Saradha Scam: India's Biggest Chit Fund Scam
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Over 200 agents, depositors, and executives have killed themselves since the news of India's largest chit-fund Saradha scam initially surfaced. This is because people connected to Saradha were from the lower socioeconomic classes. This meant that since they had used all of their life savings, they had no choice but to commit suicide.
Before its demise in 2013, the Saradha organization had received between $4 and $6 billion from more than 1.7 million depositors. The Saradha Group attracted small investors by using a group of businesses and promising them extremely high profits.
However, similar to a traditional Ponzi scam, money was raised by a large network of agents who received commissions of over 25%. As a result, the con has earned the moniker "Bonzi," a mix of Bengal and Ponzi.
You can find a section on the Saradha scam explained in this blog and what was Saradha Scam amount. '
- SudiptoSen founded Saradha Group in the early 2000s, promising rural communities enormous gains. The Saradha organization rapidly began to grow outside of Bengal, in the states of Odisha, Assam, Tripura, Jharkhand, and Chhattisgarh, thanks to a name that was instantly identifiable, the promise of stratospheric returns, and an army of agents who were extremely driven. To motivate them to spread the pyramid, the agents employed in the same areas were given royalties ranging from 25 to 40 percent of the return on the deposited sum.
- To present a ruse of a varied firm to potential investors, the Saradha Group acquired several shell companies. These include Global Automobiles, West Bengal Awadhoot Agro Private Ltd., and Landmark Cement. According to a source, after being acquired by Saradha, the deeply indebted Global Automobiles stopped production but maintained 150 employees on the books who would pose as employees when "truckloads" of potential investors came to visit and see for themselves before investing.
- The Group initially raised funds by selling secured debentures and redeemable preference bonds. A firm, however, cannot collect funds from more than 50 persons without releasing a thorough brochure and balance statement after receiving approval from the Securities and Exchange Board (SEBI) of India, by Indian Securities Regulations and Section 67 of the Indian Companies Act (1956). The Saradha group changed its operating style after SEBI raised alarms in 2009. It established 239 businesses to build a convoluted, multi-tiered corporate structure that would make it difficult for SEBI to assign culpability.
- To avoid being busted, the Group continuously changed its fund-raising strategies. Sen-led consortium employed several collective investment schemes (CIS) as a ruse, including those involving forward travel and hotel booking, timeshare credit transfers, real estate, infrastructure financing, and motorcycle manufacturing. Some of the investments were also deceptively presented as chit funds since state governments rather than SEBI governs chit funds.
- Saradha Scam amount approx. Rs. 10,000 crores were lost, which was discovered in April 2013. The Saradha group siphoned funds obtained through questionable share market operations a year before the bankruptcy. The organization allegedly trafficked a significant amount of money to Dubai, South Africa, and Singapore.
- In the Saradha Scam case, SudiptoSen sought to develop his political network in addition to his brand. He had invested in the Bengali film business and owned media companies. Satabdi Roy, an act or TMC member, and MithunChakraborty, a former Bollywood superstar and RajyaSabha member, served as Saradha's brand ambassadors. When Saradha spent Rs 988 crore and engaged over 1,500 journalists, TMC MP KunalGhosh was named CEO of the media company. It was published in eight newspapers in five languages by 2013.
- According to reports, in the Saradha Scam case, Ghosh received a remuneration of Rs 16 lakh each month. Srinjoy Bose, a different TMC MP at the time, worked on the Group's media initiatives. The Group's employees' union was headed by West Bengal's minister of transportation, MadanMitra.
- The Kolkata Police received patrol motorcycles from Saradha. In parts of the state affected by Naxalism, the government provided ambulances and motorcycles donated by Saradha. Additionally, the Assam BJP leader HimantaBiswaSarma, who was once in the Congress, and the Congress leader and former union minister MatangSinh are allegedly connected to the Group.
- In the Saradha Scam case, in February 2015, the ED questioned RinkiSarma for collecting funds from the Saradha Group to air commercials on her Assamese TV channel. In the investigation, the agency also questioned TMC MP ArpitaGhosh. Over a dozen TMC MLAs and MPs were interrogated by the CBI, and Srinjoy Bose, MadanMitra, and KunalGhosh were taken into custody.
- Former West Bengal DGP and TMC deputy president RajatMajumdar, TMC Youth Congress leader Shankudeb Panda, and MPs Satabdi Roy and Tapas Paul were among those detained. Assamese singer and director SadanandaGogoi, ex-Odisha attorney general Ashok Mohanty, and Mukul Roy, a former close associate of Mamata's who is now with the BJP, were also interrogated in the Saradha Scam case interrogation. After being interrogated by the CBI and having his home investigated, retired Assam DGP Shankar Barua committed suicide.
Legal Proceedings on the Saradha Scam
SudiptoSen is facing more than 98 counts and has already served more than seven years in prison for the Saradha Scam. Even though he admitted guilt, there are currently no indications of how the Saradha Scam case against him is developing. SudiptoSen is working to appear in court as soon as possible. This is because he is aware that, even if found guilty, he will only be sentenced to a maximum of 7 years in prison, which he has already served. He regrettably lacks the Rs. 1.2 crore he would need for bail as the Saradha Scam case continues because the CBI has taken all of his assets.
Mamta Banerjee announced a four-member judicial investigative commission and a USD 70 million relief fund for low-income depositors following the collapse of the Saradha scam. To expedite the investigation of the Saradha Scam case, a special investigation team (SIT) was established. A year was spent looking at it. The probe must be conducted according to a Supreme Court order. West Bengal first disagreed with this choice, but as states like Assam and Tripura followed suit, it submitted the matter to the CBI.
In India, rural areas are home to the bulk of the country's low-income inhabitants. They have two main financial issues, the first of which is finding a secure location to deposit their money. The second type of loan comes from a fair source. A 239-company Ponzi scheme operated via them that was designed to deceive SEBI. SudiptoSen was aware of these issues and chose to use a chit fund to address the first one.
In essence, this was a Ponzi scam masquerading as a chit fund. However, the government has made an effort to address these problems by implementing a tiny savings program. Investors, largely low-income residents of eastern India's Naxal belt, were guaranteed a 50% annual return on their investment, or a return of twice as much after three years. Well-known Bengali figures promoted the program from television, sports, politics, and the film industry. The Group's investments were promoted constantly on Bengali networks. The organization had a tight relationship with the state governments of both Left Front and later TMC.