DCHL sets sights on graduates

Controversial multilevel marketing firm shifts focus from rural sellers to mainland youngsters

PUBLISHED : Thursday, 05 December, 2013, 4:45am
UPDATED : Thursday, 05 December, 2013, 4:45am

An Asian chain running a controversial multilevel marketing (MLM) scheme recruiting mainlanders as distributors has stopped targeting rural areas for new recruits, according to one former distributor who lost everything after six months with the company.

Digital Crown Holdings HK (DCHL) is now focusing on recent graduates or ambitious young men from county-level cities who may be more willing to take risks.

The DCHL headquarters in Causeway Bay was the scene of a five-day protest by disgruntled mainland distributors in October, who complained the company had sold them products that had little or no resale value.

A 33-year-old former DCHL distributer from Yunfu city in Guangdong, who gave only the surname Huang, recounted to the Post his ruinous experience with the company. Huang was not part of the protest in October.

"My wife and I invested 340,000 yuan (HK$430,000) in our DCHL business, which we borrowed entirely from relatives and friends in our hometown," Huang said.

After a three-day indoctrination course in Hong Kong, Huang quit his 3,000-yuan-a-month job as an electrician to invest in DCHL. He was told at his indoctrination that he would "easily" earn 10,000 yuan per month as a distributor. He invested 320,000 yuan in products and membership fees to become a "count" distributor in May last year. In keeping with the baroque decor of the Causeway Bay headquarters, members are divided into the levels of baron, count, marquis, duke, archduke and majesty duke. Distributors at the lowest level receive no title.

Three months later Huang convinced his wife, a garment worker, to put in another 20,000 yuan. But he struggled to make back any money from the products he had bought.

"My dream lasted for just six months. As soon as I woke up, I felt like throwing myself from a rooftop. I had lost everything - my family's savings, my friendships and relationships with relatives from whom I borrowed so much," Huang said.

"My wife saved my life by saying she couldn't raise our three children alone. But I still dare not return home. I'm too ashamed to face my parents and relatives."

DCHL was founded in Taiwan 12 years ago by Kim Huynh, a businessman from Zhongshan , Guangdong who has a French passport. As an MLM operation, distributors are encouraged to build up networks where each level is at least five times bigger than the one above it.

New individual distributors are told that if they recruit five members, who all recruit five more in turn, they will move up the ranks to become a baron, then a count and so on.

The company sells a variety of items, including "French" beauty products, red wine and health supplements. But some distributors told the Post they discovered that many of the goods were actually made in Vietnam, Taiwan, Malaysia and elsewhere in Asia.

DCHL is prohibited from operating on the mainland and in Macau, and was banned in Australia in 2010 under a federal law prohibiting pyramid schemes. Its operations were similarly outlawed in EU countries.

DCHL says it is an MLM company that sells products, whereas pyramid schemes are concerned with generating funds with no services or products provided.

While pyramid schemes are illegal in Hong Kong and carry penalties of up to seven years' jail and a HK$1 million fine, DCHL's operations are allowed here as a result of provisions of a bill passed by the Legislative Council in 2011 aimed at tightening the rules on pyramid schemes.

New members are encouraged to buy as many products as they can afford. If they have not got enough money, senior distributors teach them tactics for borrowing money, former distributors told the Post.

As Huang was leaving DCHL in November, a group of mainland students and graduates were arriving for orientation. Among them was Huang Daming (no relation), a 23-year-old Shenzhen graduate.

"I and many of my peers were invited by our classmate to attend a DCHL Christmas party in December last year, where more than 20,000 people showed up at the AsiaWorld-Expo convention hall," Huang said. "It was an amazing party, and I saw Hong Kong celebrities like Raymond Lam-fung, Moses Chan Ho and pop star Mag Lam Yan-tung, who were invited guests." Huang said the party was the deciding factor for many of the students to sign up with DCHL.

Another university graduate from Hunan said he had invested his parents' savings of 54,000 yuan to become a "baron" in April.

"Both my parents are poorly educated farmers," he said. "They trusted me and gave me all their money. That's why I was targeted by the DCHL distributor, who was also my classmate."

Later Huang Daming realised that the pop stars at the party had been invited by a production house, and had no connection with DCHL.

The two students separately decided to drop out in June. Huang Daming got back 5,000 yuan from his 12,000 yuan investment, while Liu was promised a 70 per cent refund of his investment because he pulled out within 90 days.

"So many fresh graduates become trapped by this company due to their lack of social experience and the low employment rate on the mainland," said a volunteer, surnamed Peng, for a self-help group for former DCHL distributors. "Typically they are married men in their 30s, basically honest and with no special skills but willing to try something new or to take risks to improve their families' standard of living," Peng said.

The company failed to reply to repeated requests for comment over the controversial operations of their senior distributors.