I have come across a bunch of very complicated sounding "business ventures" which try to pass of as direct-selling or network-marketing. questnet is one of them. since some friends have tried to get me to join, tried convincing me, i figured i’d look into how this works :

wikipedia has an entry on pyramid schemes which as you will read are pure fraud. surprisingly it’s not just the organization that’s guilty of fraud. every member who recruits another member is guilty too. so let’s see if questnet falls into this category.

how does this work ?
every "activated" member must perform the following:
a pay Rs 460 for registration
b purchase products at Rs 30,000
c recruit two more members

let’s call each person on this network a "node".
every node in this system there fore generates revenue:
a registration fee Rs 460 x 2 = Rs 920 ( from the two recruits )
b product sale at the rate of Rs 30,000 x 2 = Rs 60,000

c in return you receive products worth Rs 4,300 each ( value of gold / silver )

total system profit generated per node = Rs 52,000 ( minimum )

questnet claims they are selling you numismatic product ( limited edition embossed coins ) and not gold / silver and hence they are justified in charging the premiums they charge.

quite obviously, this revenue is not generated in exchange for any real products or services. the Rs 26,000 you paid as premium for this "product" is paid in the hope that either
(a) the product appreciates 8 times it’s value or
(b) as an active member you can recruit more members and earn more money than you lost through commissions.

i’m not going to bother about (a), that’s obvious nonsense.
point (b) on the other hand, makes mathematical sense.
questnet compensates you with Rs 11,500 when you recruit 6 new members.
which seems like a good deal since you’re earning them Rs 150,000 even if these six members never recruit any more members of their own.

this is a perfect pyramid. you stand to lose unless you can recruit more. if you recruit more, they’ll stand to lose. and if you’re thinking this is harmless and that everyone can just recruit more people and everyone can earn some money, remember the population of this planet can be covered within 13 levels. and at the bottom are people who will lose Rs 26,000 each.

why is this ethically fraud, but legally not ?

simple. i cannot prove that the value of the coin is less than Rs 32,000 to someone.

when does an item demand a large premium ?

this happens depending on availability of the item and on the value of it for the purchaser. a fan of princess diana may hold a diana coin’s value above the value of his hard earned cash. and if this diana coin is not available anywhere at a lower rate, he is willing to purchase it at a higher rate.


is this the case with the thousands of quest coins ?

that’s for you to decide. it’s your money.

as for the ethics of this, i suggest you look into the model and figure out for yourself, whether you’re making money by adding more people to the network or by selling. would anybody want to purchase more after becoming a member ?
if you’re being paid for adding people, you’re working as part of a scam. if non-members are willingly purchasing the products and form a substantial portion of your sales, you’re in a legitimate home-business.

http://sheshank.blogspot.com/2007/07/multi-level-fraud.html