Modi-Mamata war: What is ponzi or chit fund scam

Hyderabad: As per official estimate, the Saradha and Rose Valley, ponzi and chit fund scams respectively collectively caused its investors a loss of Rs 20,000 crore. However, some unofficial figures put these scams at a worth of Rs 40,000 crore.

The scams originated and rocked West Bengal as subsequent names of some big players in the state politics cropped up during investigation. It has been alleged that Sudipta Sen and Gautam Kundu, masterminds of Saradha and Rose Valley scams respectively, had connections with the mighty in the state power corridors.

Ponzi scheme and its modus operandi

A ponzi scheme is similar to other deposit taking schemes like pyramid scheme, chit fund or multi level marketing frauds etc. SpeakAsia scam was one such multi-level marketing fraud that looted gullible investors of their hard earned money. Experts say that the first sign of a ponzi scheme or such fraud is a very high rate of monthly interest they distribute among its investors. However, most of the companies call them as profits. These companies promise and give out monthly profits in the range of 30-40% of the amount invested. This rate of interest or so-called profit is much higher than the rate of interest on bank fixed deposits. An investor can get an interest rate of up to 12% from company fixed deposit. While, from a bank fixed deposit they can earn an interest in the rage of 7 to 8.5%. These schemes work hard in luring new investors so that they can pay the old investors. Once, new investors stop joining the scheme, it turns out to be a fraud. At this point of time investors will stop getting their installments and the scheme becomes a scam.

Mamata-Modi stand-off

The ongoing probe into the Rose Valley and Saradha chit fund and ponzi scams, that duped gullible investors from across multiple states of Rs 20,000 crore, have triggered a stand-off between the West Bengal and central governments. Chief Minister Mamata Banerjee has gone on to protest and started a sit-in against the Narendra Modi-led central government. Mamata alleges Modi to have misused his powers and central institutions. But, Modi government accuses the state government of shielding the accused.

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What has caused the stand-off?

West Bengal chief minister Mamata Banerjee on Sunday evening started a “Save the Constitution” dharna in Kolkata to protest against Narendra Modi government’s “excesses”. The protest began after a team of Central Bureau of Investigation (CBI) arrived in the city and landed outside Kolkata police commissioner Rajeev Kumar’s residence. As per reports, CBI wants to question Kumar who led the Special Investigation Team (SIT) formed to probe the case before the case was transferred to the premier probe agency in 2014. The CBI believes Kumar was involved in shielding several big names who are member of TMC and Lok Sabha. The agency believes these big names were involved in the case. On the other hand, Banerjee calls Kumar as “world best” police chief.

When the scams were busted?

The scams which rocked and originated in the eastern state of West Bengal came to light in 2013 when the so-called deposit taking “companies” or schemes collapsed. At this point of time, the schemes stopped paying profits causing fear and panic among investors. Since then they have been a bone of contention between Trinamool Congress (TMC) and its opposition parties. TMC was not in power when the scams rocked the state. Supdipat Sen was mastermind of Saradha scam while Gautam Kundu ran the rose Valley cit fund scam.

What is Heera Goldscam?

Recently, a similar scam related to ponzi scheme involving Heera Group of companies popularly known as Heera Gold among investors, was busted by the Hyderabad police in southern state of Hyderabad. In October 2018, the Hyderabad police arrested Heera Group’s managing director and CEO Nowhera Shaik, and since then the “woman entrepreneur” has been taken into custody by police across many cities in Maharashtra. Heera Gold was offering a monthly profit of up to 36% of the invested amount.