As investors begin to come to terms with a Ponzi scheme that is estimated to have duped hundreds of thousands of Indian investors out of billions of dollars, details are beginning to emerge about the scheme and its mastermind, while suicides continue to mount in a grim reminder of the true human toll of Ponzi schemes. In a script perhaps better suited for a Hollywood movie, there are tales of bribes paid to politicians, a factory where workers pretended to work to impress potential investors, and a mastermind so opposed to having his picture taken that his website simply features a picture of an empty chair in his stead. Now, two weeks after the scheme unraveled, many are trying to piece together what is likely the largest scam in India's history.
Shockwaves began emanating out of India in late April that Sudipta Sen, the man behind an Indian conglomerate known as the Saradha Group, was missing amid rumors of financial irregularities and increased scrutiny from India's Securities and Exchange Board of India ("SEBI"). Sen's Saradha Group operated a series of companies that offered 'depositors' the ability to invest in a wide range of ventures ranging from real estate to motor vehicles to even bio gas. Investors were offered the ability to make short-term investments with promised returns based on the duration.
Sen was able to promote his investments to the masses through a wide range of sources, including an extensive presence in television and newspapers and connections to members of one of the leading Indian political parties. Sen also employed an extensive network of approximately 300,000 agents that were paid commissions to recruit new investors into the scheme. In total, it is estimated that hundreds of thousands of Indian investors may have entrusted billions of dollars to Sen's many ventures.
However, as details have emerged from India, it is now becoming increasingly apparent that Sen's massive business empire may have been nothing more than a devastating Ponzi scheme. As the Hindustan Times reports, Sen appears to have taken elaborate measures to attract investors to his scheme - even creating a full motorcycle factory spanning nearly 8 acres and manned by 150 employees who did little more than perform for busloads of potential investors. As the article relates,
For two years since January 2011, employees at the Saradha group-owned Global Automobiles were forced to pose in front of the conveyor belt to give the impression that the plant was operating in full swing.
They pretended to work whenever truckloads and busloads of prospective depositors of Saradha Realty visited the plant for a first-hand check before investing.
Just before the depositors reached the factory, the workers would get dressed in their blue uniforms, rush to the shed where the assembling of motorbikes used to be done and pose in front of the conveyor belt as if they were really assembling the twowheelers.
They also used to turn on the fountains inside the campus. The prospective investors had no way of doubting that the plant had actually stopped production in January 2011.
There has also been an immense amount of scrutiny directed towards the ruling Trinamool Congress that has been linked to Sen. Some politicians had extensive ties to Sen's businesses, including Kunal Goosh, a member of the Trinamool Congress Parliament who also served as head of Sen's media operations. As the Hindu BusinessLine has reported, Sen filed an 18-page complaint letter wth the Central Bureau of Investigation shortly before he fled, accusing at least two members of Parliament for receiving bribes in return for protecting him from potential prosecution. Additionally, Chief Minister Mamata Banerjee has made several comments that have been ill-received by investors, including admonishing victims that "what's gone is gone."
Minister Banerjee has since proposed the establishment of a relief fund that would provide $9.2 million for defrauded investors, that plan too has sparked a backlash - this time from Banerjee's announcement that 30% of the fund would be collected by increasing cigarette taxes. Said Banerjee,
"Smoke a little more to help the investors,"
Finally, in a grim reminder of the true devastation of Ponzi schemes, there have been multiple reports of suicides linked to the scheme. Two victims are believed to have committed suicide in the immediate aftermath, with one woman setting herself on fire while another man hung himself. Additionally, another deliberately drank poison and remains in critical condition. Recent news reports out of West Bengal suggest that two more individuals committed suicide within the past several days, including the father of an individual who served as a commission agent for the scheme who was being heckled by investors at his house. According to the Hindustan Times, this brings the total number of deaths attributable to the scheme to ten - with seemingly no end in sight.
Sen remains in police custody, and recent news reports have indicated he is cooperating with authorities.
superyacht, aptly named 'Bull', is back on the market and can be had for $5.5 million - less than the notorious fraudster himself paid. The 88-foot Arno Leopard, which was built to Madoff's exact specifications, is being sold by an international yacht broker acting for the liquidator for Madoff Securities International, Ltd., which was the title of Madoff's London operations. Madoff had purchased the yacht in April 2007 for approximately $6 million after negotiating a $1 million discount for, ironically, paying in cash for the yacht. The yacht is currently being stored in Gibraltar, after having been moved from France due to a legal dispute between liquidators and a French creditor.