First impressions are the most lasting. Sometimes, they could be the most deceptive.
Mohammed Mansoor Khan, the fugitive founder of I Monetary Advisory (IMA), the so-called Islamic investment enterprise that went bust on June 10, went to great lengths to make sure he, his company, his offices and his staff made great first impressions.
So, when a lay Muslim entered the company’s opulent headquarters — IMA Tower on Lady Curzon Road in the heart of Bengaluru — s/he was bowled over by the orderliness and the neatness of the place. But more than anything else, it was the approach and the appearance of the IMA staff that pulled at one’s heartstrings.
Every male employee there wore a crisp kurta-pyjama, complete with a white topi, or the skull cap traditionally worn by Muslims. Almost everyone sported a beard: neat, clean and well-trimmed. The moment you stepped into the second or third floor of IMA Tower, you received packaged water, emblazoned with the IMA logo. The IMA staff were arguably prompt in attending to visitors. No one seemed to have to wait. You would be attended to immediately and your questions answered in the politest manner. These impeccable soft skills, along with an overt display of religiosity, played a central role in the meteoric rise of IMA.
The company’s beginnings were humble. Although it was founded in 2006, few people knew it existed until 2013. In April of that year, IMA placed an advertisement in the Urdu daily
Salar, offering a hard-to-resist opportunity of ‘Halal’ investment. The company said it traded in bullion (gold, silver and other precious metals), diamonds and jewellery and promised monthly returns of 3-5%. Since Islam prohibits all types of interest, many Muslims refrain from investing in traditional savings schemes of the type banks offer. Nor do they participate in futures trading or investments in ‘sin’ industries such as alcohol, tobacco, etc.
Around the same time, Khan approached prominent Ulema, or Muslim religious scholars, in Bengaluru. He took them through his business model and enquired whether it was permissible under Islamic law. Without going into the specifics, he explained that he imported gold from Africa at a 10% discount and sold it in India at a premium. He aspired to expand this “brilliant” idea by taking investments from people and sharing with them the profit/loss as per the Islamic concept of ‘Mudaraba’. Mudaraba is when one individual provides start-up capital to another individual, who runs the enterprise. They share both profit and loss.
Khan said IMA preserved investors’ money in gold and other physical assets. So, even if the business makes losses, the capital would remain safe. The traditional Ulema, having little knowledge of banking or finance, found the idea appealing and were quick to ratify it. Having received endorsements from the Ulema, Khan didn’t care about Islamic finance professionals, some of whom had begun to view IMA’s activities with suspicion.
Among them was Ebad Waqar Momin, a PhD in Islamic Finance from the International Centre for Education in Islamic Finance, Malaysia. Momin, now a principal at Mount Judi, a Bengaluru-based ethical venture capital firm, remembers visiting the IMA offices in 2016 out of inquisitiveness. When he asked an IMA representative about the gold trading and how they made profits, the man showed him a chart with nothing but graphs indicating gold prices. “He said they bought gold when the price went down and sold it when it shot up.” Momin left the IMA offices, convinced that it was a fraudulent company. He explained: “Anyone familiar with gold trading would laugh at the idea. First of all, it’s impossible to trade in any exchange-traded asset class with precision. Further, gold price fluctuations are so feeble that even the most sophisticated trading algorithm cannot detect them with such consistency. In short, you cannot ensure such paybacks by trading in gold in the long run.”
Says Momin: “The idea that you can preserve money in the form of gold and trade with it is absurd. Gold is a dead asset. Unless you use derivatives (in itself not compliant with Shariah) or convert it into cash, it cannot generate a return.” Being a qualified Islamic finance professional, Momin found it appalling that the IMA staff didn’t seem to have any experience in the business of investment, let alone Islamic finance. “They appeared a clueless lot,” he adds.
IMA never solicited the services of TASIS or any Shariah advisory firm, Momin says. TASIS is a Mumbai-based firm that provides Shariah advisory services. Among its offerings is “understanding the sense of a financial transaction or scheme and then to analyse whether the route to the desired objective involves any Shariah-repugnant elements such as interest or excessive uncertainty.” But for IMA, the Ulema’s word was convenient and enough.
Khan also hobnobbed with politicians of all hues, the most prominent being the Congress’ Shivajinagar MLA, R Roshan Baig.
Khan and Baig proved extremely beneficial to each other. IMA was the ultimate cash cow for Baig, funding his every project: from holding Mushaira (a gathering of Urdu poets) to conducting Haj training camps to running the franchise of Baig’s Urdu daily, Siasat.
For IMA, Baig afforded the legitimacy in the eyes of ordinary Muslims that it sought. Soon, tacit endorsement came from even the likes of former chief minister Siddaramaiah, his successor HD Kumaraswamy and Deputy Chief Minister G Parameshwara.
IMA donated generously to madrasas and adopted schools, the most prominent being the Government VKO School in Shivajinagar. The company also donated groceries to the indigent and funded the education of poor students. Khan’s philanthropy made IMA a household name.
For the undiscerning Muslim, everything about IMA was hunky-dory and its schemes a godsend. Word spread quickly. Soon, there was a flood of applications. IMA’s coffers swelled so much that the company opened a glitzy jewellery store. The store offered incredible deals. No wastage or stone charges and a 50% discount on making charges. During sales, the making charge was waived. A buyer paid only for the gold. Another jewellery store opened in Jayanagar the next year.
Khan also opened a pharmacy chain, Frontline Pharma. Last year, IMA opened Frontline Super Specialty Hospital in Shivajinagar. Mulberry Greens, IMA’s grocery business arm, opened stores in BTM Layout and Banaswadi. All this while, Khan was on a spree acquiring property and developing real estate.
The first signs of trouble appeared in early 2017 when income tax officials raided IMA, suspecting it of money laundering following demonetisation. Investors panicked but Khan held his nerve and paid off the dissenting voices, including the head of a Kannada news channel.
Azmathullah Bellary, a retired professor of economics whose family invested Rs 6.5 lakh, said what set apart IMA was the prompt payment of the monthly dividend. “They never delayed it,” he said. Investors felt reassured and didn’t pull the plug.
Things came to a head in November 2018 when the Revenue Department issued public notices in newspapers, warning of seizing IMA’s properties. But it took another five months before IMA’s troubles came out in the open. April 2019 saw IMA paying a dividend of just 1%. Panicky investors started applying for withdrawal of their money. IMA talked of a “temporary slowdown” and promised all was well.
Some investors were paid the dividend in May. Others were promised the same by June 5. Then IMA declared Eid holidays until June 9. Even then, some investors received the message that their dividend was on the way. “Dear IMA Client, your April Payout has been transferred to your registered bank account, Subject to bank clearance, Regards IMA Team,” read the message. But June 10 dawned with the news of Khan’s great escape.