Saradha chit-fund scam
The Saradha chit-fund scam was a Ponzi scheme run by Saradha Group which is a consortium of over 200 companies believed to be running collective investment schemes.
Saradha chit-fund scam might have collected around 300billion Rupees from over 1.7 million investors before it collapsed in 2013.
Due to complexity of scandal and money laundering,case was handed over to Central Bureau of investigations in 2014 for further enquiry which is India’s federal investigative agency.
India’s large low-income and rural population have limited or with little access to formal banking facilities due to financial institution’s norms for banking especially in lending practices .
Such people need to borrow money for their cultivation or for their children education purposes largely depend on their Parallel and informal banking in the form of money lenders or pawn brokers who are poor people banking institution’s for centuries.
These money lenders are often un regulated and they are wealthy landlords or socially influenced people who charge exorbitant Rate of interest somtimes chit funds,
People greed push them to invest their life savings for higher returns believing that Money lenders reputation as collateral for their investments. These kind of Ponzi schemes usually promises returns which no financial institution can afford.
This is how it all started Saradha chit-fund scam , lets take a look
Saradha Group which was founded by Sudipto Sen in 2006 was a consortium of various companies which promised huge profits and returns for their investments and even recruited agents to lure commoners by sharing some percentage or commision of their investments to agents,
The schemes introduced by Saradha promised un believable returns along with perks ! By investing as low as Rs.100 investors could get unbelievable returns ranging from 15% to 50% with no upper limit on investments.
Besides monetary gains , lavish vacations and plots of land were also promised in the glossy brochures of the scheme.
Like most Ponzi schemes, the going was great in the beginning. Money would be collected by one depositor and used to pay another – and buy time.
Saradha Group ventured into investing in multiple companies in media, automobile, real estate, infrastructure and finance sectors to give legitimacy for its illegal financial transactions,Saradha Group roped in famous politicians and film stars based in West Bengal, Odisha, Assam and Tripura, and paid them huge dividends as brand ambassadors. Former MP Kunal Ghosh headed the media division of Saradha Group.
But by 2009, it was starting to become clear to some investors and agents that there was something fundamentally dubious with the company’s business model.Unregulated collective investment schemes were first noticed by the Securities and Exchange Board of India (SEBI) in 2009 when it asked Saradha Group to furnish its balance sheet for auditing under the Indian Companies Act.
In order to evade regulations group had opened 200 companies as consortium and started complex exchanges which were difficult to track ,SEBI also warned State gverment in 2011 for possible scam by Sudipto Sen-led group. The group also laundered money to Singapore, UAE and South Africa.
In 2012, SEBI asked the Saradha Group to immediately seize its collective investment schemes and seek permission from the market regulator before any commencing such operations. But they did not comply by SEBI instructions and illegally collected public money somewhere Rs 200-300 billion ($4-6 billion) from more than 1.7 million depositors across the country until the scheme collapsed in 2013.
After nearly 600 money depositors staged a demonstration in 2013 in West Bengal against the money laundering and fraud by the Saradha Group more than 400 FIRs were filed against the group, Sudipto, and six other executives, they were eventually arrested by Kolkatta Police.
The Supreme Court later transferred the money laundering cases related to
Saradha chit-fund scam to the CBI in 2014.
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