Ponzi scheme fallout

The Saradha scam which defrauded thousands of small investors in Assam and other states is about to be dwarfed by a humongous chit fund scam at least four to eight times larger. While the Saradha ponzi schemes siphoned off Rs 2,500 crores, leaving behind little trace of the money trail — the Rose Valley group may have duped at least one lakh small investors of over Rs 10,000 crore. As CBI and Enforcement Directorate sleuths dig deeper, the suspicion is that the loot may even touch a staggering Rs 20,000 crore, surely the mother of all such scams unearthed in the country till now. With the recent arrest and grilling of the Rose Valley maging director and another key director, to add to the interrogation of the group owner Gautam Kundu in custody, the contours of its chit fund business are emerging. It reportedly has over 20 lakh investors spread across 12 states including Assam and Tripura, with about 2.7 lakh active agents and another 10 lakh registered agents collecting the money. Fraudulent schemes promising very high returns were floated, like ‘Ashirwad’ luring small investors with a plot of land and ‘Holiday Membership’ plan in which instalments were collected for staying nights at a group hotel. The collections were routed through some 880 branches to 21 regiol offices and thence onwards to four divisiol offices, with the Rose Valley headquarters directing operations from Kolkata. Investigators are uncovering details of around two dozen high-end hotels, front companies, major amusement parks, over 3,000 suspect bank accounts and thousands of acres of real estate amassed as parts of the Rose Valley empire.

The most worrying aspect of this scam is that ED sleuths have found data of only about Rs 900 crore returned by the group to investors ‘on maturity’, with little hope now for the rest of the money collected to be returned. Legions of petty traders, small artisans, day labourers and farmers whose hard-earned money was being collected over years, are now staring at the chilling prospect of those ‘savings’ disappearing into thin air with the imminent collapse of the Rose Valley group. The unearthing of the mega scam has caused further tremors in Mamata Banerjee’s Trimool Congress, with its government already on damage control exercise over the Saradha fallout. As in West Bengal, the Rose Valley group is also alleged to have developed close links with top leaders of the ruling Congress in Assam and Biju Jata Dal in Odisha, along with key bureaucrats and officials to carry out their illegal business in these states. The arrested Rose Valley MD is being taken to Bhubaneswar for questioning, with the CBI reportedly seeking details about the inroads Odisha police have made in its probe.

It will be interesting to see what details Assam police can share with the CBI to help figure out the numbers of investors duped in the State and the magnitude of the amount looted. In January this year, the Gauhati High Court asked the Assam government to hand over all cases relating to chit funds and non-banking fince companies (NBFCs) to the CBI without further delay, as the court was unhappy with the progress made by State investigating agencies. Assam alone has over 200 such cases involving at least 179 chit fund companies and NBFCs. Thousands of gullible investors in the State have been left bemoaning their losses as chit fund companies like Jeevan Suraksha, Rangdhali, Unipay 2U, Rising East, Mudra, Daffodil, Basil Intertiol and many others shut shop overnight and disappeared. The fact that these shady, fly-by-night agencies could operate with impunity in Assam, brazenly flouting RBI and SEBI norms, speaks volumes about the complicity of corrupt sections of the State administration, particularly the police and enforcement branches. The situation reached such a pass that the CBI had to plead before the Supreme Court and High Court that it alone cannot be expected to shoulder the burden of probing all such fraud agencies with its limited resources and manpower.