The Bhutanese Leading the way.
Nobody really knows the numbers, but popular social media sites in Bhutan, like Facebook and Instagram, are seeing the increasing presence of hundreds of mainly women, and even some men, declaring themselves as ‘Digital Business Owners,’ with their own personal websites through which you can register to “Run a Digital Business From Your Kitchen.”
However, the reality is that this, in all probability, is Bhutan’s biggest and fastest Multi Level Marketing Pyramid scheme, where the company in Japan called Enagic, that mainly sells water ionizing machines, and its few top recruiters, including some in Bhutan, make all the money while the vast majority are left holding expensive Enagic products that they do not really need or cannot sell.
Multi Level Marketing (MLM) schemes are not new, but they are globally controversial schemes where the main income comes as commission from recruiting more distributors by selling them overpriced products. MLM companies in the US, for example, have been involved in several legal cases and settlements, and have been compared to pyramid schemes.
According to the US trade regulatory body called Federal Trade Commission (FTC), it did an analysis of 350 MLM companies in USA and found that only 0.4 percent of those who take part in a product based MLM are likely to make money (with even most in this 0.4 percent not making much) while the sheer majority of 99.6 percent are likely to lose money.
The Enagic MLM scheme in Bhutan’s case is a MLM pyramid scheme, as the main way to earn money in this business is to recruit more people under you and get a ‘commission’ from their sales of overpriced Enagic products, and they, in turn, have to recruit more people. Despite the statistics and slim chances of making money in this pyramid scheme, many hang on with the dream of earning money.
What such companies do not tell you is that, mathematically, if every person recruits five people under them, and each of the five new recruits, in turn recruited another five each, then in 14 cycles or multiplications, it would essentially cover the entire population of the planet.
So while a very few at the top make money, eventually the pyramid will collapse and leave a vast majority of people at the bottom losing money or even in debt, in many cases. But the company stands to move on and form another pyramid.
Modus Operandi
None of these Digital Business Owners will tell you, upfront, what the ‘business’ is or even what ‘products’ you will land up selling, as this reporter found this out, when calling several members of the scheme, but they declined to share the business model or even the product.
Instead, the reporter was encouraged to sign up and shell out a refundable USD 149 to find out about the business.
The very nature of this scheme is deliberately secretive to avoid mass attention or the gaze of regulators. Since many are made a party to the system to recruit more victims to recover their money or earn more, it does not encourage whistleblowers.
However, there are also Bhutanese who are coming forward to share how they decided to stop the chain with them, and not create more victims, even if they lose their money to the scheme.
In addition, to the promise of ‘financial freedom,’ the business operates in such a way that the person recruiting you is usually a family member, or a friend, a former classmate, or work colleague, somebody in your social circle or someone you look up to on the social media living the good life due to this ‘business’.
For those who are interested, they will first be registered on the recruiter’s personal website by sharing your email address, after which you get access to a 90 minutes’ video about recorded testimonials by people, including Bhutanese members, of how the business helped them gain financial freedom and other benefits.
Interestingly, in this long video none of the testimonials talk about what the business is or what the products are.
After this, the person has to pay USD 149 to sign up, usually through a credit card. With this, the person gets access to more online materials and videos on the business, making more promises of financial freedom. An introduction is given on the business and the various steps up the ladder, which you can get by more sales, and also recruitments. Another USD 20 has to be paid to set up a personal website for you through which you can recruit more people.
You may think that you are in after paying all the fees, but now comes the main expenditure.
Just to join this network, it is compulsory to buy expensive products, with the minimum being Nu 70,000 worth of herbal tea of 20 packets containing 30 sachets each. However, most are encouraged to spend more than Nu 550,000 in buying a Kangen water ionizer, Kangen shower and the herbal tea. The products can vary slightly, but the price is around this range.
The ‘benefit’ of spending so much money on three products gives you a 2A rank as opposed to a beginner rank of 1 A for buying just one or two products, and so you are entitled to more commission if you make sales, or those who you recruit in the future make sales. Many opt to go for this three products option, and the money used is either from their life savings or by incurring a debt.
The level starts from 1 A and goes up to 6A which can be reached only with 101 plus recruitments or sales. You can go even above 6A as you recruit more people, and people under you achieve higher ranks like 6A.
Dr Tshering Cigay Dorji is a tech expert who believes this is a pyramid scheme, and he shared the account of a Bhutanese lady from Australia, on the condition of anonymity, who was a part of this scheme. She had gone for the Nu 550,000 plus package in Australia to start with a higher rank. She was recruited by a Bhutanese friend in Bhutan.
She said, “The only way I could earn an income for me was by recruiting more people below me. And when these people cough up their hard earned money to buy these unproven, but overpriced healthcare products, I would get a percentage as my commission. This is the business model of the whole scheme.”
The highly complicated compensation plan of Enagic requires members to make a direct sale every six months to get any commission from people you recruited, and if this is not done then your commission will drop to 50 percent, and after two years, there will be no commission.
“Yet, unlike me, most of the people who have joined would only say good things about this scheme. Why do they do it? They are greedy and want to make money for themselves. They already lost money like I did initially. Now, they want to recover the money, and also want to make money at the cost of others, which is totally unethical,” she said.
She said in her case soon after spending so much money, she realized the futility of the whole scheme, and how it was designed to cheat most participants out of their hard earned money.
“It is only the very few people at the top who would earn money at the cost of lot of poor victims. I have heard that one or two Bhutanese in Australia at reached ‘Dream Team’ status, which you reach after putting many, many people under your down line. By then, I think they start to earn some decent income. But that is only like a very few people. And they earn at the cost of other thousands of victims who are spread out all over the World – Bhutan, India, Bangladesh and countries in Africa. Many others who joined have lost similar amounts of money. I would request everyone to beware and keep away from such schemes,” she said.
A Bhutanese man who is also in Australia, Passang, shared that he invested some money around a year ago, but he did not get any amount back yet. He said he knows of some of his own friends who did the same.
“Hence, I would encourage everyone to refrain from such a business. There is a huge loss at the end,” he said.
Apart from making members tap all their family and social contacts to sell products and recruit more members, its members are encouraged to sell a lifestyle on social media centered around financial freedom, working from home, family time, etc.
Anna’s Analysis, a YouTube page known for in-depth investigations, found that globally the company’s distributors target anyone from terminal cancer patients looking for a final cure to people who have lost their jobs due to the pandemic, and even vulnerable and depressed people. It reels in people using an emotional appeal.
The business, initially, advertises itself as being flexible and a ‘side hustle’, but once members join, they have to spend large amounts of time trying to make sales of some very expensive products.
She points out that it leads to even toxic relations with family members who are either recruited in, and there are trust issues, or family members and friends who counsel against it are looked at suspiciously. The scheme not only encourages distributors to believe in and make false claims, but it also encourages predatory practices due to the money at stake.
The scheme has exploded in recent times due to the pandemic for three reasons. People have lost their jobs or income and want a way to make money, a lot more people are on social media with lockdowns, and thirdly, as people become more health conscious, the company’s distributors make outlandish and often false medical claims to sell their product (debunked on pg 1 story).
The network also becomes like an echo chamber as members have frequent webinars and seminars.
It is difficult for members to make sales as the water ionizers are already very highly priced, where more than 50 percent of the cost is kept for direct and indirect commissions.
The Company and its products
The Enagic company’s museum claims it was established in 1974 as Shiguma Ku, but its online Corporate History page it claims it started as Sony speciality trading operation.
It changed its name to Enagic in 1990, and began selling Kangen Water, which means ‘return to origin’ in Japanese.
In 1998 they developed the current 8-point commission structure, which would not be implemented in the company until five years later in 2003 when it opened the Los Angeles, USA branch office and became a MLM company.
The company mainly sells water-ionizing machines with the price ranging from USD 1,980 to USD 5,980. It also sells a water spa system called Anespa priced at USD 2,890.
However, they also sell soap (USD 760 for 32 bars of soap), tea (USD 760 for 20 boxes of 30 sachets each) and turmeric supplements (USD 760 for four-month supply). The company was sued for USD 27.6 million (mn) in USA for making unauthorized robo calls to 1.8 mn people.
The company, itself, and mainly its distributors make outlandish medical benefit claims, which are not backed up by credible medical research (see story on pg 1).
The USD 180 filter on the water-ionizing machines need to be replaced after every few months entailing extra costs in the long term.
The Recruiters
One of the better known digital business owners and a major recruiter is Leki Wangmo from Phuentsholing, who works in a State Owned Enterprise (SOE). She has done well for herself, according to her own Facebook business page, and she is also in the process of coming up with a multistory building.
Leki was initially reluctant to share the business details, and asked the reporter to check out the 90-minute video by registering. However, when the reporter talked to her about details of Enagic and the network of distributors, she said it is a renowned product and nothing like a pyramid scheme.
She said there was no commission to recruit members, but there was only commission from sales to them.
However, this statement does not make sense, as the only way to recruit a person is by selling products, and if a commission is shared from that sale then it is similar to a recruitment commission. In addition, the only way to buy the company’s products are from distributors, as you cannot order the products directly without being a member with a ID number.
She clarified that the USD 149 goes to the back end, and this can be refunded if a person does not want to join within a month. She said the business is a well proven system and people are not forced to join or buy products.
Leki said that the members engage in ‘lifestyle marketing.’ This is a term for the common nature of the Facebook or online advertisements by members, showing how joining this business has changed their lives.
Leki compared the members to be like RICBL or BIL insurance agents making a commission. She also pointed out the network is not the only one selling the products, but there are also ‘offline’ people who sell the products from their stores.
However, RICBL and BIL agents, while getting a commission for selling insurance, do not get additional commission for getting in new members.
Leki said that buying the products is akin to an investment in a business, like a ‘pan dokan’, and one has the option to invest more or less. She said that even if people do not sell the products, they can keep at home and enjoy the ‘benefits’.
She emphasized that the company had been formed in 1974 in Japan, and there are offices in 23 countries.
She questioned the motives and ‘vested interests’ of those who are questioning this business on Facebook, and she said they have the right to sue people who make false claims against them.
This was on Thursday evening. On Friday afternoon, a freelance journalist, Namgay Zam, shared the account of the Bhutanese lady in Australia (sent by Dr Tshering Cigay Dorji to her and this paper) on her new Facebook page, which went viral.
An hour or so later, Leki Wangmo went Live on Facebook to defend the allegations with the main points being that the business is legitimate, nobody is forced to buy the products and that ‘vested or biased people’ including journalists are questioning them.
In what is common practice in this business, as in other parts of the world, Leki criticized the anonymous woman who had shared her account and blamed her for not understanding the business.
This is one of the reasons why whistleblowers are afraid to come out as they can get blamed for failures, and are stigmatized by their former network even though the real chance of success is very slim.
Leki’s post too went viral, showing social media power, and she had many network members from Bhutan supporting her in the comments section showing the large and dedicated membership base in Bhutan.
This brings to light the almost cult-like culture of the business, where apart from being secretive, the majority of its members are almost brain washed by the company, senior recruiters and even each other into thinking they are in a legitimate productive business, they can make money and they are selling good products which help people. Add a lot of personal savings or potential income at stake, and the mix gets explosive and very personal very quickly.
A Global Cult Authority, Steven Hassan, has written saying that almost all MLMs are like commercial cults and warns people about them.
Another member and recruiter is Sonam Deki. She too gave similar talking points as Leki, about it being legitimate, not a pyramid scheme and people not being forced to join and the company being formed in Japan many years ago with networks in 23 countries.
She said the network has decided to declare their income, and are talking about getting a license for doing business in Bhutan. Sonam said that this is not a short-term investment, as Bhutanese run after high returns in a short term, but this is a long-term investment.
What the Laws and Govt agencies say
This is not the first MLM pyramid scheme in Bhutan, as there have been many in the past. In 2019, the MagneSSa scheme saw around 2,000 young graduates and youth signing up to pay Nu 35,000 membership fees and earn money through selling health supplements, and also recruiting additional members. Most of them lost their money, not only on the membership fees but also on unsold products.
Pyramid schemes are not allowed in Bhutan by law. As per Section 38 (xiii) of Consumer Protection Rules and Regulations (CPRR), 2015, business entities are refrained from establishing, operating or promoting a pyramid promotional scheme where a consumer receives compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the sale or consumption of products.
The OCP in December 2021 issued the Pyramid Scheme Identification Guideline.
It identifies a pyramid scheme saying, ‘Some schemes may purport to sell a product but they often simply use the product to hide their pyramid structure or disguise the scheme. Generally, a product sale is between the members or to the new recruits and there is little or no transfer of products in the markets. The incentive program of schemes compels recruits to continuously recruit additional down line members and buy or sell products often at inflated prices;”
It says, ‘Members are made to purchase products of the company periodically for a certain price. There is no product buy-back policy or other safeguards, if the members are unable to sell the goods. Members at the top of the structure receive substantial compensations and profits based on the recruitments and payments by the down line members.’
It also says there is very little or no revenue generated from the retail sales of the products and services that are associated with the scheme. The recruit’s income is dependent on payments by new members they enlist rather than from the sale of products or services.
From the above points, the Enagic business model fits into a pyramid model albeit a hybrid and modified one, but with still the same basic characteristics listed above.
A 2009 RMA Notification says there are two types of Pyramid schemes. One is product based and the other is financial. RMA says there are many variations of the pyramid scheme, and some try to pass themselves off as MLM or Direct Selling.
RMA says their products typically have little or no intrinsic value and and is sold at prices way above the market value. It says nobody would buy these products except as a way of joining the pyramid scheme itself. The ‘product’ may consist of household products, vitamins, cosmetics, etc.
It is also not clear if the members who make a lot of income declare that income.
The Bhutan CIRT, which looks after cyber crime and incidents, issued a notification on Friday in tandem with OCP under MoEA and RMA warning about online investment schemes though it does not specify the schemes in detail.
When asked about her response to the Bhutan CIRT notification, Leki Wangmo said that the notification is every general, and it has not done any investigation.
Leki is right, in that no investigation has been done on the issue, as the buck has been passed from one agency to another with no agency taking the lead.
A RMA official said that the lead on product based pyramid schemes has to be looked after by OCP, though RMA is looking at the financial details of how money (foreign exchange) is leaving the country in such schemes, and what can be done about it.
An OCP official said they were not aware of the scheme, as there was no complaints and it was only brought to their attention a couple of days ago. A review is under way.
The Bhutan CIRT also said it did not get any complaints on the issue, and it is only an IT body with limited powers and the lead should be taken by either OCP or RMA.
However, Enagic is not the only MLM or Pyramid scheme in Bhutan, as there are others also coming up like QNET, SaladMaster and others.
