Investors had lost Rs.236 crore in Ponzi schemes and fraudulent chit fund companies that downed their shutters overnight since 2007.
There had been about 50 such cases in the city since then. The victims number about 68,900 and 78 accused were apprehended. While people lost Rs.133 crore in Abhaya Gold, in Sai Vuma Chit Fund they lost Rs.72 crore. The property seized by the police was about Rs.35 crore.
These apart, there are about 11 recent cases that are under investigation. In last one month there were three such instances – that include Omkar Jewellers, Dasara Chit Fund or the Redamma scam and Apple Tree Chits.
The Ponzi schemes or fraudulent chit funds have been there in the city for 20 years and with every busted case – two new companies spring up with renewed vigour. The main reason was the greed of investors, said Police Commissioner B. Sreenivasulu.
“It is difficult to understand the psyche of the people. They still go ahead investing in these dubious firms. People should realise that no amount can be doubled in two to three years as claimed by these firms. Even the best of the banks around the world cannot do so”, he added.
In a Ponzi scheme, the operators promise to pay high returns in short time and it is named after Charles Ponzi who became notorious in the 1920s for inventing such schemes and duping investors in the US.
In Ponzi schemes returns are paid from existing capital or new capital and not from the profit earned and a slight delay in the capital flow causes the company to wind up.
“Abhaya Gold and the recent Omkar Jewellery case were a clear Ponzi cases, but the investors rarely checked the details giving the scamsters the required time and flexibility to amass huge sums and then wind up the show overnight,” said Mr. Sreenivasulu.
The lure factor is advertisement and people fall for it, said inspector Satyanandan from CCRB. What are the warning signs one should look for? Mr. Sreenivasulu said: Never invest in firms that promise high returns on investment with little or no risk, check whether the companies are registered with institutions such as registrar of companies or are they governed by the Chit Funds Act of 1982, check on the website of Ministry of Corporate Affairs for the list of fraudulent chit fund and Ponzi companies; check whether the chit amount is being deposited in a ‘Pot’ as per the Act and go for regular banks or big registered chit fund companies.
