Contract farming of emu, the flightless birds of Australia, had all the ingredients of a ponzi scheme from the beginning.
The prospect of getting rich quick proved difficult to resist for hundreds of people from Tamil Nadu, Kerala and Karnataka, and they lost staggering amounts of hard-earned money.
The ‘emu bubble’ burst in August 2012, six years after the main promoter M.S. Guru founded Susi Emu Farms at Perundurai, a small town in Erode district of Tamil Nadu, promising staggering returns from the birds.
Investors realised that emu farming was a scam only when payments from Susi Emu Farms dried up. Then it collapsed like a house of cards as in any classic pyramid scheme, and all the companies that adopted the model of Susi Emu Farms shut shop, leaving hundreds of investors in financial ruin and abandoning more than 12,000 exotic birds, which are now being auctioned off by the government to livestock traders for meat.
Here’s how it operated. The scheme, first introduced by Susi Emu Farms, promised a return of at least Rs. 1.44 lakh within two years for an initial deposit of Rs. 1.5 lakh for rearing emus. The company also returned the deposit at the end of two years. Like any typical ponzi scheme, the company paid the early investors promptly so that others would grab the bait.
Word spread, and new investors rushed in. To build trust, it opened a chain of restaurants, inviting celebrities and ministers to cut the ribbon. This brought in more investors.
With the huge success of Susi Emu, more than 100 companies came up at Perundurai in Erode and neighbouring Tirupur, Coimbatore, Namakkal and Salem districts. Some companies went on to offer Rs. 2.40 lakh for a deposit of Rs.1.5 lakh. A few even adopted the same business model for poultry farming.
This was despite the continuous warning by the government authorities on the commercial viability and the questionable business model of these companies.
“We never heard about emus until we saw advertisements about contract farming and the promise of huge profits. We believed that the business was viable because we were told that an emu fetched Rs. 20,000 and its eggs Rs. 1,200 a piece. It was said that its skin, meat, feathers and even nails had a huge market. So we invested. But we got cheated,” said P. Sathish, who deposited Rs. 3 lakh.
Like Sathish, more than 15,000 investors complained against the emu firms in Tamil Nadu, and were hoping to get back at least a portion of their investment. The Economic Offences Wing in Erode has received 9,400 complaints. The wing registered 22 cases against the companies and their owners. “We have arrested the promoters of 21 companies, including M.S. Guru of Susi Emu Farms. We are searching for the owner of one company,” Deputy Superintendent of Police M.K. Jagannathan said.
The cases are now being heard by a special court for the Tamil Nadu Protection of Interests of Depositors (in Financial establishments) Act in Coimbatore.
Officials said the amount recovered from the companies and through the auctioning of the birds would be distributed to the investors only after all the legal proceedings were completed. Though police estimated that the scam was of the order of Rs. 150 crore, industry estimates claim the emu companies swindled more than Rs. 500 crore.