Ever heard of Ponzi Schemes? This ubiquitous word that represents any scam or fraudulent activity has a history dating back to the summer of 1920s when Charles Ponzi carried it out. He became well known throughout the United States because of the huge amount of money that he took in. However, the first recorded instances of this sort of investment scam can be traced back to the mid-to-late 1800s and since then there have been thousands of prominent ponzi schemes duped billions of investors’ money.

There have been several Ponzi schemes, but one scheme that has recently left many investors in the lurch lately is, the IMA PONZI SCHEME. Founded in 2013 by Mohammad Mansoor Khan, I Monetary Advisory Private Ltd. (IMA), was an Islamic investment company headquartered in Bangalore. IMA was a successor of  Iliyas-Mansoor Advisory co-founded in 2006 by Khan and his partner named Iliyas, which failed terribly in 2008 and dissolved but was unknown to common people.

 Khan restricted the scheme to practising Muslims only. He promised a return of 7% to 8% through the investment in billions and roped in influential people of Muslim community to speak for him. They were deluded in pretext of being the continued successor of a successful company having years’ of standing and promised that hospitals and schools will be built with the corpus. The employees followed pious practices to maintain the belief. Donations were made and investors were gifted Holy Quran. Returns yielded well initially around 9% to 5%. Consequently IMA Group diversified into other segments including jewellery (IMA Jewellers), real estate (IMA Builders and Developers), bullion trading (IMA Bullion and Trading) and IMA Gold, groceries (Mulberry Greens), pharmacy (Frontline Pharma), hospitals (Frontline Multispeciality Hospital), and publishing.

The company was highlighted in 2015 owing to the massive discounts offered by IMA Jewels on purchases of gold, but it got saved. The Reserve Bank of India (RBI) suspected it of being a Ponzi scheme and tipped off the Revenue Department. Somehow the latter couldn’t pull off any legal actions against IMA. The case came to attention when Khan fled to Dubai, and shot a video message saying that he was committing suicide because of corruption in the state and central governments. Revenue Department investigated Mansoor Khan in early 2017 with searches of his properties and non-filing of ITR returns. After 3-months of chasing, he was arrested on 21 July on his arrival. This collapse is estimated to have costed 4000 crore (USD 560 million).

As said by Investopedia, “A Ponzi scheme is an investment fraud in which clients are promised a large profit at little to no risk.” Such schemes seem lucrative and safe to investors making them the most apt investment opportunity. But the question is how to see the red flags and avoid being tricked? We’re here to tell you how not to fall prey to one.

· If it’s too good to be true! That should be the primary red flag. Ensure you investigate further before putting your money there.

· Consistent returns should be a good thing, right? Not always. Returns on any investment fluctuate based on the market condition.

· You aren’t given authentic paperwork or if the scheme incorporates a complex structure that isn’t being explained to you.

· If the scheme doesn’t let you withdraw your principal amount or insists you to stay invested for higher returns, it could be an indication of scam.

· Always check with the company if it is registered with a financial regulator. A company registered with the Registrar of Company does not mean it’s authentic. The investment scheme has to be registered under the RBI, SEBI, IRDAI or PFRDA. You can check on RBI’s Sachet website.

Most often, Ponzi schemes thrive over a person’s greed to make a quick buck. So always remember, if it sounds too good to be true, then it’s most likely a scam!

---Aarushi Sharma

(Gargi College)

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