has not faced any action yet.

“If someone lodges a complaint and police investigations find the firm flouting the law, its operators can land behind bars,” said Narayan Sharma, a solicitor.

A group of Nepali victims said they are preparing to approach the HK government and file a complaint against DCHL. “We are gathering proof of wrongdoing. We will lodge our complaint with HK Police through the Customer Council,” said Pun. 

Published on: 22 September 2012 | Republica