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Ponzi scheme victims can get money back

New provision in Prevention of Money Laundering Act will help expedite recovery of money and offer relief to 6 crore affected investors

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It is good news for thousands of investors who have either lost or locked their money into ponzi schemes across the country. A provision under the Prevention of Money Laundering Act (PMLA) relating to such schemes, announced in the Finance Bill passed on Thursday, provides restitution of duped investors' assets from attached properties of offenders.

"The amendments in the PMLA will enable for the repayment of assets to those investors whose assets and monies have been fraudulently cheated away by chit fund or ponzi schemes. This will bring huge relief to SpeakAsia and Saradha group scam investors who has lost thousands of crores of money," a top Enforcement Directorate (ED) official told dna.

A financial services expert said it would help agencies involved in the probe and prosecution of ponzi cases to swiftly recover funds held up in such schemes that involve frauds worth over Rs 80,000 crore in India.

"It (the provision under the PMLA for Ponzi schemes) appears to be an express act provision that legislators have passed to give incremental power to agencies for attaching the assets and eventually confiscating them. The intention is to swiftly recover the money to safeguard the interest of people but it has to be seen whether it is adequately effective in doing so," he said.

From the ponzi scheme of Subrata Roy's Sahara group to Saradha, Rose Valley, Pearl Scam and others, these disguised investment plans have reportedly duped over six crore gullible investors across the country over the last few years.

Ponzi schemes, which are also referred to as chit funds, are fraudulent investments that entice non-suspecting investors by offering attractive returns on their money, with no intention of keeping their commitments. "Such schemes are designed to convince the public to place their money into a fraudulent investment. Once the scam artist feels that enough money has been collected, he disappears - taking all the money with him."

Shaktikanta Das, secretary in the department of revenue of finance ministry, said, the provision provided under the PMLA was very important in the context of rising frauds being committed under ponzi schemes. "It (restitution) is very important because when there is a ponzi scheme, the ED (enforcement directorate) attaches the property that will eventually lead to its confiscation," he said.

He said it would be beneficial to the "poor and small investors" who have lost their money by getting carried away by advertisements of fraudulent investors promising "handsome returns." Das said guidelines and the rules of the provision would be spelt out in due course of time. He said the restitution activities would be done under court supervision and as per its orders.

Recently, the Supreme Court (SC) had said it was monitoring CBI probe into 243 cases relating to Ponzi schemes in the eastern states of West Bengal, Assam and Tripura and was not in favour of allowing the central investigating agency to drop cases involving smaller amounts as it would obstruct their in-depth probe that could lead bigger offenders in such cases.

—with inputs from Shrimi Choudhary

Money Trail

SpeakAsia

So far, ED has attached over Rs 101 crore worth of bank balance in connection with its money laundering probe in the SpeakAsia online marketing scam case. The central probe agency had registered a criminal case against the firm, its officials and few others in 2012 under the provisions of the Prevention of Money Laundering Act (PMLA). "The attached assets are bank balances in the accounts held by the firm and others. The agency considers them the proceeds of crime. The Singapore-based firm is being probed for allegedly defrauding about Rs 700 crore worth funds of investors. The case came to light in 2011 when the Mumbai crime branch registered a criminal case against the group.

Saradha Scam

ED, which is also probing the money trail in the Saradha ponzi scam has attached properties worth Rs 1500 crore. These properties, held in the name of Saradha group chief Sudipto Sen, are large pieces of land at Bishnupur in Malda (including an orchard). Claiming that this was a "big achievement" of ED, the official said the total value of attached properties would cross Rs 1500 crore, which was substantial. According to estimates, the total money raised by Saradha Group was about Rs 2500 crore, out of which Rs 541 crore had been returned to the depositors.

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