Karnataka government ignored RBI alerts on firm’s Ponzi scheme

BENGALURU: It was all hunkydory for investors of I Monetary Advisory (IMA) Group until a purported audio clip of founder-owner Mohammed Mansoor Khan blew the lid off the multi-crore Ponzi scheme. However, in 2015, the Reserve Bank of India (RBI) had alerted the state government that the group was a scam-in-the-making.
The government not only slept on the alert, but the police department also gave the group a clean chit, insisting its business did not come under the Karnataka Protection of Interest of Depositors in Financial Establishments (KPID) Act, and hence no action could be taken.
“The police could not take action because of various reasons including procedural issues,” home minister MB Patil admitted to TOI.
After the RBI alerted the government, the matter went to the police department. IMA promoters told police that their company was not an investment firm and they were not collecting deposits. It said investors were pumping in money in their capacity as partners and funds were being collected under limited liability partnership.
“The police department wrote to the RBI saying it could not take action against IMA under KPID Act. The police report not absolved the firm of any wrongdoing, but also allowed it to continue perpetrating the fraud,” said a senior official from the revenue department.
Dissatisfied with the police’s explanation, the RBI wrote to the government again in 2018 seeking an investigation into the group’s activities. Following this, the government empowered the assistant commissioner of revenue department to investigate business activities of all Ponzi companies and seize their properties. The revenue department on November 16, 2018 issued a public notice against IMA Group, bringing the illegality of the company to the notice of investors.
The notice also named 16 entities and individuals, including Mohammed Mansoor Khan, and sought information from the public on their movable and immovable properties. The revenue department was supposed to seize assets of the company, but the move was hit by procedural issues.
“We asked the police to register an FIR against IMA Group, but they said it could not done without a complaint,” said AC Nagaraj, assistant commissioner (revenue), who is now handling cases related to Ponzi companies. On January 21, 2019, the inspector general of police (economic offences), CID, officially gave a clean chit to the IMA Group. “This step of the government actually let the IMA Group off the hook. Had we taken action then, we could have averted this scam,” said an official.