Investment Scams Through MLM Networks: How Extraordinary Monthly Returns Lure the Public

Across India, numerous schemes are operating through MLM (Multi-Level Marketing) networks, trading bot platforms, crypto promotions, and referral-based structures that promise extraordinary monthly returns ranging from 10% to 30% or even higher.

These schemes often appear professional, technology-driven, and legally structured. However, a basic financial analysis reveals serious warning signs.

A simple and logical question must be asked:

If banks and regulated financial institutions offer approximately 7–10% yearly returns, how can any entity sustainably promise 10–30% monthly returns?

Such returns, if calculated annually, amount to 120% to 360% per year — figures that are unrealistic and economically unsustainable in legitimate markets.

Financial Reality Check: Why Not Take a Bank Loan?

If promoters genuinely have a profitable business model and require funds to execute their plan, why do they not approach banks or financial institutions?

Banks provide business loans at approximately 9–11% per annum (subject to eligibility). If a business model is genuinely profitable, institutional finance is the most rational and lawful option.

Instead, such schemes:

• Collect funds from the public

• Pay commissions to MLM networkers

• Promise 10–30% monthly returns to investors

When marketing commissions and investor payouts are combined, the financial burden becomes irrational.

No legitimate enterprise would avoid borrowing at 10% yearly from a bank while simultaneously paying:

• Multi-level commissions

• Plus 10–30% monthly returns

This mismatch is one of the strongest indicators of a potential Ponzi or unregulated deposit scheme.

How These MLM-Based Investment Schemes Operate

Most such structures involve:

• Trading bot claims

• Crypto or forex platforms

• “AI-based” investment dashboards

• Referral income structures

• Incentive-based recruitment targets

• Social media promotions and seminars

Initial payouts are often made to build trust. Once large amounts are collected, payments stop.

Common Excuses Used When Payments Stop

Victims are usually told:

• “Audit is going on.”

• “Server maintenance.”

• “Regulatory approval pending.”

• “Compliance issue under review.”

• “Technical upgrade.”

These explanations are designed to delay complaints and maintain psychological control over investors.

Why Victims Hesitate to Take Legal Action

Victims often:

• Hope payments will resume

• Fear losing remaining investment

• Feel embarrassed

• Face pressure from uplines

• Believe filing complaint may block recovery

Unfortunately, delay benefits only the promoters.

By the time complaints are filed:

• Funds may be siphoned

• Bank accounts emptied

• Directors may resign

• Assets transferred

• Websites taken down

Time is critical in financial fraud cases.

🚩 Red Flag Checklist: Warning Signs of an Investment Scam

If a scheme displays multiple signs below, extreme caution is advised:

✔ Guaranteed high monthly returns (10–30% or more)
✔ Heavy emphasis on referral commissions
✔ Lack of clear company address
✔ No transparent director details
✔ No regulatory registration clarity
✔ Vague or evasive responses to financial queries
✔ Frequent use of “audit” or “technical issue” excuses
✔ Pressure to reinvest instead of withdraw
✔ Recently registered website domain
✔ Promoters avoiding written communication

If transparency is absent, risk is high.

Legal Position Under Indian Law

Such schemes may attract liability under:

• Information Technology Act, 2000

• Indian Penal Code (Section 420 – Cheating)

• Criminal Breach of Trust provisions

• Consumer Protection (E-Commerce) Rules, 2020

• SEBI regulations (if investment activity involved)

• Banning of Unregulated Deposit Schemes Act, 2019

Collecting public money without lawful authority or proper disclosures can result in:

• Criminal prosecution

• Freezing of bank accounts

• Attachment of properties

• Arrest of responsible persons

What Victims Should Do Immediately

1. Preserve Evidence

• Take screenshots of website and dashboard

• Save transaction receipts

• Preserve chats and promotional material

• Record withdrawal requests and responses

Evidence preservation is essential.

2. Organise Collectively

Consolidated complaints carry greater weight before authorities.

Collective action helps:

• Establish scale of fraud

• Demonstrate systematic pattern

• Increase seriousness of investigation

3. Issue Legal Notice

A structured legal notice:

• Puts promoters on formal record

• Demands refund

• Signals seriousness

• Prevents denial later

If the entity is genuine, it will respond transparently. If fraudulent, evasiveness usually follows.

4. File Structured Complaint

Depending on facts, complaints may be filed before:

• Cyber Crime Cell

• Economic Offences Wing (EOW)

• Local Police

• Regulatory authorities (if applicable)

Timely action improves chances of asset preservation.

Conclusion

Investment schemes offering extraordinary monthly returns through MLM structures should be approached with caution.

Financial logic, regulatory compliance, and transparency are fundamental indicators of legitimacy.

If:

• Returns are unusually high

• Funding logic is irrational

• Disclosure is incomplete

• Payments stop with vague excuses

Immediate legal consultation is advisable.

Delay significantly reduces recovery prospects.

How Sachar Law Firm Assists

At Sachar Law Firm, we assist in:

• Legal due diligence of companies

• Verification of directors and registration status

• Drafting structured complaints

• Issuing strategic legal notices

• Representing victims before investigating authorities

• Initiating asset protection proceedings

Timely legal strategy can make a critical difference.

Frequently Asked Questions (FAQs)

1. Is it legal for a company to promise 10–30% monthly returns?

No legitimate regulated financial institution guarantees such high monthly returns. If a company promises fixed high monthly profits without proper regulatory approval, it may indicate an unregulated deposit scheme or fraudulent structure.

2. How can I verify if an investment company is genuine?

You should check:

• Company registration on MCA portal

• Director details and DIN records

• Regulatory registration (if claiming SEBI/RBI approval)

• Physical office address

• Transparency in documentation

Absence of proper disclosures is a serious red flag.

3. What is the difference between a genuine MLM product business and an investment scam?

A genuine MLM model sells actual products or services. An investment scam primarily collects money by promising fixed returns and relies heavily on recruitment commissions rather than real business activity.

If income depends mainly on new investor deposits rather than real revenue generation, it may resemble a Ponzi structure.

4. What should I do if payments have stopped?

Immediately:

• Preserve all transaction proofs

• Take screenshots of website/dashboard

• Save chats and promotional material

• Avoid reinvesting further funds

• Seek legal consultation without delay

Time is critical in financial fraud matters.

5. Can bank accounts of such companies be frozen?

Yes. Investigating authorities and courts have the power to freeze bank accounts, attach properties, and block websites in appropriate cases involving cheating, unregulated deposit schemes, or financial fraud.

6. Should victims file complaints individually or collectively?

Collective complaints often carry greater weight, especially in large-scale schemes. A consolidated representation showing total financial exposure increases seriousness before investigating agencies.

7. If the company says “audit is going on,” should I wait?

Repeated use of “audit,” “technical issue,” or “compliance delay” without clear written disclosure is a common tactic used in fraudulent schemes. Legal advice should be sought rather than waiting indefinitely.

8. Can promoters be held personally liable?

Yes. Directors, promoters, and key managerial persons may face personal criminal liability if involvement in cheating, conspiracy, or unlawful deposit collection is established.

9. Is it risky to file a complaint if I still hope to recover money?

Delaying legal action may reduce recovery chances. If the entity is genuine, it should not fear legal transparency. Filing a structured complaint can help preserve assets before funds are diverted.

10. How can Sachar Law Firm assist in such cases?

Sachar Law Firm provides legal analysis of the scheme, verification of company records, drafting of complaints, issuance of legal notices, and representation before competent authorities to safeguard victim interests.

Disclaimer

The information provided in this article is for general informational and educational purposes only. It does not constitute legal advice and should not be treated as a substitute for professional consultation. Every case involves unique facts and legal considerations, and readers are advised to seek independent legal advice before taking any action based on the contents of this article. Viewing this content or contacting Sachar Law Firm through this website does not create an advocate-client relationship.