Crackdown on DCHL may leave 100,000 out of pocket, fuelling protest

Mainland police say 100,000 have been caught up in controversial sales scheme - and many are coming to Hong Kong to fight for their money

PUBLISHED : Wednesday, 11 December, 2013, 5:25am
UPDATED : Wednesday, 11 December, 2013, 4:51pm

A massive crackdown on a multilevel marketing scheme run from Hong Kong could catch out as many as 100,000 mainlanders - prompting more of those involved to head to the city to demand their money back.

More than 80 distributors, who were promised big profits based on a complex system in which they benefited by recruiting more distributors, yesterday completed the final day of a four-day protest outside the Causeway Bay offices of Digital Crown Holdings (DCHL).

Police sent in four vehicles and dozens of officers to keep watch. The protest by distributors from Guangdong and Hunan provinces follows five days of protests in October and November.

A police officer from Ningxiang county in Changsha city, Hunan, told the Post that mainland police estimated that at least 100,000 people had signed up with DCHL.

"Ningxiang police have so far detained 16 'dukes', or top salespeople," the backbone of DCHL's mainland operation, the officer said. "We are still trying to collect evidence and will charge them with organising and operating an illegal pyramid scheme."

While banned on the mainland, multilevel marketing is legal in Hong Kong if it involves the resale of an actual product. DCHL distributors said they paid for goods which proved to have no resale value.

Reports from the China Police Daily said DCHL's operations in Ningxiang involved at least 330 million yuan (HK$419 million). The crackdown had seen at least 20 million yuan frozen and 1,000 distributors dismissed - leaving them with no chance of recovering their money on the mainland.

"I was woken up after the crackdown in my hometown as my superiors were detained, pushing me to dismiss all my 19 subordinates," Li Huidong, a protester from Ningxiang who put in at least 1 million yuan, said yesterday. "I joined the protests to demand a 50 to 70 per cent refund because I put in all my family savings, as well as more than 200,000 yuan I borrowed … and now my wife wants a divorce."

DCHL distributors are encouraged to build a network, in which each new tier is at least five times the size of the one above. A distributor who buys HK$67,000 of DCHL's goods is a "count", while "marquis" status is for those who persuade five subordinates to put in HK$67,000 each. A "marquis" was promised 30,000 yuan per month, but Li said he hadn't received a cent since joining in October 2011.

Protester Cici Zhang, 26, said a crackdown in Guangdong earlier this year awoke distributors to the dangers and convinced them DCHL's promise that Beijing would legalise multilevel marketing was a "big lie".

DCHL management yesterday asked protesters to provide contact details, but did not set out any plan to refund them.

The company did not respond to requests for comment.