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  • Category: Miscellaneous

    Frauds in high return investments/Ponzi schemes. Who is responsible, the investor or the Government?

    We have read of the various attractive investment companies shutting down after a few years and swindling the entire funds collected that run into crores. In Bangalore, this month, we have had the IMA group scam, hundreds of crores duped, nearly a lakh customers left in a lurch.

    Many such scams hit the headlines, apart from the investors losing money, the logistical burden on the state resources are huge and cases go on for years. If we analyze the root cause, it often boils down to the greed or temptation of earning more (much above the FD interest rates). Isn't this something like stocks and shares? if you gain you keep it, if you lose, you bear the loss. If knowingly people invest, how can they cry foul when the scamsters run away with the money?

    As far as Ponzi schemes are considered, who should be held responsible? The government authorities for letting these scams flourish with the blessings of the local influential people? The investors who for the want of more returns deposit in such unauthorized schemes? the brains behind the scam for exploiting the desire/greed? the taxpayer for indirectly footing the bill for all the work done by the police/CBI/judiciary for each and every scam?

    Why not have a clear draft/white paper for every state stating that the Government will NOT entertain complaints if such Ponzi schemes go bust?
  • #667656
    All Ponzi schemes are fraudulent and when people get to know that it's a Ponzi scheme they have already lost their money. It's true that people invest in schemes thinking of high returns and if this investment is related to the capital market a warning message is always displayed by saying that return on these investments are dependent on the market and the investors must read all the documents of the scheme thoroughly to understand the risks. I do not know whether any such document is provided to the depositors in those Ponzi schemes. Whatever may be the scheme, any investor must know it fully before investing that how the high return promised is generated. They should never think that their job is over just after paying the cheque/money. The companies who run these Ponzi schemes provide high returns to their previous customers from the money deposited by the new depositors. As long as there is a flow of new depositors somehow they manage to repay their previous depositors. This increases the confidence of the depositors and they keep on reinvesting. People do not care to check the documents minutely when they get a good return in the initial stage. That's the main problem.

    Any company involved in the business of investing public money has to follow some guidelines of the government after obtaining the necessary permission and the depositors/investors must check the authenticity of these companies before investing. The government is responsible in a few of the cases if it is found that the government itself has given permission to such fraudsters by not checking the credentials of the companies. In that case, the government cannot evade its responsibility. Otherwise, if there is no such lacking from the part of the government then the depositors are solely responsible for their loss.


    "Life is easier when you enjoy what you do"

  • #667684
    Mainly the greed the investors are having is the root cause of all these problems. They want high returns in a short period. This is only causing all these worries. It is your money. You should think before believing their words. One thing we should keep in mind is that we shouldn't think that the other party is vey sincere. No one in this world will bring his money and give you. If there is no profit no one do any business. But they do so many advertisements and other gimmicks to attract you. But it is your responsibility to check the credentials of the company. It is you who have to check the terms and conditions. It is you who have to enquire about the company.
    The government will see whether what business is legal or not and they will give the permission. They never advise you to put your money in such places. So there is no point in blaming the government for these issues. Yes. If there is any rule violation you can complain and see that action will be taken against the erring officers or company. But you should satisfy yourself before investing your money in such instruments and organisations.

    always confident

  • #667686
    I would squarely put the blame on the investors. We claim to be so updated about everything with the flourishing media helping us in that regard but still fall into such traps. Call it greed for money or the inherent desire to become rich in an easy way, it is we who are at fault. Why blame the government for everything? When we deposit our money with some fraudsters, do we actually check their background or their credibility? I don't think. The more the offer, the more is the attraction. We come across so many cases of fraud/ cheating on a daily basis but still submit ourselves to the temptation.
    I agree with the author that governments should issue a notification to the effect that no complaints about the loss of money/ property invested in such Ponzi schemes ( which are not licensed or registered) would be entertained.

    'Chickens don't praise their own soup'. - Martinican

  • #667697
    There are many investment avenues like Govt securities, private company fixed deposits, real state, gold, share market, mutual funds, private equity etc. The returns are different in different schemes and risks are also different. In general a high return is always associated with high risk. Investor must go through all these risks before investing in an opportunity.

    I remember when I was in Chennai, there was a reputed gold and diamond shop which used to give 24% return if you keep some money with them and you could take your money whenever you want or convert it into gold or diamond with lucrative gifts as a scheme. This went on for some time and one day we found that the shop was sealed by the police and the owner was arrested for some doubtful business practices.

    So blindly investing has its own repercussions and investment requires a prudent approach. We should not risk our hard earned money in dubious channels.

    Knowledge is power.

  • #668007
    As long as people are there to be fooled, the fraudsters take advantage. People are becoming more greedy. When someone offers interest rate of 30 to 40% per annum on the investment, people blindly go behind them and invest their hard earned money. Everyone know the interest rates prevailing in the banks. How on the earth can anyone offer interest rate of 30% or 40%.

    We should squarely blame the people who have invested in such Ponzi Companies. Despite several reports about such companies cheating public, people come venture to invest in such Companies. This is height of foolishness of the people who have invested in such Companies.

    "If you don’t understand my silence, you will not understand my words"

  • #668011
    All the members have blamed the people for investing in such ponzi schemes & I too agree that in such updated world, where we can collect minor & major information about everything within fraction of second, how do people fall under such companies lucrative offers. We read that everyday new & improved way of scooping is used by such fraudster. People do think before lending or depositing in such schemes but everyone knows that " human wants are never satisfied, & you can say that its want for more. but this is only one side of the coin.
    Now coming to the other side of the coin, We know that to start a new business, the company has to get its registration/sanction done from many authorities which study the purpose of the company & its function. They are given the VAT no# under which they are registered. When we have so much procedures & the best study who confirmed that the company is legal & can start a business. Now if all these are a routine procedure, don't you think , government need to monitor the cash flow of such company & need to have an audit or raid done in order to check the genuinity of the company.
    I don't say, the full fault lies on the government but they too play a role in providing such ponzi companies/schemes to come up & fraud the people. Just printing or advertising " investments are dependent on the market risk the investors must read all the documents of the scheme thoroughly to understand the risks" is not the only responsibility of the government but also monitoring them frequently should also be put into practise.

    “Each day provides its own gifts.” —Marcus Aurelius

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