Strong political will is needed to deal with the fraudsters of ponzi scams
The serious rupture in relations between the Trinamool Congress and BJP-led central government is a consequence of the reported nexus that Trinamool leaders had with Rose Valley investments and chit funds, a blatant ponzi scheme, which has duped thousands of small gullible investors. Mamata Banerjee has taken the arrest of party leaders Sudip Bandopadhyay and Tapas Pal to the prime minister’s doorsteps, giving it a political spin. But, what happens to the thousands of small investors who have been left high and dry, as their savings invested in Rose Valley have vanished into thin air?
The promise of exorbitant returns, doubling investments in a short time span and multi-layered structuring of Rose Valley investments and chit funds on the strength of ‘fictitious real estate assets’, reveal that the entire operation was dubious in intent and spirit. An eye-popping Rs 15,000 crore investment into Rose Valley schemes operated by Kajal Kundu and his elder brother Gautam Kundu for 17 years, has found its way into promoters’ accounts or their outfits abroad.
The Enforcement Directorate and CBI probe has not just pointed to the political patronage Kundus received in Bihar, West Bengal and Odisha, but the siphoning off funds up to Rs 1,000 crore from 2,600 accounts of small investors, has also been established. It is clear that the Kundus could not have carried out such an operation without political patronage. Half-a-dozen regulators, including Sebi and Irdai, apart from the Income Tax department, Enforcement Directorate and other investigative agencies are pursuing Kundus and their political mentors. But the action has come rather late in the day and the damage is already done. In reality, charges of top TMC leaders’ involvement in the Rose Valley fraud came immediately after the infamous Sharada scam, that continued to hit the headlines in the last couple of years.
Ponzi schemes have existed in India over last the five decades and the innovative means used to defraud investors have become legion. For instance, it is not easy to overlook Nirmal Singh Bhangoo’s ponzi scheme that involved whopping investments of Rs 45,000 crore mobilised from investors in Punjab, Andhra Pradesh and Rajasthan. Akin to Rose Valley scheme, Bhangoo’s Pearl Group outfits duped over 23 lakh agents, company officials and 5.5 crore investors. In this scam, half-a-dozen company outfits, hundreds of shell firms opened by their agents, field associates and top officials of this group, stripped unsuspecting investors of their savings and siphoned funds off to as far as Australia, New Zealand and Dubai. Of course, the most notorious of such schemes in recent memory is the deposit mobilisation resorted to by the Sahara Group involving $5.4 billion by promising land and other assets, with the usual promise of handsome returns. Investigative agencies doggedly pursued the case for years before Sahara Group chief Subrato Roy was jailed in 2014.
The history of such schemes goes back to Boston-based Charles Ponzi, who first ran an arbitrage scheme way back in 1920 conning over 30,000 investors. The most frustrating is that all such frauds occurred in broad day light with the active connivance of politicians while market regulators twiddled their thumbs. Strangely, there are enough laws to deal with fraudsters. What is needed is strong political will to come down heavily on such perpetrators.