A Hamilton, Fresh Zealand marketing company, Tech Vault Enterprises, has been sentenced after being prosecuted for unconscionable conduct, following a Commerce Commission investigation that revealed a “Ponzi operation model” targeting vulnerable individuals, including an 87-year-old woman with dementia. The company, trading as HouseSmile, pleaded guilty at Hamilton District Court and was fined $60,000, with an additional $7,500 ordered in emotional harm reparation.
Liquidator Pritesh Patel revealed the scheme involved taking money from customers through an intermediary company, Flo 2 Cash, and using those funds to fulfill orders for previous customers. “It’s white-collar theft,” Patel stated, adding that 51 customers across the country, from Invercargill to the far north, are owed a total of $38,865.50. He as well noted significant outstanding debts to the Inland Revenue Department (IRD), which now places those customers who have already paid as unsecured creditors.
The Commerce Commission investigation found that HouseSmile used Facebook advertisements and its website to solicit customers, then employed a call centre to aggressively pursue sales, including unsolicited calls. In one particularly concerning case, a daughter reported that sales agents continued to contact her elderly mother, despite being informed of her dementia and inability to use a computer, for over 18 months attempting to secure further sales of tablets, phones, and Bluetooth speakers.
Rahil Munir Tharani, the sole shareholder and director of Tech Vault Enterprises, incorporated in April 2020, acknowledged the liquidation but claimed health issues and distanced himself from Flo 2 Cash, stating, “They’re a different entity.” However, Patel stated that Tharani has been “fully co-operating” with the liquidation process. Patel has written to Flo 2 Cash requesting the release of approximately $15,000 held in deposits, but has yet to receive a response.
Patel described the business as “sliding backwards” due to its reliance on funds from new customers to satisfy existing orders. He also noted that Tech Vault rarely held any stock, instead purchasing goods for previous customers after receiving payment. The liquidator is currently facing difficulties accessing a storage unit in Hamilton due to unpaid rental fees owed to National Storage.
The case represents one of the first two prosecutions brought by the Commerce Commission for alleged unconscionable conduct under the Fair Trading Act. The Commission has also filed proceedings against Brand Developers Limited, trading as The TV Shop. Convictions for unconscionable conduct can result in fines of up to $600,000 for businesses and $200,000 for individuals.
The Commerce Commission investigation and subsequent media coverage led to a decline in goodwill and customer base for Tech Vault Enterprises, according to Patel. He had instructed all creditors to cease payments to Flo 2 Cash.
