Source:
https://www.copyright link/companies/games-and-wagering/asx-firm-funnels-cash-for-global-multi-level-marketing-scheme-20210719-p58b3z

ASX firm funnels cash for global multi-level marketing scheme

The penny stock trading as Emerge Gaming has appeared on the ASIC radar before revealing nearly all its sales are generated from a company that is subject to warnings from several international regulators.

The corporate watchdog is monitoring ASX-listed Emerge Gaming, which last week revealed 98 per cent of its revenue is derived from Crowd1 Network, a multi-level marketing company that has been the subject of warnings from several international regulators.

Emerge Gaming, a small Perth-based company with a market capitalisation of just $30 million, booked revenues of $10.9 million for the year to June 30, of which $10.6 million came through sales of its Miggster gaming platform, a white-labelled “e-sports” program it is responsible for running.

Miggster, which entices consumers to play rudimentary competitions with a promise of cash prizes, is owned by the multi-level marketing company known as Crowd1, established in Europe, registered in the United Arab Emirates and headquartered in South Africa. It has targeted consumers across Africa, China, Russia and south-east Asia.

Crowd1 and its Spain-based parent group, Impact Crowd Technology SL (ICT), have been the subject of consumer warnings from more than a dozen global regulators concerned that they could be a “pyramid scheme”.

Like many multi-level marketing schemes, Crowd1 labels itself a “legitimate marketing company” that helps boost the self-empowerment of its members, who earn income based on how many friends and family members they successfully invite to join the company.

The scheme has copped criticism for coaxing millions of consumers in the developing world into handing over chunks of household savings in return for promises that they could become millionaires by marketing further take-up of Crowd1’s unsophisticated digital products to their networks.

Crowd1’s basic subscriptions, which range in price from €299 to €2499 ($480 to $3980), offer personal self-development courses (which have been shown to have copied material freely available on the internet), access to a travel and booking service (based on a white-labelled search engine service available to anyone) and “Crowd1 loyalty points” that can ostensibly be redeemed for more Crowd1 products.

All basic subscriptions sign up new Crowd1 members to a 12-month subscription of the Miggster gaming platform, which it values at €69 a year. Crowd1 boasts it has 30 million members globally.

Emerge Gaming has disclosed, in a response to a query from the ASX on August 5, that the cash received for running the Miggster program “comes from Crowd1”.

‘Community is the core’

Under the deal struck last September with Crowd1, Emerge Gaming receives $3.10 for each customer that subscribes to Miggster, up to 1 million subscribers. It then receives 39¢ for each subscriber exceeding that. In an August slide deck it noted Emerge receives $3.20 for the first 1 million subscriptions and thereafter 40¢.

According to its full-year results released on August 31, Emerge Gaming booked revenues of $10.86 million for the 12 months through June. Of that, $10.6 million was through sales of Miggster.

The rest was made up of revenue derived from the company’s other gaming platform, MTN Arena, which was launched in July 2020. MTN Arena generates revenue by billing a daily subscription fee against mobile subscriber accounts when they subscribe to the MTN Arena platform.

At the Miggster launch, the prizes on offer for players on the platform, paid for by Emerge Gaming, included free Miggster subscriptions, travel vouchers, laptops and smartphones, up to a total value of €65,000 ($104,000). Since then, there have been new deals with ICT where ICT’s net revenue is on a sliding scale depending how many paying subscribers it delivers on Miggster each month.

Emerge Gaming has sought to put distance between itself and Crowd1, with a company spokeswoman saying Emerge provides the online tournament platform that Crowd1 may market under a licensing agreement.

“This is the extent of our exposure to Crowd1/ICT,” the company said in response to questions from The Australian Financial Review.

However, Emerge Gaming chief executive Greg Stevens, who was born and is based in South Africa, appeared as recently as July in a Crowd1 promotional video noting that: “Our community is the core of our product.”

Crowd1 promotional videos, freely available on YouTube, use actors playing seasoned television presenters on lavish studio sets spruiking the benefits of its products and interviewing “entrepreneurs” who have built up successful income from the platform.

The Financial Review is not suggesting Emerge Gaming has engaged in any multi-level marketing, only that it receives revenue from Crowd1, which has attracted attention from international regulators for its activities.