Mumbai: 100 Ponzi cases worth Rs 200 crore reported in city in last 10 years, says EOW top cop

Nishith Mishra joint commissioner of the Mumbai Policersquos Economic Offences Wing EOW explained why schemes such as the Torres scam where thousands of investors across Mumbai Navi Mumbai and Thane are suspected to have been duped of around Rs 1000 crore continue to be created The Mumbai police have so far received complaints amounting to only Rs 40 crore in the investment scamOfficials believe many investors are hesitant to come forward due to fear or social pressure Mishra shed light on red flags investors should watch for ways to protect oneself and how the EOW is gearing up to use the recently implemented Banning of Unregulated Deposit Schemes BUDS Act to nip such scams in the budExcerpts from the interviewPonzi schemes seem to persist despite actions taken by regulatory agencies and people continue to fall prey to them What do you think is the reason for this and what are the red flags to watch out forPeople are inherently attracted to the idea of making quick money As a result they often fall prey to such schemes without verifying their sustainability driven largely by greed and the desire for fast profits The key difference between legitimate investments and Ponzi schemes lies in the returns they promise The returns in the latter are usually exorbitantly high compared to those of legitimate wellestablished schemesFor example gold bonds or RBImandated schemes offer stable returns while Ponzi schemes often promise returns that exceed these by two or three times or even more This should raise a reasonable suspicion that the scheme may be fraudulent To put it in perspective when buying property people from all walks of life typically conduct a title search to ensure its legitimacySimilarly before making an investment individuals should verify the companyrsquos backgroundmdashsuch as its revenue model and the type of returns it claims to offer This due diligence can help filter out potentially fraudulent schemes early on We would like to make an appeal to everyone whenever you come across an organisation offering unusually high returns it should be considered a major red flag Please report such instances to the relevant authorities so they can monitor and investigate them Additionally I urge Torres investors to come forward and share the details of their investmentsWhat steps is the EOW taking to ensure that people are aware of such schemesWe are planning to organise an awareness programme focused on Ponzi schemes with a primary emphasis on investigation The cyber department has already been conducting significant awareness efforts related to fraud which includes Ponzi schemes We publicly disclose the modus operandi of scamsters through the press and electronic media to help educate the publicThe recent Torres scam operated openly despite initial red flags flagged at the Shivaji Park police station Do you think this could have been prevented earlier Could the BUDS Act have been effectively utilised to stop this scam soonerI do not have jurisdiction to comment on the Shivaji Park police station as they are conducting their own internal inquiry Our team is currently studying the recently implemented Act with the help of legal experts to ensure it can be effectively utilised to prevent such scams In the case of Ponzi schemes it is essential to have a complainant who provides evidence to support the claim of being defrauded as without this the case may not hold up during the trialHow were the Torres scam victims lured into buying fake jewellery What is the scale of the racketA stone initially worth around Rs 200Rs 300 was promised to be worth Rs 25000 to Rs 50000 Once people bought the stone and invested in it the stone and the money were kept by operators and in return they were promised monthly returns ranging from three per cent to seven per cent Early investors did receive returns and as the scheme progressed they were encouraged to recruit more investors offering rewards such as flats cars expensive iPhones and additional commissionsWhile early investors saw good returns those who joined later only received returns for a couple of weeks before the scheme collapsed and the operators fled Initially the scheme attracted fewer investors but as they started offering bigger rewardsmdashlike cars and flatsmdasheverything was heavily promoted on social media which helped the scheme thrive for over a year Currently we have over 2000 complainants with an estimated fraud amount of R36 crore reported to us We believe this number will increase Once we obtain the bank details of the scammers we will be able to determine the exact amount that people have been defrauded ofThis scheme was both a Ponzi scheme and a form of MLM multilevel marketing In a Ponzi scheme money is taken from new investors and used to pay returns to earlier investors without any actual investment taking place As the scheme progressed a pyramid structure was created where each investor was encouraged to bring in new investors with the original investors earning commissions from their recruits Torres operated under the guise of a luxury jewellery business targeting middleclass citizens However the showroom never actually contained any jewellery it only displayed stones which should have been the first red flag for investorsWhat action will the EOW take to ensure that the Ukrainians behind the scam are brought to justice under Indian lawThere are established procedures in place and we are seeking assistance under international treaties to ensure that those who have fled are brought back to India to face the law Currently 11 foreign nationals are still absconding We are also exploring the use of the MLAT Mutual Legal Assistance Treaty and LR Letters Rogatory to enforce criminal laws through Bharatpol an international portal for police cooperationIndian suspects claim to be whistleblowers and that they were trapped by the foreignersWe need to assess the situation from the perspective of the investors and witnesses We will investigate whether these individuals were actively involved in luring people and what knowledge they had about the nature of the operations At this stage it is premature to draw any conclusionsIn recent years how many cases of Ponzi schemes have been reported to the EOW What is the total amount involved and what is the current status of these casesIn the past ten years over 100 Ponzi scheme cases have been registered under the MPID Act 1999 which protects the interests of depositors in financial institutions within Maharashtra and are currently being investigated by the MPID unit of the EOW These cases involve more than 26 lakh victims The total amount involved in these cases exceeds Rs 2000 croreDo you think it is time to include financial crimes under organised crime lawsYes this is clearly an organised crime and we are currently examining whether it meets the criteria for organised crime as defined under the law This includes determining if the individuals involved are repeat offenders and if the court has taken cognisance of at least two charge sheets If the case fits these parameters we will consider applying those provisions So far we are utilising the MPID Act The primary objectives of the Act are to punish financial institutions that fraudulently default on repaying depositors and to attach and sell the properties of these institutions to repay the affected depositorsWhat is the BUDS ActAccording to the EOW the Banning of Unregulated Deposit Schemes Act 2019 was enacted to prevent illegal financial activities such as multilevel marketing scams chit funds real estate frauds and other financial crimes It provides a mechanism for setting up surveillance systems to detect and prevent such fraud The Act includes provisions for establishing special courts similar to MPID courts to address such cases at the district levelIt also empowers district collectors to identify and attach properties of individuals found accepting deposits or running unregulated schemes Section 5 of the Act titled lsquoWrongful Inducement in Relation to Unregulated Deposit Schemesrsquo states ldquoNo person by whatever name called shall knowingly make any statement promise or forecast that is false deceptive or misleading in material facts or deliberately conceal any material facts to induce another person to invest in or become a member or participant of any unregulated deposit schemerdquoWhat is the MPID ActThe primary objectives of the Maharashtra Protection of Interest of Depositors Act 1999 are to punish financial institutions that fraudulently default on repaying depositors and to attach and sell the properties of these institutions to repay the affected depositors The maximum punishment under the MPID Act is six years and it is difficult for a person to secure bail once booked under it