Ponzi schemes are born every second. They make false claims to systematically plunder gullible people. But why are our regulators and ministries silent?
The ministry of consumer affairs as well as every independent regulator in the country spends tens of crores of rupees on advertisements warning people against scams or telling them to stand up for their rights. Yet, when it comes to the systematic plunder of gullible people through false claims by multi-level marketing schemes (MLMS), every regulator and ministry passes the buck.
In December 2010, Moneylife warned about a dubious investment company called Stockguru India which, in April 2011, ended up duping two lakh investors of Rs1,000 crore. On a minimum investment of Rs11,000, Stockguru offered to pay Rs12,000 in six months and return the principal of Rs10,000 over the next six months (Rs1,000 was a registration charge). In effect, a 120% return per annum. Lokeshwar Dev, its promoter, who claimed to earn these returns through stock trading, is now absconding. The Securities and Exchange Board of India (SEBI) ought to have halted this sham company that wasn’t registered with it. It did nothing, despite our warnings.
It is the same with SpeakAsia (SpeakAsiaonline.com), an online survey company that claims to have enrolled 19 lakh ‘panellists’ and intends to take that number to one crore by December 2011 through multi-level marketing and the promise of extraordinary returns. SpeakAsia claims a Singapore domicile and has no promoters or legal registration in India. It is silencing mainstream media through expensive advertising campaigns, but surely it requires the permission of the Reserve Bank of India (RBI) to transfer funds overseas? We have written to RBI but it remains silent. In the past, RBI passed the buck for regulating dubious MLMS like Gold Quest (another international operation) to the state governments. Dubious deposit schemes proliferating in states like Orissa and West Bengal are collecting thousands of crores and launching TV channels and newspapers. High financial illiteracy and growing incomes make India an ideal market for the proliferation of chain and pyramid marketing frauds. Unfortunately, neither the finance ministry nor its regulators are interested in introducing legislation to ban this menace. Until they do, it is ‘investor beware’!
(This article was first published in the Moneylife magazine edition dated 19 May 2011 that was available on the stands from 5 May 2011.)