Pyramid schemes take advantage of the situation of refugees and sell them “losses”
“Are you a decision maker and want to quickly realize your dreams and earn millions?”. The question is posed by a “professor” or “expert”, as they call him, to try to persuade people to join a company that sells its products through a pyramid scheme method, like “Qnet”, which has spread among Syrian refugees in Turkey.
Talk of the company, its operating mechanism and how it convinces and attracts many young people is nothing new. The Internet is full of dozens of articles that talk about the risk of dealing with this type of company and warning against them.
Nevertheless, its expansion among Syrian refugees in Turkey, especially among young people in recent months, pushed Enab Baladi to examine how these types of companies operate, make profits and losses, and the ways in which they mislead their clients.
Targeting the poor
In recent months, talk among Syrian youth in Turkish public places, cafes and public transport, has focused on joining Qnet and how to make large amounts of money in a short period of time without making much effort other than paying up to 2,000 dollars to the “person at the top of the pyramid” and then receive a commission for each person who is brought in to join the company.
Amal Owaidat, who is originally from Daraa and lives in Istanbul, is one of the victims of this company. She told Enab Baladi that she first joined the company through some close friends who asked her to buy products from the company for 2,000 dollars, and then convince other poor people to buy the products on the pretext of helping them and changing their financial situation.
Owaidat added that, at first, she felt hesitant about dealing with this company, but her friends asked her to meet the top official, who is called “the expert” and who had great persuasive abilities.
Owaidat asked to check out the company and how it works. The expert asked her to visit their office in the Şişli district of Istanbul. There, they showed her the documents that confirm their legal work as a company that carries out “network marketing” based on selling a real product through representatives, rather than a pyramid scheme in which the agent earns a commission that increases when he brings in a larger number of clients into the scheme.
The company’s members showed Owaidat records of fatwas (religious opinions) by some Islamic scholars in which they argue that dealing with a company that relies on network marketing is permissible and halal.
When Owaidat hesitated about working with the company, the expert she was speaking to began playing on her financial situation, misleading her about the large sums of money she could earn in a short period of time through working with the company. He eventually convinced her to start by borrowing money to buy the products.
Owaidat said she borrowed 4,000 dollars from her mother and bought a water filter for 1,100 dollars, a wristwatch for 900 dollars and a six-day hotel booking for 2,000 dollars.
After paying the money, she started the process of looking for other people to persuade them to join the company in order to earn a commission. The expert asked her to attend a three-day conference in the city of Antakya, Turkey, in order to receive training on how to persuade others.
Owaidat said hundreds of young people, mostly Syrians, attended the conference and received lectures on personal development, how to address the unconscious mind and how to persuade others. In addition, the trainers distributed a book titled “The Instant Millionaire” by the American writer Mark Fisher.
Oweidat, a victim, was living in the hope that the illusion would turn into reality and that she would win millions, and she started to think that she would buy the house she was renting. However, she realized, over time, that she had been the victim of a scam, as she could only bring two people in to join the company. Therefore, she earned a commission of only 225 dollars out of the four thousand dollars she had paid.
Persuasion, coercion then loss
Qnet lunched its work on the Internet from Malaysia in 1998. The company defines itself on its website as one of the leading direct selling companies in Asia, which focuses on helping people to grow and prosper through solutions to expand freelance jobs, enhance lifestyles and raise the living standards of the company’s distributors, their families and communities, as well as helping others achieve their dreams.
However, the economic researcher, Younis al-Karim, confirmed to Enab Baladi that the company’s work is based on pyramid schemes, a fraud operation that is based on transferring losses from one person to another.
The company’s work, according to Karim, is based on selling a product to the “victim” as an exclusive product at a price that is much more expensive than its real price on the local market.
The company forces the person to buy its product at a high price as a condition to start working in the company. Once the product is purchased the person becomes an agent to start persuading others to join the company in order to get a commission to make up for the money he paid at the beginning.
The agent then has to bring two people, one of whom will be registered on his right and the other on his left, who will buy the company’s products. The more people there are below the subscriber’s network the higher his commission.
In order for a person to gain a larger profit, he must balance between the number of people to the right and left sides. If he brings in more people on one side than the other, he cannot win a percentage of the profit due to the lack of balance, which is one of the fundamentals of profit.
The process of making profit is based on doubling the number of people. This is not as easy as some make it seem, and requires time and patience. Therefore, after a period of time the person tends to get bored, especially if he is the last person at the bottom of the pyramid.
This work does not last long because the commissions of the people involved may exceed the sales of the company. Therefore, the company collapses and closes, then comes back to relaunch its business using other names such as QuestNet and GoldQuest.
Those who make a profit are the people on the second row of the pyramid, according to al-Karim who confirmed that they are taking large sums of money from the company’s officials, radically changing their lives either in terms of their way of dressing or by buying a car. This is very clear to others, especially relatives and friends, as a way of persuading them to join the company.
A Suspicious History
Pyramid schemes started in Syria under the name “QuestNet” in early 2008. The company was licensed by the Ministry of Economy on August 30, 2008 under the name “Chinese QuestNet”, owned by a Syrian company called “al-Korai and al-Saadi”, according to a report published by the Syria News website on December 1.
The Director of Trade Facilitation and Efficiency in the Ministry of Economy, Ramzi Asawda, told the news website that the ministry had sponsored the company at the beginning and held a workshop attended by officials at the Sham Hotel.
According to Enab Baladi’s sources, the company’s headquarters were located in al-Salihiyah in Damascus. It operated on the stock market and organized courses about the stock market. It was inviting people to participate in the stock market on the global stock exchange for a subscription fee of 5000 Syrian lira (100 dollars when the exchange rate was 1 dollar to 50 lira) and get 2000 lira for every person who subscribed.
However, after uncovering the company’s way of work, the former Minister of Economy in the Syrian regime, Amer Lotfi, issued a decision on April 1, 2009 to cancel the registration of the company’s agency with the Ministry of Economy after the number of victims had reached 22,000 subscribers from various Syrian cities, according to Syria News. It was reported from a source that the amounts paid by the victims were 660 million Syrian lira (13 million dollars).
Earning millions is an “illusion”
The companies that use hierarchical marketing target unemployed and low-income people who dream of making large sums of money over a short period of time as well as recent college graduates.
In Turkey, they take advantage of Syrian refugees who work for long hours (up to 12 and 14 hours a day), according to Amer Ibrahim, a young Syrian resident in Istanbul.
The young man told Enab Baladi that the difficult living conditions of refugees made them easy victims for these companies’ scams in the absence of awareness or warnings from officials, media or religious scholars, as dealing with these companies is forbidden in Islam.
Ibrahim explained that his friend at a youth hostel, who works in a Turkish factory for 12 hours a day, joined Qnet and refused to listen to his advice or explanation of the way these companies work. The friend was convinced by the great dream and illusion that an “expert” had planted in his head that he would become a millionaire in a short space of time.
Forbidden by Sharia: Gambling and usury
In 2009, the Fatwa Department of the Ministry of Awqaf issued a fatwa that prohibited dealing with these companies. In 2013, the Mufti of Damascus, Abdul Fattah al-Bizm, did the same.
On June 29, 2015, the Association of Syrian Scholars in Istanbul issued a fatwa confirming that joining these companies was forbidden because “it is like taking people’s money for no reason, as the network marketing program only grows if someone loses for the benefit of another who wins. Without the required losses on the lowest levels, huge commissions at the higher levels cannot be achieved, which is the purpose of the program. If it stops at a certain level, those at the lowest level are the losers – at huge amounts many times more than at the higher levels – and the higher levels are the winners, which means that the majority is losing so that a minority wins.”
The fatwa classified dealing with such companies as gambling because members of the “hierarchy” intend to subscribe in the marketing and not in the products. The success of the marketer in bringing in people on his right and left is uncertain, as is the case for the level below him. Everything is uncertain, which is the essence of gambling.
The fatwa also classified it as usury because the higher levels make a profit from the lower levels without making any effort. This is usury as the usurer makes huge profits without doing any work.
The difference between network marketing and hierarchical marketing
Hierarchical marketing differs from network marketing in terms of products and profits although many believe that they are similar and they are both considered as scams and fraudulent financial activities.
Network marketing is an alternative marketing method to traditional marketing. It promotes the products of a particular company by sales representatives or by the consumer itself in exchange for commissions and in accordance with a clear and predefined system. It means that the marketer can get a commission for each product he sells to his relatives or friends.
However, hierarchical marketing is based on selling a product at a high cost to the hierarchical marketer (agent). The company then asks him to provide other clients, to be registered under his name, in order to earn more profit, which increases as his network hierarchy grows, rather than due to the price of the product or an increase in sales.
The difference between network and hierarchical marketing is one of the most controversial issues and has been raised at the global level for decades. The differences between the two methods are as follows:
|Network Marketing||Hierarchal Marketing|
|Products||There must be a product or services provided by the company||There is no product or the product provided has no value|
|Duration||Not specified||Not continuous and stops after a period of time|
|Profit||Profit depends on the sale of the product or the service||The profit depends on the participation of new members in the hierarchy|
|Contracts||Provides clear contracts and commitments to the subscribers||No contracts are provided or the contracts are fictitious|
|Cancellation||The marketer can cancel his subscription by returning of the product or service||The subscriber cannot refund the money used to buy the initial product if he decides to cancel the transaction|
|Legal Framework||Legally registered and documented by the United Nations and recognized internationally||Is not legally registered and is internationally prohibited|
|Information about the company||Clear to everyone||Unclear and does not give any information to the agent|
|Subscription||Multiple subscriptions are allowed per person||Subscription is only allowed for new people|
|Sharia position||Permitted subject to conditions||Forbidden|