Rich and famous routinely fall prey to blade companies

Ponzi scams in Bengaluru show a pattern, as they do elsewhere: they offer fantastic returns, deliver the first few years, and suddenly go bust.

Many in Bengaluru, including legendary cricketer Rahul Dravid and well-heeled doctors, are complaining about Vikram Investments, which they say has robbed them of their money. The scam is said to run into Rs 800 crore.

"Such schemes are floated by people with the only motive of making quick money," explains a high-ranking officer with the city police.

Individuals and companies running such schemes are fully aware they can't pay out the returns they are promising. And over the years, many affluent, well-educated people have fallen prey.

"The promoters are usually smooth talkers. They are well-dressed, and understand what the investor is looking for," he says.

Investors don't do background checks. "The greed for more money silences them. When they get high returns, their confidence increases, and they bring more people into the scheme," he says.

Such companies know it is just a matter of time before they shut down.

"The idea of a Ponzi scheme is to run it smartly and efficiently to make a fortune. It takes a lot of intelligence to keep it real and believable. It takes skill to prevent the investor from filing a police complaint," adds the officer.

Once in 12 years

Philips Cherian, chartered accountant, says, "Ponzi scams have always been around and a new one comes up every 12 years."

Public memory is short and people are soon ready to invest in new dubious schemes. "They never stop to wonder where such high profits come from," says Cherian.

Greed drives the business.  "It is like gambling. You put x amount of money and get double in return. This makes the investor happy and drives him to invest more and more."

When the company is unable to provide high returns, the scheme goes bust, he says.

Dreamz Infra India
Sachin Naik with his partners Disha Choudhury and Mandeep Kaur pulled off three major frauds through their firms -- Dreamz Infra India, TGS Construction and Gruha Kalyan. The scam runs into Rs 1,000 crore, police say.

Vini Vinc
Srinivas Shastry aka Vini Vinc Shastry was arrested in October 2005 following complaints against a co-operative society run by him. Police say he had collected about Rs 200 crore from people across the state by promising an annual 150 per cent return on investment.

Spot a scam
Fabulously high returns.
Apartments, expensive items as rewards.
Collateral you can't verify (eg, teak trees).
Anything too good to be true.

Will investors get their money back?
In most cases, the promoters are arrested but investors are unlikely to get their money back, according to a police source.
If a Ponzi company has invested in tangible assets, they can be auctioned and the proceeds distributed among investors. But the legal process takes years.
"Investors mostly don't get their money back because the money doesn't exist. The bottomline is greed and there is no solution to greed," a senior policeman says.

Why the rich fall prey
Etty N, investment expert and market watcher, says investors go by the principle of "money makes money."
"People with excess money don't like to stick to the conservative methods like bank fixed deposits. They are looking for a fast buck," he says.
Ponzi schemes are run on trust and personal rapport. "The company never discloses where it is reinvesting the money. Lay people don't know how money is multiplied. They are only bothered about the end result," he says.

What's a Ponzi scheme?
It is a well-orchestrated investment fraud where the operator generates returns through money paid by new investors, rather than from legitimate business or trading profit. The operation is named after Charles Ponzi, who pulled off a scam in the 1920s by using the principle of 'borrow from Paul to pay Peter.' Ponzi was an Italian-born American financial operator who promised 50 per cent returns every 45 days.

Shattered Dreamz
Roopa Prakash (name changed) invested Rs 10 lakh with Dreamz Infra India Ltd, TGS Construction, in a lakeside property in Madivala.
The price was attractive for the location, and prompted Roopa to invest. She had learnt about the company through a newspaper advertisement.
Her story: "My brother-in-law and I have invested Rs 10 lakh each. It's been more than a year and we haven't got our money back. The company had a good office, and had listed 20 ongoing projects. It was all believable until we found out it was a fake company in December 2016."

Vikram Investments
This is the latest to hit the headlines. Raghavendra Srinath and his associates, including a former sports reporter, are accused of cheating about 800 investors of Rs 350 to Rs 400 crore.

One family, Rs 20 cr
A family of 12 had invested about Rs 20 crore in Vikram Investments.
They were getting 30 per cent every three months for 12 years. A year ago, the payouts stopped.
They were the first to go to the police earlier this month. They were followed by some doctors, and Rahul Dravid.