Salah Uddin Shoaib Choudhury
If anyone comes up and promises to double someone’s money in less than a year or promises a return on investment of 30 percent a month, best to turn around and walk away. It will save one his or her hard-earned money. That surely is a financial scam.
A typical pyramid scheme is where participants make money solely by recruiting new participants who will invest. The mastermind promises a high return in a short period of time, and there is no product or service actually sold as the main focus is the recruitment of new investors.
A Ponzi scheme (named after Charles Ponzi, who victimized investors in the 1920s with a postage stamp speculation scam) is similar in that it also pays high returns to existing investors with money collected from new investors.
In June 2019, the Court of Appeals (CA) in the Philippines had ordered freezing Kapa-Community Ministry International’s bank accounts over allegations that it operated the largest investment scam in the recent history of the country since the Aman Futures Group pyramid scam. The CA said it found probable cause that the organization was involved in unlawful activity. Authorities found Kapa recruiting members to donate a minimum amount of P10,000 in exchange for a 30 percent monthly return for life. This fraudulent Ponzi scheme is based in Mindanao province.
Security and Exchange Commission’s Chairman Emilio Aquino said, that Kapa was engaged in a Ponzi scheme, an investment program that offers ridiculously high returns and pays investors through the capital contributed by later investors.
Aquino said Kapa will eventually run out of cash, with the last investors to suffer the most.
“As sure as the sun will rise in the east tomorrow, they will never be able to sustain that, especially with a 30% return per month for life,” the SEC chairman said.
There are other similar scams victimizing people in the provinces. Following the crackdown on Kapa, the SEC also ran after a few more groups running illegal investment schemes. These were Rigen Marketing, Organico Agribusiness Ventures Corp., Ada Farm Agriventures, Ever Arm Any Marketing and Alabel-Maasim Credit Cooperative, MGA Business Enterprises, Coophub Multimedia Services, Jogle Innovative Marketing, Global Dream Zion, Grappler, Sherpan, BCT Marketing/BCT Motorcycle and Car Trading, RTM/RTM Pharmacy and General Merchandise, Diamond Marketing, Fusion Marketing, FMarket, Cirfund, Vibearn, Onepro, BCC/BCC Cosmetics Trading, Unlishop Compensation Plan Marketing, VUCC, Bitrain, TCOIN, Crowd Royals, Ada Farm Agri Venture, Nermie Marketing/Nermie Health and Beauty Products Trading.
These companies encouraged the public to invest money in various products, promising hefty monthly returns ranging from 35 percent to 500 percent.
According to SEC, the schemes by these companies include offering investment contracts in Facebook pages or secret Facebook groups and chatroom, YouTube etc; offering unrealistic return on investments ranging from 10% to 400% per month; requiring investors to pay their initial investments by depositing their money to a specific bank account, Coins.Ph account, GCash, through a money remittance company and through face-to-payment with one of the entity’s agents, and asking investor to send through a private message a copy of the proof of the deposit to the offeror who shall send his confirmation after validation; delivering payouts through similar methods; and claiming that they invest their funds in forex, bitcoin and other cryptocurrencies to justify their earning capacity.
Despite such actions taken against those Ponzi scheme rackets in the Philippines, there are plenty of such rackets still operating and most disturbing fact is, some of the rackets are targeting foreigners and tourists through their agents in Manila and other cities.
The biggest-ever Ponzi scheme in South Asia were Sahara Group, Destiny Group, Sharadah and Rosevalley, which had cheated hundreds of millions of people by offering them the false hope of huge profit against investment. Sahara Group in India grew to such a huge extent that it had its own airline company, television channel, newspaper, hotels (even in the United States and Britain) etc., creating a false image of being a legitimate multi-diversified enterprise.
On 26 February 2014, the Supreme Court of India ordered the detention of Subrata Roy, the mastermind of Sahara Group for failing to appear before it in connection with a legal dispute with Market Regulator – SEBI. In a statement after the arrest, his lawyer said Roy’s 92-year-old mother was in poor health and needed “her eldest son” by her side, and hence he failed to appear at the court. As he failed to appear in the court during the ongoing legal battle, Roy was held in custody in the Tihar Jail, Delhi and is now out on parole since May 2016. Sahara was allowed to sell a part of its assets in India to raise part of the money in question.
Initially, he was granted interim bail by Supreme Court of India on 26 March 2014 on condition of depositing Rs 10,000 crore with the market regulator SEBI. His deposit of 10,000 crore has not been made. As of August 2014, Roy was trying to sell some of his hotel properties to raise enough money. Roy was granted his first bail in May 2017 for four weeks to perform the last rites for his deceased mother, later extended to 24 October. Since then he has been successful in getting his bail extended on various grounds. As of 31 January 2019, Sahara still had to pay Rs 10,621 crore to meet its total liability.
Sahara claims that the company’s fundamentals are intact and assets are greater than the liabilities, and so far has deposited more than 20,000 crores which will in due course of justice come back to Sahara India as it has already repaid 95 percent of its investors, the Securities And Exchange Board of India (SEBI) has repaid only Rs 64 crore to the investors since 2012. It is also been reported that Sahara has paid Rs 725.97 crore as TDS (tax deducted at source) to the Income Tax Departments on the interest which along with investment was repaid to 95 percent of the investors, between 2009-10 and 2012-13. The income tax authorities had found that the beneficiary investors were existent and accordingly confirmed the repayments made in those particular years. One of Sahara’s arguments in the apex court revolves around the fact that if one government body has found investors, why can’t the other.
Roy was named among the 10 Most Powerful People of India in 2012 by India Today. In 2004, Sahara group was termed by Time magazine as ‘the second largest employer in India’ after Indian Railways.
Salah Uddin Shoaib Choudhury is the editor of Blitz. Follow him on Twitter at Salah_Shoaib