Financial shockwaves are rippling throughout India as authorities announced they have uncovered a massive Ponzi scheme that appears to have taken in over $3 billion from thousands of investors. Authorities announced they had detained Sudipta Sen, the man behind a conglomerate of companies operating under the Saradha Group name, who is to remain in custody for at least the next 14 days. If true, the scheme would be not only one of the largest schemes in India, but would rank as one of the largest in history. The effects of the scheme are expected to be widespread due to the large number of victims, many of whom rank among India's lower class. Indeed, two individuals have already committed suicide, and a third that willfully ingested poison is believed to be in critical condition.
According to authorities, Sen's Saradha Group operated a series of companies that dabbled in real estate, motor vehicles, and even bio gas. Investors were solicited to make varying short-term investments that promised above-average returns. One company, Saradha Realty, offered investors the ability to invest for a varying range of time, with the option to receive an allotment of land or a refund at the maturity of that investment along with the promised interest. Depending on the amount invested, each investor was promised returns ranging from 12% to 24%.
Investors were solicited through a series of advertising, including a heavy presence in television and print media. The editor and chief executive of the Saradha Group's media business also had significant ties to one of the leading Indian political parties, which also served to lend an air of legitimacy to the venture. In addition, an extensive network of agents was also used to solicit investors in return for commissions. Based on these efforts, it is believed that over $3 billion was raised from a large amount of investors - many of which were poor investors who entrusted their savings to the scheme.
The mastermind, Sen, was arrested earlier this week after a brief stint on the lam. However, authorities were able to locate him after Sen reportedly took little effort to conceal himself, staying at expensive hotels in highly-populated areas.
According to one source, the Saradha Group is said to have been under investigation by the Securities and Exchange Board of India ("SEBI") since June 2010. However, the Saradha Group is said to have buried SEBI with a flood of documents in order to stymie the investigation, which included the submission of 240 cartons of documents in 2012 alone. After this strategy was successful in delaying the investigation, SEBI ordered the production of information in excel spreadsheets, which soon lead to the production of beneficial information. However, by this time the Saradha Group had collapsed.
Authorities have instituted an action in the Calcutta High Court asking for the appointment of a receiver to preserve assets and begin the process of returning funds to investors.