Saradha Group ran ponzi schemes, says SFIO report A govt release said SFIO report will be shared with the concerned state governments and the CBI

The Saradha group of companies, their promoters, directors and managerial personnel have been found to be guilty on many counts for violation of various provisions of the Companies Act, 1956.

 New Delhi/Kolkata: The Serious Fraud Investigation Office (SFIO) has found that investment schemes run by Saradha Group companies were ponzi schemes, where the primary source of payments to subscribers were collections made from new members rather than income from investments.

After completing investigations into 14 firms of the Saradha Group, SFIO found these companies had illegally collected deposits and were guilty of numerous other violations, the corporate affairs ministry said in a statement on Monday. SFIO operates under the ministry. The corporate affairs ministry will now proceed with prosecution in a magisterial court since the violations are criminal offences.

SFIO’s report has been sent to the concerned state governments and the Central Bureau of Investigation (CBI) and market regulator Securities and Exchange Board of India (Sebi), corporate affairs secretary Naved Masood said over the phone. West Bengal and Odisha had been investigating the matter till it was transferred to the Central Bureau of Investigation (CBI) in May. SFIO’s report into the multi-crore Saradha chit fund scam was likely to reveal a clear money trail, Mint reported on 25 June.

SFIO had found verifiable trails of how funds were funnelled into and out of a central pool on a daily basis and that money raised from investors was diverted to a complex web of companies at the end of every day for purposes other than those for which it was intended, Mint’s report had said. The forensic unit of SFIO had traced the money trail from the computer servers of the Saradha Group. Masood on Monday confirmed these details. “Yes, this was indeed the modus operandi,” he said, but declined to put a figure on the scale of the fraud. “It was not the purpose of the investigation to ascertain the quantum of the scam,” he said. “It was about what company laws were violated.”

From around 2009-10, a large number of financial enterprises started ponzi schemes in West Bengal to take advantage of the high savings propensity among the people. Among them, the Saradha Group gained prominence because of the patronage it appeared to receive from Trinamool Congress leaders. It also launched or bought into several media organizations. It has recently been alleged by Kunal Ghosh, former chief executive of the Saradha Group’s media ventures, that West Bengal chief minister Mamata Banerjee was the biggest beneficiary of the Saradha Group’s diverse operations, although the Trinamool Congress leader has vehemently denied such allegations, saying that neither she nor her party took a penny from it.

Ghosh, who was arrested by the Kolkata police in November last year and has spent almost a year in detention, is a Rajya Sabha member nominated by the Trinamool Congress. He has since been ousted from the party. The Saradha Group was the first major financial enterprise that ran aground. In February last year, its founder and chairman Sudipta Sen fled Kolkata, only to be hauled back by the police from Kashmir within a few days. As protests escalated in Kolkata, the central government ordered a probe by SFIO. Since then, Sebi has laid siege on bank accounts of several other financial enterprises, forcing almost all to default on repayments to investors.

A commission of inquiry constituted by the West Bengal government in the wake of the collapse of the Saradha Group has received some 1.7 million complaints, of which at least 500,000 were against firms other than those of the Saradha Group. No firm action has yet been taken against them. On 9 May, the Supreme Court ordered the Kolkata police to hand the responsibility of investigating the operations of the Saradha Group to CBI, saying the local administration had failed to unearth the money trail.

The Enforcement Directorate, too, is probing foreign exchange violations and allegations of money laundering by the Saradha Group. On 4 June, CBI said it had registered 46 first information reports (FIRs) in the case out of which 43 were registered in Odisha and three in West Bengal. Some of the people booked by CBI, apart from Sudipta Sen and Kunal Ghosh, are Debjani Mukherjee, director of the group; a business associate Arvind Singh Chouhan; Manoj Kumar Nagel, director of Saradha Realty; and Somnath Datta, vice-president of Saradha’s media group and former leader of the Communist Party of India (Marxist).

CBI has since made a string of arrests and questioned several people as its investigation has progressed. In the latest arrests, CBI said late on Sunday that it had detained Manoj Das, chairman and managing director of Kamyab TV and Madhusudan Mohanty, owner of Odiya newspaper Odisha Bhaskar in the Artha Tatwa case “on charges of siphoning of funds”.