In two cases recently, investors were duped by financial firms, writes S. Sundar

At least in two recent cases of fraud, financial institutions have been accused of duping a few thousand depositors to the tune of a few crores of rupees by offering attractive returns. In both the cases, investors from Madurai city and district were taken for a ride by private companies — one in Madurai and another in Virudhunagar.

In the first case, the company at Keeraithurai promised the investors of higher returns, ranging between 10 to 30 per cent, depending upon the size and duration of investment. Investors were given post-dated cheques that could be encashed at regular intervals.

The company at Virudhunagar gave five post-dated cheques for Rs. 3,360 on an investment of Rs. 5,000. The investors were attracted by free gifts of home appliances, and agents given hefty commission on introducing new depositors.

In both the cases, early birds made huge money. And as the message of “easy” and “huge money” spread like wild fire, people thronged the companies with deposits. While the Madurai company could sustain only for around two years, the one at Virudhunagar found its end within four months. The result: around 15,000 people lost Rs. 25 crore to the first company and around 6,000 investors were duped of Rs. 21 crore to the other company.

With their fingers crossed, they now pin their hopes on the State Government and the police to get back their money. “It is true that some have made money. But they never realised that it was at the cost of others. The companies were able to repay the depositors as long as they got fresh deposits. Once it stops or the fund flow slows down, the chain breaks and the game is over,” a senior police officer said.

Another officer attributed the investors’ greed of making quick money for the disaster. Among the duped included Government employees and police personnel, daily labourers and industrialists.

Salary arrears gone

“Some Government employees have invested a lump sum which they got as salary arrears recently,” he said. In the Virudhunagar case, bank officials had complained of dwindling deposits at their branches.

Glitzy office interiors, busy activities inside air-conditioned office and post-dated cheques were the baits for gullible investors. “More than anything, publicity through word of mouth worked very well,” another officer said. The second company had paid as much as Rs. 8.5 crore to around 800 agents alone. Till such a time that people started to question the rationale behind never-heard-before returns and suitable agencies to monitor such companies were formed, the list of duped depositors would keep growing.