Introduction: The Changing Face of Money Doubling Schemes
The history of fraudulent investment schemes in India is marked by constant evolution and increasing sophistication. From the 1970s to 2000, the country witnessed simple money circulation schemes. These were soon replaced by plantation schemes (2000–2006) and real estate investment scams (2006–2010). Since 2011, the landscape has been dominated by unregistered collective investment schemes, under the guise of dealing in forex trading by deploying algorithmic trading bots, and, more recently, decentralised and centralised cryptocurrencies and other virtual digital assets (VDAS).
This progression has enabled scammers to stay ahead of regulatory frameworks and law enforcement, making detection and prosecution increasingly challenging. The digital era has given rise to new forms of deception, with scammers leveraging technology to create the illusion of legitimacy and to move illicit funds across borders with unprecedented speed.
The Scale and Impact of the Crisis: Realisation is the key
India's financial ecosystem is under siege from an unrelenting wave of scams that employ multi-level marketing compensation plans. Notorious operations like Speak Asia, Gain Bitcoin, TVI Express and modern players such as One Coin, iX Global, FX Stock and Torres have siphoned billions from unsuspecting citizens, leaving behind a trail of financial ruin, broken trust, and fractured communities.
The numbers are sobering: 686 MLM scams have been identified among 775 new MLM operations in India from 1 January 2025. Most follow the classic Ponzi model of phantom returns, but even 89 of the remaining MLM ventures, which promote tangible products, fail to fully comply with India's Consumer Protection (Direct Selling) Rules, 2021, and other applicable regulations. This leaves participants equally vulnerable to financial loss and legal uncertainty.
Since 2007, more than 5200 MLM scams have hit India, many of which were listed before the perpetrators absconded with the loot or were closed down by law enforcement agencies. These scams' sheer volume and persistence underscore the urgent need for a coordinated, systemic response from senior law enforcement officials.
The Victim-Perpetrator Paradox: The Engine of Self-Sustaining Fraud
Modern MLM scams are uniquely insidious in that they weaponise their participants. Unlike traditional Ponzi schemes, where victims are passive investors, MLM models actively recruit participants as agents of their exploitation.
This dual-role dynamic is achieved through:
- Recruitment Quota Systems: Participants are given monthly recruitment targets, which force them to recruit new victims to maintain their status and potential for returns.
- Inventory Loading Mandates: Compulsory purchases of intangible or low-value products serve as disguised investments, locking participants into a cycle of spending and recruiting.
- Social Proof Engineering: Algorithmically generated dashboards display fabricated success metrics, sustaining participation and encouraging further investments.
This architecture transforms late-stage participants into unwitting conspirators who recruit others in a desperate attempt to recover their losses. The result is a self-sustaining fraud ecosystem that grows exponentially until it collapses under its own weight. This is the reason why they manage to fly below the radar of the agencies.
The Human Cost of Delayed Action: When Raids Come Too Late
The devastating impact of MLM scams is not limited to financial loss. The human cost is often far greater and more insidious.
Consider the case of a 2023 crypto MLM that promised "server rental income." When investigators raided its Delhi office, they found empty desks and abandoned chai cups. The masterminds were already relaxing in Dubai penthouses, funded by over ₹1,900 crore in stolen money.
Consider the case of a multi-level marketing (MLM) fraud that operated nationwide under the guise of a direct selling MLM company. This entity was flagged in our alert list in July 2021 for collecting deposits in mule accounts for an unauthorised forex trading platform and running an unregistered collective investment scheme, promising high returns on investments in virtual digital assets purportedly generated by them.
Despite the availability of information and a preliminary inquiry conducted by the Economic Offences Wing of the state police in April 2022, the First Information Report (FIR) against the entity was registered only in August 2024.
Subsequent investigations by the Enforcement Directorate revealed the use of upwards of 200 bank accounts across nationalised and private banks to collect deposits from victims, layer the funds, and ultimately siphon them out of India.
Based on victim complaints, our analysis has so far identified 65 bank accounts in Indian banks (both nationalised and private), 7 accounts in foreign banks, 35 cryptocurrency wallets, 5 money mules, and 3 full-fledged money changers involved in supporting the fraud. The promoters established shell entities including proprietorships, partnerships, and private limited companies in India, the UAE, the US, and other jurisdictions to facilitate the fraud.
A review of account statements for the mule accounts (in the chargesheet) used by the promoters revealed that these same accounts had previously been used to collect funds from victims of earlier MLM frauds operated by the same masterminds (one a US citizen and ex-marine in the US Army, and two Indian nationals) before launching this scheme. Currently, the US citizen (identified as a key mastermind) and one Indian associate (responsible for layering and laundering) are absconding, while the third promoter is in judicial custody since 2023 but was found to be accessing social media platforms as recently as April 2025.
Early participants and core beneficiaries of the scheme, earning between INR 20 lakh and INR 9 crore per month, received their payouts in trust wallets (A non-custodial crypto wallet designed to manage virtual digital assets including cryptocurrencies, tokens, and NFTs which enables users to maintain complete control of their assets and does not require KYC verification to use) maintained by the company.
Many of these beneficiaries have since begun promoting new MLM schemes with similar modus operandi to keep their downline victims engaged and discourage complaints, while some top beneficiaries have absconded.
FIRS are now being filed against the company in multiple states, reflecting the widespread impact and complexity of the fraud.
To date, the Enforcement Directorate has attached assets valued at ₹290 crore in connection with these operations, a figure that represents only a small fraction of the overall illicit proceeds identified in this case.
The financial loss is only part of the story for survivors like Arjun, a 28-year-old mechanic from Delhi. "Every time my phone rings," he says, "I panic. It's Ravi's widow asking when she'll get back the ₹2 lakh I convinced her to invest." In many cases, victims avoid filing complaints out of shame or fear of social ostracism, compounding their suffering in silence.
The Bureaucratic Tangle
Even those victims who muster the courage to come forward often find themselves trapped in a maze of red tape. Take Mala, a schoolteacher from Telangana who lost ₹6.82 lakh in a "Forex Trading and NFT" scam. After months of navigating police stations and cybercrime portals, she was told: "Madam, do you have the CEO's Aadhaar card? Company PAN? Registered office proof? Preliminary enquiry is ongoing… We'll let you know."
Meanwhile, scammers mock their victims on Telegram groups with photos of Dubai skyscrapers captioned: "Working hard for your passive income!" By the time investigative teams trace the money trail, it has already been converted into untouchable assets:
- Luxury Purchases: Lamborghinis are parked in US and Dubai garages; limited-edition Patek Philippe watches are on wrists in Singapore.
- Digital Fortresses: Funds scattered across anonymised crypto wallets and laundered through decentralised platforms lacking KYC/AML controls.
- Global Real Estate Portfolios: Beachfront villas in Zanzibar, high-rise condos in Singapore, and penthouses overlooking Palm Jumeirah in Dubai.
This rapid asset conversion by the use of mule bank accounts, hawala operators and FFMC creates a labyrinth for investigators while leaving victims with little hope of recovery. Filing an FIR (First Information Report), securing a search warrant, and pursuing asset seizure is often fraught with delays due to a lack of understanding of the modus operandi and information about the damages caused by deleted data (by the fraudsters), legal obstacles, and procedural bottlenecks.
Mistaken Identities: The Direct Selling Dilemma
Direct-selling companies that sell tangible products and deploy multi-level marketing compensation plans are often misunderstood as Ponzi schemes. These legitimate businesses compete with mathematically unviable schemes, money circulation, and unregistered collective investment schemes that promote intangible products and promise quick and easy money.
This competition leads to two significant problems:
- Loss of Business: The migration of participants (direct sellers) from legitimate companies towards MLM schemes which promise easy money.
- Perception Issues: Uninitiated observers mistakenly label direct selling companies as fraudulent due to a lack of understanding of the Multi-level marketing compensation plans and business models.
The confusion stems from a lack of clear understanding regarding the differences between legitimate, mathematically sustainable MLM businesses and fraudulent MLM schemes. For law enforcement, distinguishing between a cognisable offence and a non-cognisable offence during the initial stages of investigation is challenging, as fraudsters often disguise their schemes to appear legitimate businesses.
Red Flags in Modern (Post-2016) MLM Schemes
Fraudulent MLM schemes have rapidly adapted to changing technologies and regulatory environments, evolving from simple money circulation and unregulated collective investment schemes often involving sectors like agriculture and animal farming to far more sophisticated operations centred around forex trading, centralised and decentralised cryptocurrencies, and NFTS.
Their operational tactics have also shifted: Where such schemes once relied on physical offices, many have moved entirely online, first through websites and then via mobile applications, and now often restrict promotion and user engagement to encrypted messaging platforms like Telegram and WhatsApp.
Despite these surface-level changes, certain core deceptive traits remain constant.
Immediate concern should be raised on MLM (Multi-level Marketing) schemes exhibiting one or more of the following attributes:
- Deceptive Profit Promises and Entry Barrier
- Effortless Returns: Schemes promising profits with minimal effort exploit the human desire for easy wealth. This tactic aligns with the psychological manipulation techniques employed by sophisticated MLM operations and non-MLM schemes.
- Registration and Subscription Fees: Mandatory joining fees and recurring subscription charges create immediate Revenue streams for scammers while exploiting the sunk cost fallacy among participants. This practice is expressly prohibited under the Consumer Protection (Direct Selling) Rules, 2021.
- Cryptocurrency and Digital Asset Exploitation
- Virtual Digital Asset (VDA) Investments: Soliciting investments in cryptocurrencies or NFTS adds a layer of complexity to asset tracing, facilitating transnational asset obfuscation networks.
- Proprietary Cryptocurrency Creation: Schemes minting their digital currencies often leverage these tokens in gamified compliance dashboards, further entrenching participants in the fraud ecosystem.
- Recruitment-Centric Models Prioritise Recruitment Over Sales
- A focus on expanding the network of investors rather than selling actual or real-value products is a hallmark of unsustainable MLM operations, as evidenced by the recruitment quota systems analysed previously.
- Financial Obfuscation Tactics
- Third-Party Account Deposits: Directing funds to accounts not directly associated with the company (mule accounts) complicates asset recovery efforts and aligns with the money laundering architectures observed in collapsed schemes.
- Foreign Currency Transactions: Invitations to deposit into overseas accounts often indicate attempts to exploit regulatory arbitrage, a growing trend in MLM fraud innovation.
- Lack of Transparency and Tangibility
- Opaque Business Models: Fraudulent MLM schemes deliberately employ complex and non-transparent business structures that obscure their operations. This opacity serves as a sophisticated deception mechanism, concealing the critical fact that returns are not generated through legitimate business activities within their ecosystem, but rather depend entirely on continuous recruitment and new investments. When pressed for details about Revenue sources, such operations typically present vague references to "investments in various sectors" or proprietary technologies without verifiable evidence. This deliberate lack of transparency prevents participants from understanding the true economics of the scheme and recognising its mathematical unsustainability- a calculated influencer strategy that allows these operations to continue attracting victims despite their inherently flawed foundation.
- Absent Compensation Plans: Failure to provide clear, publicly accessible MLM compensation structures on official platforms, including websites, is a red flag, often indicative of mathematically unsustainable models.
- Intangible or Non-Functional Products: Promoting nebulous or non-existent products aligns with the inventory loading tactics used to generate liquidity and create psychological commitment devices.
- Wrong office addresses or absence of the same on its official website.
Insights from 18+ Years of Experience: Patterns and Challenges
After analysing over 15,900 MLM operations since 2007, several key patterns have emerged that define fraudulent MLM schemes:
- Fraudsters Never Stop: The lure of easy money drives scammers to continuously rebrand and evolve their schemes, often turning consultants to join hands with new ones to launch in India.
- Evolving Scams: Once exposed, fraudsters retreat behind the scenes, launching new MLMs with employees as figureheads while maintaining control.
- Global Operations: Fraudsters operate across multiple countries, especially Dubai, using networks of shell companies, unhosted crypto wallets, and hawala operators.
- Money Recovery is Rare: Most stolen funds are siphoned out of the country into trust wallets or other unhosted wallets, which do not classify as reporting entities under Indian AML law and do not have AML/CFT reporting obligations to FIU-IND. This complicates tracking and, therefore, recovery.
- Beneficiaries Escape Accountability: Early participants/core group in fraudulent MLM schemes often receive substantial financial gains, with funds typically funnelled into trust or unhosted wallets to obscure their origins. Despite profiting from the scheme, these individuals frequently claim victimhood when the operation unravels, attempting to evade legal responsibility for their involvement. This tactic complicates efforts to hold beneficiaries accountable and recover lost funds, further perpetuating the cycle of deception inherent in such scams.It is comparatively difficult to identify the real beneficiaries and their properties in MLM frauds because multi level payout structures fragment proceeds across numerous uplines, the core ledger of investments and distributions is centralized by operators and often deleted or withdrawn at the first sign of enforcement, and substantial payouts are routed to unhosted crypto wallets or offshore/proxy bank accounts, all of which exploit gaps in KYC visibility and cross border cooperation (letters rogatory/MLATs), thereby delaying or defeating timely attribution and recovery.
- Intimidation Tactics: Fraudsters often employ aggressive intimidation tactics to silence whistleblowers and discourage victims from seeking justice. These tactics include issuing defamation notices or filing false complaints against those who speak out. Additionally, they may deploy legal teams to manipulate downline victims into filing complaints against upline participants, creating internal conflict and demoralising those attempting to expose the scheme. Such strategies are designed to create confusion, sow distrust, and protect perpetrators from accountability.
- Corruption Networks: Fraudulent MLM schemes often exploit systemic weaknesses by leveraging corruption networks to obstruct justice. Procedural delays in FIR registration, repetitive application of the same legal sections by investigating authorities, and unnecessarily prolonged investigations (though this may also be because of overload on the investigation official) frustrate and discourage victims from pursuing complaints. These deliberate obstacles undermine the legal process and embolden perpetrators, making it even more difficult for victims to seek redress and for authorities to hold fraudsters accountable.
- Cryptocurrency Laundering: Scammers increasingly prioritise converting stolen funds into cryptocurrency as a means of laundering proceeds and evading detection. By moving illicit gains into digital assets, they exploit cryptocurrencies' anonymity and global reach, making it significantly more difficult for investigative agencies to gauge, trace transactions and recover stolen funds. This tactic safeguards their stash and adds a complex layer of obfuscation, further hindering law enforcement efforts to bring perpetrators to justice.
- Psychological Manipulation Tactics:
- Sunk Cost Fallacy: Victims are encouraged to reinvest in new MLM scams initiated by the promoters to recover previous losses.
- Community Isolation: Exclusive Telegram groups replace real-world social circles with scheme-approved contacts.
- Apocalyptic Narratives: Participants are told that external authorities are trying to destroy their financial independence.
These tactics create investigative blind spots, as victims often defend their exploiters rather than cooperate with law enforcement. This is one reason most victims do not file complaints until it is too late.
The only Way Forward: Proactive Policing and Systemic Reform
Preventive measures are crucial and effective in combating MLM scams, as reactive strategies alone often prove insufficient once the damage is done. Proactive interventions, such as early-warning systems, public awareness initiatives, and robust regulatory frameworks, can significantly reduce victimisation by empowering citizens to recognise and avoid fraudulent schemes before investing.
- Given the national scope and evolving complexity of MLM scams, a central national committee should be established to systematically evaluate the data and legal compliance of all MLM business models operating in India. This committee would be responsible for approving or disapproving of MLM operations and investigating and assisting enforcement agencies in swiftly bringing unapproved entities to justice and shutting them down. Such a coordinated, centralised approach is essential to address these schemes' cross-border and interstate nature, close regulatory gaps, and ensure consistent enforcement across jurisdictions.
- Dealing and promoting any Virtual digital assets should be illegal for any mass marketing operation that deploys the MLM compensation plan to compensate its participants. By leveraging preventive mechanisms like the MLM Scam Alert List and enhancing public financial literacy, authorities can disrupt these scams at their inception, protecting individuals from economic devastation and preserving community trust.
Conclusion: A Call to Action
The battle against MLM scams is not just a fight against financial fraud but a fight to protect the integrity of India's social and economic fabric. Senior law enforcement officials must lead with vigilance, ensuring early FIR registration after instructing their colleagues to check if the operation was compensating the participants using a Multilevel marketing compensation plan at the initial stage itself before deploying a specialised team like the economic offences wing, effective seizure of assets, timely remand and custody of the accused, and diligent preparation of the charge sheet. Every complainant and witness deserves to be heard, and every scam must be met with swift, decisive action.
By fostering a culture of proactive prevention, inter-agency collaboration, and continuous public education, India's law enforcement community can dismantle the systems that allow fraudsters to thrive beyond the reach of justice.
"Every prevented scam preserves not just wealth, but the very fabric of families and communities in our country".
