Betrayed: DistributeX members seek answers as recruiters go dark

Recruiters for digital platform DistributeX have gone dark, leaving those they enticed into a system that had the hallmarks of a Ponzi scheme ruing their fate.

People who put hundreds and, in some cases, thousands of euros into DistributeX have come forward to recount their experience. And they all tell the same story of betrayal, frustration and anger after losing their ‘investment’.

The Malta Financial Services Authority (MFSA) has since warned that DistributeX and entities and individuals operating under its name are not and have never been licensed, authorised, regulated or otherwise approved by the regulator.

The MFSA has also rejected claims by DistributeX that it held discussions with the authority over its activities. In a statement, the MFSA specifically warned people against transferring a €300 payment requested by the platform as part of what it described as a compliance verification process.

But for those who joined the platform, the operation initially appeared sufficiently credible to encourage them to put their money in it.

One man, who asked not to be identified, said he first heard about DistributeX through a friend of his wife. He carried out his own research and was aware of signs that raised questions about the operation, but decided to invest an amount he could afford to lose. What helped convince him to go along was DistributeX’s presence in the physical world. The platform has four outlets.

The man and his wife initially put in €250 each at what DistributeX calls Level 2. After about a month, they recovered their money and decided to put in more.

They each invested a further €800 to reach Level 3, with one of the accounts eventually returning its €800 deposit.

The couple subsequently encountered the €300 payment demanded by DistributeX for a purported compliance verification.

The man decided to make the payment in an attempt to recover his funds, only to be told afterwards that he needed to pay a further €800 to return to Level 3 and recover the money in his account.

“It was clear they were trying to siphon off more and more money,” he said, adding the couple ultimately lost €800 and the €300 payment.

The experience is being repeated among other members, including within Malta’s Filipino community, which was targeted by DistributeX.

A Filipino woman told this newspaper that she was introduced to the platform by friends and was persuaded by what appeared to be signs of an established business.

“What convinced me was that I saw a physical office, advertising on bus stops and other places, and that to me made the company legit,” she said, adding the company was presented to her as an investment opportunity.

A group of around 10 friends eventually joined the platform, with the woman putting approximately €700 into a Level 3 account in July. She has managed to recover only €290.

But she also knows a friend who had invested €2,000.

A few weeks after joining, the woman came across MaltaToday reports about DistributeX and began to suspect that something was wrong.

Days later, the €300 “verification fee” was introduced and she decided to pay it, hoping it would allow her to regain access to her money. When asked whether the fee could instead be deducted from the credits already showing in her account, she was told this was not possible because she no longer had access to those funds.

Attempts to establish why the payment was required only raised further questions.

“They would give me long-winded non-answers,” she said.

She is now among a group of former DistributeX members trying to establish what options are available to them. “We don’t know where to turn to.”

The uncertainty has been compounded by the silence of some of the people who had previously recruited new members.

“People who used to recruit new members have also gone dark, and not replying to messages or calls,” she said.

She believes some recruiters may themselves be worried about potential investigations, while also feeling embarrassed about their involvement.

For her, however, the issue goes beyond the money she lost. “You feel betrayed and you do feel a bit stupid,” she said.

DistributeX’s business model was described by the MFSA as having features resembling multi-level marketing arrangements and potentially exhibiting elements linked to pyramid schemes. The regulator has said transactions with unlicensed entities are unregulated and carry risks for consumers.

The Malta Competition and Consumer Affairs Authority has also joined the MFSA in investigating DistributeX over potential breaches linked to its business structure.

DistributeX members were encouraged to deposit cryptocurrency, complete daily tasks through an application and recruit others into the network in return for rewards. Withdrawals were subject to conditions including a 180-day period and completion of daily tasks.