Ponzi schemes resurface as multi-state cooperative societies

After having made themselves scarce for more than a year in West Bengal, Ponzi schemes seem to be back in business in the state under a new garb, that of the 'multi-state cooperative society'.

"We recently conducted an inquiry and found that certain organisations, by obtaining registration as a multi-state cooperative credit society (MSCS) from the Centre, are raising money from the common public by promising huge returns. Neither do they have a no-objection certificate from the state nor any kind of RBI permission," State Cooperative Minister Jyotirmoy Kar told PTI. "We suspect that chit-fund companies/Ponzi schemes which used to operate in the eastern states may be using the guise of MSCS to raise money. These companies may be taking advantage of the MSCS Act to evade legal action," he said.

After the Saradha bubble burst in April, 2013, several Ponzi schemes and chit-fund companies had to wind up their operations as central and state agencies cracked the whip amid protests by lakhs of defrauded investors.

MSCS is cooperative society which operates in more than one state and has a minimum of 50 members in one state. According to officials of the state cooperative department, the MSCS acts as a good option for chit-fund companies as it more or less matches their pattern of collecting money and operations. Kar said the matter first came to light a few months ago when he received a complaint from a woman in East Midnapore district that a MSCS organisation took Rs 70 lakh with a promise of huge returns but was now untraceable. "After getting the complaint we started an investigation and found that the address on which the company was registered in Kolkata doesn't exist at all," he said. According to Kar, it was found that around 100 MSCS are functioning in various districts of the state and are raising money from the common people with promises of huge returns on recurring and fixed deposits.

"Out of these MSCSs, no trace is to be found of more than 90. Neither could we trace their officials or their offices in West Bengal. We can't even take any action as they received their MSCS registration from the Centre," he said.According to officials of the state cooperative and registration department, West Bengal has its own cooperative society banks where money may be deposited and withdrawn only by members. "We have 44 such state cooperative banks which serve only the cooperative society members. They have got the NOC of the state government," said an official.

The Ma Sarada Agro Multi-State Cooperative Credit Society, a Saradha Group company, too, had applied for registration with the Union agricultural ministry in December 2012, which was kept pending, officials said.

Kar said that last year, the agricultural ministry, which gives registration to MSCSs, had noted that such bodies need to get NOCs from the governments of the states in which they operate and asked the registrars of state cooperatives to study the business model of all cooperative societies, particularly those which have a credit disbursal model.

"The registration department of a state cooperative can look within the state but it doesn't have the authority to look into other states as an MSCS has a license to operate in other states. But they need the NOC of the state government to operate. We have not issued NOCs to MSCS but still they are operating and raising money from the people. We don't know whether they have proper permission to raise the money," said Kar.

He said he has written to the Centre asking it to look into the matter and take appropriate steps against these MSCSs. "I have written to the Centre asking it to take immediate action against these MSCSs. We don't have the authority to act," he said.