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eBIZ.com Froud

eBIZ.com .Pvt.Ltd 

Noida-based firm eBIZ.com busted for Rs 5000 crore fraud; 17 lakh people duped.

While the financial racket was busted, the 62-year-old managing director and his son were taken into custody. The company head office at Noida was also sealed. The deposits worth Rs. 398 crore have also been frozen in their multiple bank accounts.

"The company used to target youngsters. Initially, a member joins the scheme by paying Rs. 16,821 to become a member. After this, the member receives 4 percent commission if he/she brings other persons to the forum," police said.

A cheating case against the management of eBiz was recently filed by the police, on the basis of complaints by Mohammed Sharooq. Apart from his complaint, three other cases were booked against the firm at various police stations in Cyberabad and an investigation was going on.

eBIZ.com Froud
The hitherto little-known company, which is believed to be operating for the past 10 years, is selling IT educational packages through the MLM format, even as the content of its courses is available on the Internet free of cost.

Over the past few years, Moneylife has regularly reported on how multi-level marketing (MLM) companies are duping gullible people with new, innovative schemes. Here is one more company which we discovered is offering a computer course on the internet, free of cost, and claiming that it has been doing this social service for many years! That's fine, only till the subscriber is asked to make an upfront payment of Rs7,446.

The company is eBIZ.com.Pvt.Ltd and it is the brainchild of Pawan Malhan. According to sources, Mr. Malhan is a non-resident Indian (NRI). Some say he was a director of BITS, Pilani, while others inform that he was head of the Association of Indian Universities (AIU) for nearly a decade. Some blogs even suggest that Mr. Malhan was the founder of a US-based MLM company SkyBiz, which was fined $20 million by the government. Sources among IIT alumni say they have not heard about Mr. Malhan and that they have no clue about his credentials.

eBIZ sells online self-learning educational packages that contain courses on operating systems, programming languages, databases, and some capsules on MS Office, computer hardware, and internet surfing. The catch is that the subscriber is expected to learn all these courses online at his/her own cost. eBIZ.com says, "Please note: All our courses are designed for self-learning only by using computer and Internet at the cost of the learner."

The CD containing the package provided by the company has some animated tutorials. The fact is that anybody can create such animated tutorials using software like Screen Casting which is available on the Internet free of cost. (Screen Casting captures all the movements on the screen and saves it as a flash file.) What is more astonishing is that neither eBIZ nor its educational module is registered with any university or technical board, so whatever certificate is given would have little or no value in the market.

As eBIZ claims, it is offering educational packages-mostly related to information technology-many students are attracted to this. Students and their parents believe they are getting a good offer at a lower rate than other computer education institutes are charging, but they fail to understand that there is no value in such self-education, unless it is endorsed by a government-recognized technical education board or university.

eBIZ has been active in the northern states, where subscribers are now finding it difficult to add new candidates to the fold. So, the business is moving to other states. The target group is the same-gullible students. Why does one have to pay for something that is otherwise available free of cost over the Internet?

HYDERABAD:- The Enforcement Directorate (ED) filed a prosecution complaint against Ebiz.com Private Limited and its managing director Pawan Malhan in PMLA special court. The ED registered a Prevention of Money Laundering Act (PMLA) case based on the FIRs registered by Cyberabad police against Ebiz.com and its directors.

In 2019, the ED had provisionally attached various movable and immovable properties worth Rs 278 crore of Pawan Malhan, his son Hitik Malhan and others. The provisional attachment has been confirmed by the PMLA adjudicating authority and the ED has taken possession of these assets.

The prosecution agency said the accused ran multi-level marketing (MLM) scheme for the sale of worthless products like computer education packages which were downloaded freely from the Internet. “These products were only for namesake. The primary purpose of the members joining the scheme was to get a commission from enrolments and not for the products. They extensively advertised their commission model in which very high commissions were paid to sponsoring members for enrolment of new members,” the ED said.

The accused company used to hold large conventions in which top rung members of the pyramid scheme take part and encourage thousands of others to join the MLM scheme. “The enrolment fee paid by the new members was used to pay commission to older members. The Malhan family was siphoning off the balance. 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 sizeable profits, leaving lakhs of members at the base of the pyramid poorer of their investments,” the ED explained.

Investigation under the PMLA revealed that funds were fraudulently collected from the subscribers as membership deposits through a chain of agents spread across India. These deposits were illegally diverted into the personal accounts of the directors, their family members, and other associates under various heads like dividends, salaries/incentives, etc., and were utilized to purchase properties for themselves or relatives, alleged the ED.

Why investing your money with eBIZ is a bad idea?

The arrest of eBIZ Father-Son Promoter Duo, On 20th August 2019, the country was shocked as the Hyderabad Police arrested Pawan Malhan and his son Hitik Malhan for allegedly committing fraud of over Rs. 5000 crores. The father-son duo was promoters of the Company eBIZ which is accused of duping people by operating a fraud business in the model of Multi-Level Marketing (MLM) scam and a pyramid scene. Over Rs. 389 Crores worth of funds held by the Company in different Bank Accounts in the name of the Company and its Directors have been frozen by the Authorities. According to the Police, the Company has managed to dupe over 17 lakh people and add them as its members in exchange for an investment, which was never returned as promised.

The business model of eBIZ

The company ostensibly sold basic computer courses at exorbitant prices, even though the study material is available online for free of cost. They are also not affiliated by any Technical Board or University, thus casting dubious aspersions on their legitimacy. This allowed the company to earn a legitimate income by selling this course at a whopping Rs. 17,000. The major selling point of the business, however, was to induce people who have bought the course to convince their friends and family to buy the course also. In successful, they would get a small commission. But then these people would have to recruit members of their own (called downlinks) and everyone on the uplink would again get some commission. In this way, the chain would continue. This is called a pyramid scheme or a “money circulation scheme” in India.

The business module is equally interesting. There are some cycles and orbits. The first six cycles make the first orbit that the associate has to complete within a year. To complete the first orbit the associate has to sell this educational package to 50 people in the ratio of 1:2 and he may receive a commission of around Rs26,000. In case he cannot maintain the 1:2 ratio he will not get the commission. This is about the income an individual can earn. But how does the company earn its revenue?

When a person becomes an associate he pays Rs6,550 to eBIZ. (The balance from the total of Rs7,446 goes towards service tax and cess on service tax.) To earn a commission of Rs2,000 he has to enroll two more people as his left and right legs. eBIZ's total earning works out to Rs19,500-Rs2,000=Rs17,500. The company keeps about 30% of this as its revenue.

In the next cycle, the person has two associates who each add two people down the line (in the ratio of 1:2). eBIZ's total earnings now works out to Rs6,550 x 7 = Rs48,850 - Rs6,000 (commission paid to the initial subscriber and his two associates) = Rs39,850. Let's say the subscriber's business continues in the required ratio of 1:2 till there are 25 members in the left and right down lines, then eBIZ would have to pay him Rs8,000 and the associates would each get Rs8,000 in the next cycle.

This assumes that the business continues in the required ratio. However, if eBIZ has to pay out each eligible member the commission from the 70% it gets, it could begin to pinch. That's why MLM businesses seek to register more and more people but would like to see fewer and fewer subscribers achieving the 1:2 ratio. This explains why there are very few people (less than 2%) who joined up early and earned money and the majority end up losers.

Why did the eBiz business fail?

Pyramid Schemes or Money circulation schemes are not practical. The entire business model depends on taking money from one person as enrollment fees for joining the company and then using that money to repay the loan of that earlier person. It is like using one credit card to pay another. In the end, there would be no more banks left to take credit cards from. Similarly, in a money circulation scheme, there would come a time when there are no more people left to join. The entire business model would collapse then as there would be no revenue source to pay off the debts of the people who have already invested in the company. The worst affected would be those who have joined at the later stages because they would not get the opportunity to earn income from getting more people to join – as there is no one left.

Can you be successful with eBIZ?

Are there people who are successful at eBIZ? Yes, there are. But they are usually high-level gold and silver members who have 100 to tens of thousands of people in their network. They had joined the company at a very early stage and had the opportunity to recruit people very early on to get dividends when these people further sold anything. But now the pool is all dried up. There are not many more people left to recruit and after the arrest of Pawan and Hitik Malhan, the eBIZ fraud has been totally exposed.

The Company does not compensate you for travel or accommodation expenses incurred for work purposes like attending frequent conventions or group meetings, which are more or less mandatory as you will be pressurized by your uplinks. Even your mobile balance, which you spend in copious amounts to keep in touch with your uplinks, is not reimbursed by the Company. You end up shelling a lot of money out of your pocket very quickly without any return on your investment. This becomes a huge downside for trying to get people to join in. It is no wonder that 95% of the people who invest in eBIZ fail to even maintain a team of 9 members – the minimum needed to reach a basic partnership tier of “cycle achiever” (team of 9 people). A minute 2% of people reach the next tier – “silver” which consists of 50 people. And a minuscule 1% of all investors reach the “gold” tier.

An insider former eBIZ employee, reveals the level of shamelessness and exploitation of new joiners and juniors by high-level gold and silver members of the eBIZ franchisee. The meetings that the Company mandatorily made the juniors go to, at their own expense, of course, was nothing but another slimy money-making opportunity by the eBIZ higher-ups. These events would be organized for a profit. Passes would be printed and given to the juniors to sell to their friends to get more people into the convention (to prey on them as new members). But the appalling thing is that the entire money from the passes would be taken from the juniors beforehand. Now it becomes their liability to sell off the passes that they have already paid for by duping their friends and family. But it has been seen that most people are not even able to recover the money they paid passes, as it is difficult to find people in real life who will be willing to pay to attend a bogus corporate reminder of a pyramid scheme company. As desperate juniors harangue and cajole their people around them, they become shunned and alienated by friends and family.

The law on MLM and Pyramid Schemes in India.

Section 2(c) of the Prize Chits and Money Circulation Schemes (Banning) Act 1978, makes any business illegal, whose central purpose is to make a quick buck by the exchange of money for the enrollment of new members. In M/S Apple FMCG Marketing Pvt. Ltd. v. Union of India, the Supreme Court stated that in any pyramid scheme there will come a point of time when the chain will get saturated and there will be no one left to sell to; and that there is a danger of lakhs of people losing their entire money and livelihood in such as scheme. Such schemes are thus “money circulation schemes” under the Act, and are illegal.

The Supreme Court in Kuriachan Chacko and Ors. vs. The state of Kerala took note of the absurdity and long-term unworkable nature of money circulation schemes, pyramid schemes, and comparable MLM schemes. It noted the downright cunning and diabolical arrangement that the only people who would benefit from this unsustainable business model are the promoters of the fraudulent themselves and no one else.

The Cyber Crime Cell of the Cyberabad police in Hyderabad has issued a Public Awareness Notice that many schemes are being floated to dupe the public under different names such as Direct Marketing (DM), Multi-Level Marketing schemes (MLM), Network Marketing (NWM), Referral Marketing, Introduction Marketing, Chain Marketing, etc., and that these are nothing but “money circulation schemes” which are banned under the provisions of the Prize Chit and Money Circulation Schemes (Banning) Act, 1978, money circulation schemes are banned in India.

The Supreme Court has declared the business of even Amway as an illegal money circulation scheme, as they distribute commissions on getting other people to join, in Amway India Enterprises v. Union of India.