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Ponzi and Sons, Unlimited

Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi, or Charles Ponzi, only wanted to give “them (his victims) the best show that was ever staged... It was easily worth the fifteen million bucks to watch me put the thing over”. Sanjib Kr Baruah and Gaurav Choudhury report.

delhi Updated: May 20, 2013 02:45 IST

Carlo Pietro Giovanni Guglielmo Tebaldo Ponzi, or Charles Ponzi, only wanted to give “them (his victims) the best show that was ever staged... It was easily worth the fifteen million bucks to watch me put the thing over”.

But he could never imagine in the 1940s that his show would lure many others in as distant a land as India more than even six decades later. His successors range from the home-grown Sudipta Sens of the Saradha fame to foreign operators.

What actually is the Ponzi scheme? He promised a 50% profit in 45 days or even a 100% profit in 90 days by buying discounted postal coupons — much in use in post-World War I Europe — and redeeming them at face value in the US.

There was nothing illegal about trading in postal coupons. Ponzi could have made a reasonable amount of money in this trade. But he took an innovative route, instead. He paid the early investors using the money collected from the later ones and continued the cycle till there was suspicion over his business practices.

His Indian successors follow more or less the same model, using the real estate, hospitality and entertainment sectors as the lure. But the foreign outfits that came in from the US, Malaysia, Singapore and Bangladesh, had an easier escape route — the Net.

“As such no physical data is retrievable from them except those stored electronically in the servers maintained by the operators. And such data cannot be accessed,” a top government source told HT.

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He said that at a recent inter-departmental meeting, the Serious Frauds Investigations Office alerted about a US-based operator. But by the time information could be obtained and passed on to state governments, “the money was taken out of India and lost for good”.

Here are some past instances: Singapore-based SpeakAsia, operating mainly out of Mumbai, collected R2,400 crore — partly online — from about 2 million Indians before it went bust a year ago.

The scheme: Investors had to join as members of an e-survey team for various products and services after paying an initial fee. The returns were in proportion to the number of surveys the members carried out.

Unipay2U, a Malaysia-based gold trading outfit, which also operated out of Mumbai, collected deposits and offered fixed returns of as high as 23% a month for 10 months. Now, the Karnataka and Kerala governments are probing it, following several complaints of cheating.

Recently, some citizens of Bangladesh have been found to be operating for the Falkon group of companies in Silvassa and Dadra Nagar Haveli, off the Gujarat coast. Falkon promises to double money in five years.

To evade the authorities, it advertises that its schemes are available “only for friends, relatives, workers”, but it actually collects funds from the public, a top government source told HT. Falkon is now on the radar of governmental agencies.

But there is no single central agency to deal with such cases. While the Central Economic Intelligence Bureau had been demanding a specialised central agency, the finance ministry’s department of financial services (DFS) turned it down on May 31, 2012, saying the states were “adequately empowered” to tackle the issue.

The official said even in the case of Saradha, various agencies noticed illegal practices, but no action was taken because of the lack of coordination and jurisdictional issues.