Ponzi Paradise

Regardless of the robust security and surveillance systems in place, Kashmir has emerged as a fraud-abundant territory. Almost every season, frauds innovate their style of cheating. The latest, nicknamed Paisa Double scam, involved a Chennai duo whose now-blocked company took money from people with a promise of impressive returns and then silently fled, reports Masood Hussain

Kashmir is nothing new to fraud. Annually, it incurs significant financial losses due to both online and offline fraudulent activities. However, the one that hit the Vale last week is perhaps the mother of all frauds that were reported from Kashmir in the last few years.

Two Tamil Nadu residents registered a private limited company in Jammu on July 20, 2023. The year is yet to close and they have reportedly raised Rs 69 crore, closed its offices and fled. Police investigating the case have located Rs 14 crore transactions, so far. They expect the figure will change once the people come up with details.  Interestingly, the whistle-blower was not the tech-savvy system in place or a hyperactive governance structure but a blogger operating from a distant south Kashmir village. Strangely, the shady company had its footprints in north Kashmir and parts of Srinagar.

“I presume the fraudsters had a proper plan to make a specific amount within a year or maybe less but the leak led them to escape,” one company affairs expert, said. “Seemingly they have fled in such a haste that they left telltale traces of their crime behind, which now police are looking into.”

A Survey Company

Registered at Channi Himmat in Jammu, as a private non-government company with a paid-up capital of Rs 10 lakh, it has two directors – Ramesh Keerthi and Manickam Mariyadoss. A resident of Thanjavur in Tamil Nadu, Mariyadoss’s Facebook page – that has very scant information, claims he has studied at IIT Madras, went to Delhi Charter School, married in April and lives in Srinagar. It has a photograph of a devta that he has uploaded as his feature image.

Ramesh Keerthi, the other director lives in Coimbatore, Tamil Nadu and has not left any information on any of his social media handles.

Open-source information suggests the company was “involved in activities such as architecture and engineering activities, technical testing and analysis.” However, Haamid Bukahri, who is the Registrar of Companies in Jammu and Kashmir said, the purpose was differently stated in the records his office has.

“They had submitted their area of activities as renting of machinery and equipment without operators and personal and house-holding goods,” Bukhari said. “The details that are appearing in the media about their activities are not mentioned anywhere. It is nowhere written that they will be seeking funds and paying people better returns. It is completely illegal.”

Interestingly, Curative Survey was incorporated as a proprietorship firm on October 22, 2022, with its registered office located in Chennai, Tamil Nadu. The activity of this company was said to be “information service activities” and “other information service activities”.

Are the two entities the same is not known? There is no information about the Curative Service Chennai directors at all. However, employees who worked for the one that operated from Jammu said they were getting all directions from Chennai.

Interestingly, the website of the company stopped operating within hours after the Jammu and Kashmir Police sealed their office at Karan Nagar in Srinagar. Their cell phones also went dumb. They were operating three bank accounts within a range of two square kilometres in Jammu – Yes Bank Gandhi Nagar Jammu, HDFC Marble Market Jammu, and ICICI Channi Himmat Jammu. All three accounts have been seized by the Jammu and Kashmir Police. One banker said the amount that is left with them is Rs 55,000 only. “Most of the transactions were taking place with a particular one,” he said, offering no details. Sleuths investigating the scam said the company managers have kept very minimal accounts in the three bank accounts which stand frozen now.

The Modus Operandi

The company had a basic Ponzi-style operation. It would register members for Rs 5000 fee and give cuts from this amount to the older members and the chain was growing. The “employees” were supposed to do a basic “survey” to entitle them to fortnightly payouts.

As the senior members, who got into the chain early, started getting their payouts in time, they felt encouraged to reinvest and in certain cases open multiple accounts. Reports appearing in the media suggest that its employees would reinvest their salaries in the systems they were operating for their masters.

Some company members who protested against the fraud said they used to deposit Rs 5000 as a security deposit every 15 months. In response, the members used to review various products which would fetch them money. Against the deposited sum, people used to receive Rs 3000 in return per month. After many people made good money, those joining the chain last month started booking losses. The routine 15 questions they were getting every day stopped. As they visited the company offices, they found them locked and then the whistleblower Nafi Javed, a YouTuber gave the details that sent everybody in shock. The company was running offices in Jammu, Srinagar, Pattan, and Sangrama.

Survey Companies have mushroomed in the last few years. They are paying either for responding to some questions about a company or a product or they seek higher-star ranking for certain products to enable the manufacturer to improve its star ranking on social media. Tragically, it is not required that one knows the product or not.

Though the company was claiming that they were investing in making some wellness and cosmetic products, it is yet to be established. Interestingly, the company is also not a member of the Indian Direct Selling Association (IDSA), an association of product manufacturers who sell directly to the consumer.

Ponzi schemes are fraud money-minting tools envisaging the creation of a long chain of “members” whose entry fee is divided between the organising team and the members. It is a cheat taking his every victim as his partner. The fraud eventually is exposed when the new membership dries up.

What is enigmatic is that the company had no authorisation for doing what it was caught doing in Kashmir. “In the case of non-banking finance companies, the system requires additional compliances in comparison to non-banking companies,” one expert said. “Usually such schemes require formal permission from the banking regulator, the Reserve Bank of India (RBI) and Security and Exchange Board of India (SEBI), which did not exist in this case.”

“The police are investigating the case and they have registered the FIR,” Bukhari said. “We will be collaborating with them. We may even write to the financial intelligence unit for further investigations.” The Cyber Police in Srinagar have registered FIR 39/2023 under sections 66D of the IT Act and 429 of the IPC. They have raided various places as well. Police have summoned as many as 20 individuals for investigations and most of them are the company employees, some of whom have also been duped. It is not known if either of the two directors of the company has been located.

Interestingly, Bukhari pointed out that they might have gotten some inkling of the operations of the company once they would file their Income Tax returns. “Since it happened almost half a year ahead of the due date of return filing, we had no idea,” he admitted.

An expert in company affairs said that the silence of the three banks is also enigmatic. “Did they not see the documents and if they did not why did not they flag the issue when huge transactions were taking place,” the expert, who wishes not to be named, said. “The company did not park its funds either with the JK Bank or with the State Bank of India. It went to three private banks.” Reports appearing in the media said the company was filing its GST regularly.

Police have raided various places, seized the offices and claimed to have retrieved some gadgets and records. It is too early to offer an idea if they have succeeded in catching any of the directors of the company. Nobody knows where they are right now.

Nothing New

Off late, Kashmir has remained a fraud-abundant space. On December 15, 2023, barely days before the paisa-double scam hit Kashmir, the Jammu and Kashmir Police filed a 382-page charge sheet in court against two women constables, Nirmal Kour Saini and Arti Sharma, for orchestrating a chit fund scam amounting to Rs 1.87 crore.

The two ‘smart’ women had obtained one lakh rupees each from each complainant, falsely pledging a monthly interest of Rs 5,000. The accused, in collaboration with her husband and another woman constable, Arti Sharma, illicitly amassed cash and gold from various sources, depositing the funds with a finance company and the gold with a bank for personal use. The total misappropriation amounted to Rs 1.50 crore and approximately 300 grams of gold.

Besides, the accused had expanded their activities by engaging in the business of electronic gadgets and furniture items at the battalion headquarters to gain the trust of unsuspecting investors. The whistle blower in this case was the commandant of the particular battalion.

Chit funds are another financial tool envisaging members of a group contributing equal amounts for a specific time with all collections going to one member at a time. Once the circle completes, the chit-fund season concludes. Usually practised by businesses, this offers them interest-free capital at very low instalments (monthly or weekly or even daily membership fee). Normally, members of the group are known to each other and the deposits are small amounts.

Kashmir Valley Finance

Barely a month back the Jammu and Kashmir Police arrested Bashir Ahmed Mir of Kathpora, Kulgam, on the outskirts of Jammu city, who was evading his arrest for 22 years. His story is more interesting.

On November 26, 1990, he launched a Non-Banking Finance Company – Kashmir Valley Finance and Investment Ltd. With banks off the scene and the JK Bank still living in the shadows, the company opened a chain of offices across Kashmir and appointed several people as its employees.

It would accept savings with a promise of better returns. It continued for many years and when the investors started seeking their funds back, the crisis took off. By then the banks had resumed their operations and a network was around. Police registered a case and the investigations started. On November 17, 2003, the Crime Branch served challans against three top officials of the company including the Managing Director, Manzoor Ahmed Shah, and Directors Bashir Ahmed Mir and Munawar Mir. The challans were produced in the court of the Chief Judicial Magistrate, with the Crime Branch accusing them of duping depositors of Rs 50 lakh in Jammu and Kashmir. The complaint, filed by Zarifa Parveen and Bharat Bhushan of Jammu, alleged that the company had promised a 24 per cent interest per annum, but upon maturity, officials were nowhere to be found, leading to a revelation during investigations that the company had duped innocent persons of Rs 49,48,881.

The current status of the case is that the High Court had passed orders as early as 2001 to take over the properties, which the company owns, sell them in the open market and pay the investors accordingly. The court direction remained unimplemented for all these years as the Ministry of Company Affairs lacked adequate staff in Jammu and Kashmir.

“We have taken possession of the properties that the company had,” Haamid Bukhari revealed. “The Company has claimed that it has landed properties at Pahalgam, Shilvat in Sumbal and Kandi Kupwara. The property at Sumbal and Kupwara are in dispute but not the one in Pahalgam.”

However, the property is yet to be sold. “We have applied to the High Court for permission because we have to go for e-auctioning and anybody across the country can purchase slightly more than 10 kanals of land in Pahalgam,” Bukhari said. “The total liability of the company is six crore rupees and I believe we will sell it at a much better cost and pay the depositors accordingly.”

In Jammu, several people are busy in a protracted legal battle against Debabrata Ghatak, Mohit Sircor, and Chandra Kant Parasrampuria, all residents of West Bengal and Directors of Janpriya Finance Investment Company since 2014. The petitioners including Balkar Singh have alleged that the finance company duped innocent people of Rs 6.25 crore. Though the division bench has passed the direction of recovering the money from the company, it was not immediately known if it has been done or not.