by Chu Lan Huong
Last month, news on multi-level marketing firm Lien Ket Viet, which was prosecuted for fraudulent appropriation of assets in an apparent pyramid scheme, overwhelmed newspapers and social networks.
The company was discovered swindling more than 45,000 people in more than 27 cities and provinces nationwide and appropriating a total of VND1.9 trillion (roughly US$85 million) since 2014.
People were shocked. Many victims cried, and some even fainted upon learning that the money they had saved all their lives had disappeared in a short moment.
Hundreds of people said they paid deposits to join the Lien Ket Viet multi-level trading system, but never received any commission as promised.
First, one should not blame MLN firms alone for cheating clients and investors. One should also carefully consider what made thousands of people, just over the last few years, empty their pockets to feed fraudulent MLN companies like Lien Ket Viet.
The companies promised clients an unbelievably high profit. Commitments related to commission and profits were only conveyed orally. Contracts, receipts and documents were lacking, but clients and investors turned a blind eye to the signs.
Who should they blame for being cheated? Should they blame themselves for their greediness and naivety?
The MLM structure operates on the principle of enrolling members for a commission-based payment scheme. People are persuaded to subscribe, via fees or purchase, on the promise that an initial investment will yield a high return.
Salespeople not only sell their products, but also encourage others to join the companies as distributors. A person will receive commission not only for the sales they secure, but also for the sales of other distributors they recruit.
Most commonly, the salespeople are expected to sell products directly to consumers by means of referrals and word-of-mouth marketing.
A large number of Vietnamese people from all walks of life have been attracted by the high-earning potential of MLM firms, only to end up losing sleep over possible financial losses once the fraudulent nature of such companies is uncovered.
Like other MLM companies, Lien Ket Viet showed the clients a super-profit business model and attracted thousands of people to join the network.
In the first months of joining, the investors were paid commission on schedule. In fact, the companies' owners used the clients' deposits to pay their clients' commission.
Lien Ket Viet Company is one of a dozen cases of MLM firms trapping greedy but nave people.
A few years ago, a project disguised as a charity named Trai Tim Viet Nam caused a storm on social network when it deceived more than 40,000 farmers.
This is an "expensive" lesson to those who want to be billionaires overnight.
Therefore, investors should be more clever and vigilant when it comes to groundless super-profit schemes that only leave them empty-handed.
Blaming greedy and nave people is easy. But it raises the question: Why are so many fraudulent MLM companies caught only after cheating thousands of people and operating for a long period of time, sometimes years? What are the responsibilities of State management authorities?
It is impossible that a company with hundreds of branches joined by thousands of investors and mobilising thousands of billions of dong could go unnoticed by management agencies for long.
In fact, a newly-opened small shop in a narrow lane of the city has to host some inspection teams during the first month of operations. So, why do management agencies fail to notice a big company like Lien Ket Viet?
Phan Duc Que, an official from the Competition Management Department of the Ministry of Industry and Commerce, said MLM is word-of-mouth marketing, so it is difficult to monitor.
Everyone wants to get rich quick, so they voluntarily lure others to join. So they are both victims and accomplices, he said.
Furthermore, regulations on operating MLM firms have been vague, and the punishment for violations is light when considering the money the firms earned.
After more than 14 years in Viet Nam, the MLM business has been illegally modified. The companies' tricks are becoming more and more artful and cunning.
Lien Ket Viet is just one case that was exposed. There are many fraudulent firms operating as MLM businesses that exist, and they are expanding their cheating operations to every corner of the country. — VNS