Ponzi Schemes: CBI books 132 firms in 100 FIRs since 2019; ED 87 PMLA cases

New Delhi, August 8 The Central Bureau of Investigation (CBI) has registered 100 cases involving 132 firms relating to Ponzi schemes in the last three and half years -- since 2019, while the Enforcement Directorate (ED) launched 87 money laundering inquiries in such cases during the period, the Centre informed Lok Sabha on Monday.
As per definition, a Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.
From 2019 to June 30, 2022, the CBI arrested 21 persons in its investigation of 100 First Information Reports lodged while probing Ponzi schemes, and the ED nabbed eight accused under the provisions of the Prevention of Money Laundering Act, 2002 (PMLA).
Sharing inputs in the Lok Sabha while replying to queries of five MPs, Minister of State for Finance Pankaj Chaudhary said the government and enforcement agencies have taken action against those running unauthorised schemes.
Citing information received from enforcement agencies and regulatory bodies, the Minister said "CBI has registered 100 cases relating to Ponzi Schemes during the years 2019 to 2022 (up to 30.06.2022), involving 132 companies/ firms. 21 persons have been arrested by CBI in this regard."
"ED has investigated 87 cases related to Ponzi Schemes under the provisions of the Prevention of Money Laundering Act, 2002 (PMLA) during the last 3 years and the current year. Eight persons have been arrested by ED in this regard."
Serious Fraud Investigation Office (SFIO) has informed that it has been assigned investigation by the Ministry of Corporate Affairs (MCA) into the affairs of nine cases (five in 2019-20, one in 2020-21, and three in 2021-22) involving 85 companies (36 in 2019-20, 16 in 2020-21, and 33 in 2021-22) during the last three years, which were allegedly engaged in fraudulent chit fund, Multi-Level Marketing (MLM) or Ponzi activities, said the Minister. "No arrest has been made in this regard by SFIO."
The Sachet portal of the Reserve Bank of India (RBI), which is the online platform for State Level Coordination Committees (SLCC) and facilitates the public to lodge complaints of financial frauds, the Minister said, received 1,540 complaints related to non-repayment of deposits and money collected for various kinds of Investment Schemes (964 in 2020-21, and 576 in 2021-22).
Securities and Exchange Board of India (SEBI) has passed final Orders against 29 unregistered Collective Investment Schemes (CIS) entities during the last four years (12 in 2018-19, 10 in 2019-20, 5 in 2020-21 and 2 in 2021-22), said the MoS.
In order to tackle the menace of illicit deposit-taking schemes which dupe people of their hard-earned savings, the Minister said the Banning of Unregulated Deposit Schemes Act, 2019 was enacted by the Central government among various of its steps to protect the interests of people. The Act contains comprehensive provisions in this regard prohibiting promoting, operating, issuing advertisements or accepting deposits in any Unregulated Deposit Scheme, and provisions for severe punishment and heavy pecuniary fines to act as a deterrent.
The MoS said 29 states and Union Territories (UTs) have passed Protection of Interest of Depositors (PID) Acts for taking action against entities collecting money from the public illegally.
State Level Coordination Committees (SLCCs), which are joint forums of financial sector regulators, state government officials and law enforcement agencies to facilitate information sharing and coordinated action against the illegal mobilization of funds from the public, were reconstituted in states and UTs in April 2014, with the Chief Secretary of the state and UT as the Chair, said the Minister.
The RBI launched a public awareness campaign in 2017 to educate the public about various banking issues, including cautionary messages against falling prey to unsolicited and fictitious offers received through emails, SMSes, and phone calls. RBI alerts the public against such offers through press releases and multimedia messages on TV and online.
Through RBI's online portal SACHET (https://sachet.rbi.org.in), which was initially launched on August 4, 2016, the public is cautioned against fraudulent schemes and entities. From the portal, members of the public can obtain information regarding entities that are allowed to accept deposits, whether the entity is registered with any regulator, lodge complaints and also share information regarding illegal acceptance of deposits by unscrupulous entities.
Recognising the need to develop standardized content to meet the requirements of the general audience for financial awareness on important banking aspects, RBI has developed Financial Awareness Messages (FAME), with target group-specific content for five target groups like entrepreneurs, Self Help Groups(SHFs), farmers, school children, senior citizens. The content inter alia spreads awareness on Ponzi schemes and scams among the general audience.
SEBI is empowered to regulate Collective Investment Schemes (CIS) under Section 11AA of the SEBI Act, 1992. Further, since investors invest in various Mutual Fund schemes, which in turn invest in securities of various companies, SEBI's Mutual Fund Regulation, 1996 specifies various investment restrictions including single issuer limit, sectoral limit, group exposure limit etc. keeping in view the interest of investors.
Besides, the Ministry of Corporate Affairs (MCA) conducts investor awareness programs to educate the general public to learn from the websites of various Ministries the information published regarding the persons involved in the scheme before making any investment.