Shenzhen police arrest 25 mainlanders for suspected links to controversial multilevel marketing firm DCHL

Authorities received complaints from people talked into ‘investing’ in company

PUBLISHED : Tuesday, 11 July, 2017, 9:29am
UPDATED : Tuesday, 11 July, 2017, 3:08pm

Police in Shenzhen have arrested 25 mainlanders for their suspected involvement in a controversial Hong Kong-based multilevel marketing firm.

Shenzhen authorities had been receiving complaints against Digital Crown Holdings HK (DCHL) since March this year from mainlanders who said they were talked into joining the company by the top salespeople. They were then invited to invest about 10,000 yuan (HK$11,480) to become product distributors after taking three or four days of classes on the chain’s operating model in Hong Kong, Xinhua reported on Monday.

A joint operation led by the police department in Futian district arrested the first batch of 12 suspects on unspecified dates. The second batch of 13 people were nabbed in subsequent raids.

The report quoted the mainland authorities saying the company had developed a sales network on the mainland in the name of a direct seller. Participants were given different ranks and commissions according to the size of their investment and the number of newcomers they recruited.

Since 2013, DCHL has been the subject of protests by disgruntled mainlanders claiming they had been misled into buying products from the company to be sold to others only to find the items had little to no resale value.

Guangdong police said previously that DCHL used a strategy of encouraging distributors to recruit salespeople aggressively and collect membership fees from them – which is illegal on the mainland.

But the system is allowed in Hong Kong, and the firm was said to have exploited a loophole in local laws regulating multilevel sales.

Its activities caught the city’s attention in October 2013 after dozens of mainlanders – who accused the firm of tricking them into buying millions of yuan on wine, jewellery, cosmetics and fragrances with almost no resale value – rallied outside the firm’s Causeway Bay office, prompting police to stand guard on the premises.

Guangdong police have been busting the firm since 2013, with occasional raids and arrests reported by the mainland media.