Indian Investors Lost 40,000 Crore In 2013 Ponzi Schemes

By Swetha Ritesh | Kolkata

From illegal money pooling to siphoning off funds, a multitude of frauds together worth at least Rs 40,000 crore have come to light in 2013, even as government agencies and rejuvenated legislations promise to curb this spiralling menace. 
    
With enticing promises of unrealistic returns, a large majority of these frauds revolve around unauthorised money raising activities or ponzi schemes targeting general public. Not just greed, corporate governance lapses and regulatory loopholes also provided scamsters leeway this year. If it was Saradha scam in the first half of the year, the latter part of 2013 witnessed National Spot Exchange Ltd (NSEL) fiasco and a soothing solution for the cheated investors still seems far away. 
Saradha scam, perpetrated in the garb of chit funds, began unravelling in April before political ripples forced the governments, both at the Centre and in West Bengal, to swing into action. Though there are no official figures, estimates peg the total amount involved in Saradha scam at about Rs 30,000 crore. 

Adding to the list, NSEL's Rs 5,600 crore payment crisis has not only dragged the exchange but also its promoter Financial Technologies and other group firms. Many of the frauds targeting investors' hard-earned money have striking similarity to 'ponzi' schemes, while there are also cases of promoters and top management personnel allegedly siphoning off money from their respective companies for personal gains. 
    
Ponzi schemes involve collection of money from public investors with promises of huge returns that are paid from deposits made by new investors. In one case, a company ‘Beetal Livestock & Farm’ came under Sebi scanner for promising hefty returns on investments for rearing goats. 
    
Investors were told that as each goat gives birth to four kids a year, the new goats would be sold to other investors -- giving up to four-fold appreciation in the first year itself. The investments could give manifold returns in subsequent years, said Beetal, with each of the four new goats giving birth to 3-4 kids the following years. 
    
Suspecting a typical ponzi scheme in the name of goat farming, Sebi began enquiry into the matter following several complaints received by it. While the size of individual ponzi schemes that came to light in India this year is relatively smaller, there are many cases and their cumulative size could easily run into a few thousands of crores. 
    
Some notable instances include Sebi action against Alchemist group entities, where the money involved in fraudulent activities was around Rs 1,500 crore. The government has ordered SFIO probes against 76 companies so far this fiscal -- the highest count in three years.