Ponzi schemes, although in operation in Karnataka for long similar to those prevailing in various parts of south India, have surfaced, with several cases coming to the fore in recent times and the police grappling with such complaints as some schemes are backed by prominent politicians, including two of them who have been Ministers.
The spread of such schemes is from the Kalaburagi region to Bengaluru and interestingly some of those linked with them are also in the gold jewellery business, with an interesting aspect that some of their jewellery stores have been inaugurated by political leaders. It may not be a difficult case to handle if the police, with adequate power at their command, appropriately investigate the cases and expose the political leaders linked with such schemes.
What is relatively new in Karnataka is the link between some political leaders and the promoters of Ponzi schemes and it is obvious that the much requisite protection for such schemes (to ward off enforcement authorities) is provided by the politicians. Per se, the political leaders have nothing to do with the schemes since they are neither the promoters nor the operators, but it is evident that but for their support the schemes cannot thrive. Many social programmes organised by some of the political leaders were sponsored by the Ponzi scheme promoters in the run-up to the elections to the Karnataka Legislative Assembly and some legislators have even been prompting people to invest in such schemes.
Another feature is that the leaders supporting such schemes are from all the political parties. A promoter of a Ponzi scheme hailing from Hyderabad promoted a political party and even fielded candidates during the Assembly elections in Karnataka. This person, with no political background, was arrested recently. This is another case of politics and Ponzi schemes being inter-twined.
There are many laws under which the promoters and their patrons can be booked, particularly for the act of luring people with high interest rates ranging between 36% and 120% a year. The Union government, about two months ago, introduced in the Lok Sabha the Banning of Unregulated Deposit Schemes Bill, 2018, which seeks to protect small investors from Ponzi schemes and prevent unregulated entities from collecting deposits from individuals. The Bill plugs the loopholes in existing laws and gives powers to the government to stop companies from soliciting such funds.
Irrespective of the powers vested in the authorities, it is unfortunate that people continue to be lured by such schemes and chit funds, largely owing to greed and on most occasions, the fraud comes to light only after the promoters of such schemes have diverted the money elsewhere, leaving behind the depositors in the lurch. It is for the political leaders to prevent such fraud rather than be a party to it. Political parties which swear by serving for the betterment of the poor, the oppressed and the downtrodden should introspect and take action since most people who have been cheated largely hail from these sections of society.
(The writer is Senior Fellow, The Hindu Centre for Politics and Public Policy)