Dummy companies The manner in which the group operated was complex and secretive. There were not just dummy directors, but dummy production units, too. Not a single two-wheeler came out of the plant after he acquired it, though more than people were employed to maintain a facade of activity to convince depositors and investors of the varied businesses the group was engaged in. Sudipta Sen defaulted on the payment of a Rs. According to reports, Sudipta Sen had set up around offices in West Bengal, Tripura, Assam, Odisha and Jharkhand and, at the peak of his fraudulent operations, had more than two lakh agents working for him.
It is suspected that these accounts were used to channel the funds collected from depositors to personal investments abroad. Most of his Indian bank accounts show no more than a few lakhs of rupees. Investigations have also revealed that Sudipta Sen maintained a server in Boston, U. The activities of these companies have gone completely unregulated. Many of their schemes are dubious. The investments in various non-existent assets, range from land and real estate to agri-products to hotels.
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Some of the schemes are also plain money-return packages. Rural people are an easy target forPonzi operators because of the lack of penetration of the formal financial services sector in villages. Moreover, a large number of the rural poor do not have the necessary documents to open bank accounts. The easiest option available to them is investment in schemes such as those offered by Saradha, which only requires them to furnish their names and addresses. The proliferation of such dubious companies is also a reflection of the economic condition of a region.
Pointing out that West Bengal ranked 15th among the States in terms of per capita income, he said it was the lack of other legal avenues and gainful opportunities that prompted the poor to invest in these schemes and the agents to seek employment in these companies. The Ministry of Corporate Affairs has received complaints against 72 deposit-collecting companies in West Bengal.
As a result of the Saradha debacle, other fund collection companies are facing a crisis as investors are insisting on premature redemption of their deposits. Owners of these companies have been appearing in advertisements on private TV news channels to convince the depositors of the legitimacy of their operations and their solvency. However, such gestures have done little to quell the panic in the market. The Saradha scam brought back to public memory the Sanchayita Investments scam in , which had affected more than one lakh investors.
However, the present scam is of a far greater magnitude, in that a much larger number of people have been ruined by it. In his absence, the Ponzi scheme unravelled.
National Portal of India
On 17 April, around collection agents claiming to be associated with Saradha Group assembled at the headquarters of TMC and demanded government intervention. A Times of India interviewee said, "'The entire Dakshin Barasat today looks like it was hit by a cyclone. Every home has a bankrupt depositor or a fugitive agent. People who were once friends became enemies.
Happy households became miserable.
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Students stopped going to school. Traders lost interest in opening shutters.
There is a sense of treachery that has replaced the warmth of a neighbourhood. Suddenly everything has become vicious. On 18 April, an arrest warrant for Sudipto Sen was issued. West Bengal's Chief Minister Mamata Banerjee was reported to have said, "ja gechhey ta gechhey" whatever has gone has gone. The state government decided to repeal an existing Bill passed by the Left Front Government in , which had not received the approval of the President of India.
The new law has provisions for retrospective effect, search and seizure, enhanced penalties, establishment of special courts and confiscation of property. The Bill was sent to the Union Home Ministry , which sent it back to the West Bengal Assembly on 6 June , stating that the Bill has penal provisions implemented with retrospective effect, thus contravening the Basic structure doctrine of the Indian constitution and the established criminal law jurisprudence. The new Bill was then sent for presidential approval.
On 8 May , Banerjee said West Bengal was considering setting up a government-backed small savings fund to encourage small depositors to invest in it rather than in Ponzi schemes. On 23 May , Bannerjee indicated the West Bengal government's willingness to take over Saradha-owned television channels Tara News and Tara Muzic , which had earlier been sent into administration by Calcutta High Court. On 4 April , the Assam Legislative Assembly unanimously passed the Assam Protection of Interests of Depositors in Financial Establishments Amendment Bill to enhance the protections available to depositors and to curb fraudulent financial schemes.
On 22 April , Assam Police sealed five offices of Saradha Group amid protests by depositors, agents and employees, and accusations that a minister, a former DGP and government officials had facilitated the group's business ventures in Assam. In 17 cases, charge sheets have been filed against 42 people belonging to 15 companies.
Politics and Nation
On the basis of complaints filed by over depositors mainly from districts adjoining Bengal, the Government of Odisha ordered the Crime Branch of Odisha Police to investigate the Saradha scam. On 3 May , Odisha police seized documents and sealed the group's local offices. In March , Central corporate affairs minister Sachin Pilot said in the Lok Sabha —the lower house of the Parliament of India—that his ministry has received complaints against West Bengal's Saradha Group and many other companies for their involvement in Ponzi or multi-layer-marketing schemes. The group is intended to unify the regulations of investment schemes by NBFCs, banks and companies, which As of [update] were governed by different laws and regulations, leading to regulatory loopholes.
The crash of the Ponzi scheme and the publication of Sudipto Sen's letter led to a barrage of cross-party accusations.
Saradha Chit Fund Scam: CBI To Continue Questioning Kolkata Top Cop Rajeev Kumar Tomorrow
The Saradha scandal became a major campaign issue amongst the political parties in West Bengal during the national election. Chidambaram , the finance minister of the central government, alleging a political vendetta in the timing—coinciding with the parliamentary elections—of a spurt in Enforcement Directorate investigation. Street protests broke out across West Bengal, during some of which protesters ransacked offices of various Ponzi funds. According to media reports, around agents, depositors and executives or directors of various money pooling companies have committed suicide in the aftermath of the Saradha Group's collapse.
In response to the expose, the Government of Bangladesh, led by Sheikh Hasina , ordered the formation of a commission to further investigate the matter. The court gave state government one week to submit its investigation report to see whether the probe was being conducted in a fair manner. Thakur and Justice C. Official data show a steady decline in small-savings deposits and a rise in withdrawals, which left a reduced amount from which the state government could borrow. This affected the overall macroeconomic situation of the state; instead of being used by government for public funding, the money went into Ponzi schemes that were either diverted to foreign locations or were put to use for private gains.
It was feared that legitimate non-banking financial companies and micro finance institutions would be stigmatised, leading to a vicious cycle of low depositor trust, higher interest rates, lower lending and a localised credit crisis. The investigation was widened to include other Ponzi funds.
Since 2 May , after complaints from depositors, state government ordered SIT to broaden its investigation and conduct search and seizure at offices of MPS Greenery Developers Ltd and Prayag Infotech Hi-Rise Ltd, which were running unregistered collective investment schemes similar to Saradha Group. By mid-August , the Justice Shyamal Sen Commission finished its initial compilation of the list of claimants. Around 1. The Commission received claims from , depositors who were defrauded by Ponzi funds other than Saradha; the Commission did not refund any of these depositors.
In April , Calcutta High Court sought a report from the Commission on the discriminatory standards being applied to the refunding of depositors. In West Bengal, because the criminal investigation had not initially been handed over to the CBI, the Enforcement Directorate ED —a Central Government agency which primarily probes money laundering—led the investigation on behalf of the Central Government. In April, , ED arrested the absconding wife, son and daughter-in-law of Sudipta Sen, all of whom had been directors of various companies of Saradha Group.
They were later released and even as CM Mamata Bannerjee was protesting on dharna against the arrest of Kumar, the Supreme court ordered interrogation of Rajeev Kumar at a location outside West Bengal to avoid further showdown. In February , Sudipta Sen was convicted in a case where he was charged, under various provisions of employment law, as a director of Saradha Group for his failure to deposit with the provident fund authorities INR 0.
From Wikipedia, the free encyclopedia.
Saradha chit fund scam: All you want to know
SaradhaGroup Former type. See also: Banking in India. India portal Politics portal Criminal justice portal.
The Telegraph. Retrieved 1 May Understanding chit fund, MLM, corporate deposits and collective investment schemes". Marketing and advertising law. Retrieved 13 June Retrieved 3 May The Hindu. Retrieved 25 April Daily Mail. Retrieved 27 April Retrieved 19 August The New Indian Express.
Retrieved 29 April Business Standard. Retrieved 10 May Calcutta Telegraph. The scamster is interested in reaching a certain level of scale. Initial guys tend to get paid off. Then they go talking about it and become votaries for that scheme. There are two broad categories of this fraud. One involves an impossibly high return of investment. Those who invested were also made agents by promising them commissions. When it went bust, by one estimate over 60, people in the entire city had lost their money. In the Saradha Chit Fund scam in West Bengal, the scale of the Ponzi became gargantuan with an entire industrial conglomerate being set up through revolving money and aided by the patronage of politicians.
The second category have pyramid or multi-level marketing schemes, where a company offers a product but the real money is made by charging the people appointed to distribute and sell it. The product is immaterial to the business model. People would be asked to pay a lump sum in return for assured returns.
They would have to get other members and thus the chain would grow. In fact it is a chain where a person is fooled and then he is trained to fool others to earn money. Sucheta Dalal, managing editor of Moneylife magazine, which has been relentlessly campaigning against them, recalls holding a financial literacy seminar for poor scholarship students and being unsure of including the subject. I was completely stunned at the high level of interest.
I kept telling my mom there has to be something wrong, why will someone give you such high returns? A recent example of a fraud involving a Ponzi structure is the Nirav Modi case, where fresh LoUs were used to illegally pay off earlier ones.