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Investing in money-making Internet schemes? Beware!

By Sanjay Kumar Singh
February 16, 2017 10:24 IST
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Investing in money-making internet schemes? Beware

Before participating in such schemes, do a detailed background check of the company's credentials, especially if the promised returns are unrealistic, says Sanjay Kumar Singh.
Illustration: Uttam Ghosh/

By now you would surely have read the news story about a Noida-based company called Ablaze Info Solutions, which is said to have defrauded about 700,000 people to the tune of Rs 3,700 crore.

In this scheme, participants first had to pay a substantial subscription fee to join it, after which they were compensated for clicking on links.

There were also incentives for bringing in other members, which made it akin to a multi-level marketing (MLM) scheme.

Experts advise that investors should do adequate due diligence before betting their hard-earned money on such schemes.

According to cyber experts, this scheme took off because the activity it was pursuing was a legitimate one per se.

There is an entire industry on the Internet, wherein you can earn money by clicking on links: This improves the traffic on Web sites and allows them to demand higher advertising rates.

Many Web sites outsource the task of improving traffic to third parties, which in turn recruit people in countries like India for the task.

You can also earn money through activities like filling forms, answering surveys, etc.

The mistake participants made in this case was to join the scheme without exploring other options.

"Many players would have offered a similar level of compensation without demanding a subscription fee. Moreover, the very fact that the company was demanding a substantial subscription fee should have made people suspicious," says Udbhav Tiwari, policy officer at the Centre for Internet and Society, Bengaluru.

Before participating in such a scheme, spend time doing a detailed background check of the company's credentials, especially if the promised returns are unrealistic.

"If the return offered by the company is high compared to market rates of return, or the company is new, you should be extra cautious. Check various blogs and forums on the Internet for possible complaints against the company and its key stakeholders," says Mukul Shrivastava, partner, fraud investigation and dispute services, EY India.

If you do join such a programme, be warned the moment the company misses out on payments, delays them, or avoids your queries.

Stop all interactions with it and lodge a complaint with the police, providing all relevant details.

If the company had used forged documents, especially ones claiming that the scheme had the approval of a regulator like Sebi, submit those.

You can also file a complaint at Sachet, a Web site set up by the Reserve Bank of India.

Another option is to contact the Serious Fraud Investigation Office (SFIO) under the Ministry of Corporate Affairs.

Usually, the police take up a case when many complaints pour in against a single entity, so motivate other victims to complain too.

The State fights the case on your behalf. Your task after complaining is to cooperate with the investigation and depose in the court when required.

Nowadays victims can be compensated under the Criminal Procedure Code as well. They also have the option to file a civil suit for recovery of their money.

Finally, there is need for new laws in the area of online frauds.

"For online activities, there is a gap both in terms of legislation and enforcement. We only have a 1978 Act for chit funds, which needs to be updated," says Nishant Joshi, partner, Shardul Amarchand Mangaldas.

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