Illegal money pooling: Sebi bans Green Buds, directors for 4 years

The market regulator has prohibited them from carrying out any collective investment scheme

Regulator Sebi has barred Green Buds Agro Farms and its directors from the securities market for four years in an illicit money-pooling scheme case that allegedly duped villagers and women in Karnataka.

Besides, the capital markets watchdog has prohibited them from carrying out any collective investment scheme (CIS).

The regulator had begun a probe against Green Buds after it came across reports that the firm and its directors had collected Rs 300 crore from 6 lakh investors across Karnataka, mostly villagers and women, according to the interim order.

However, Sebi said these entities did not furnish the details sought by it, including details of the investors, amounts mobilised from them and their whereabouts.

In absence of the vital information, it is "difficult" to ascertain the amount of funds raised by the company, the period during which the mobilisation continued and the number of investors affected by the schemes, the regulator said.

"I conclude that Green Buds and its directors Bettahalli R Lakshmegowda and Aruna Prasad have contravened provisions of ...CIS and... PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations, by floating CIS without obtaining registration from Sebi," the regulator's Whole Time Member G Mahalingam said in an order dated July 18.

Accordingly, Sebi has restrained Green Buds and its directors "from collecting any money, either directly or indirectly, from the investors or launching or carrying out any CIS".

Besides, they have been restrained from transferring the properties acquired out of the money mobilised through the CIS. Also, they have been barred from accessing the securities market for 4 years.

As the quantum of money mobilised by the company is not certain, Sebi would make a reference to the Karnataka government so as to utilise the assets of the firm for the purpose of effecting repayment to the investors.

Earlier in May 2014, Sebi had barred Green Buds and its directors from running illicit money-pooling schemes and asked them to submit details of their assets and investors.

Following media reports, Sebi as part of a preliminary enquiry into the alleged fraud had gathered information from the website of the company as well as from that of the Ministry of Corporate Affairs.

Sebi had also received a complaint from Greenbuds Workers and Depositor's Protection Committee in March, 2014, alleging that the company raised funds mainly from villagers and women offering high rates of interest.

The company's scheme pertained to purchase of land from the public funds for developing forestry/agriculture/industry and the profits were to be distributed to the investors.