Saradha was operating ponzi schemes; to face prosecution: SFIO

Closing probe into one of the most talked-about scams in recent times, SFIO has found that 14 Saradha firms defrauded investors through 'ponzi schemes' and will now face prosecution for violating Companies Law, Sebi Act and Indian Penal Code among others.
While there was no official word on the size of the scam, sources said that it is estimated to be worth about Rs 2,500 crore to Rs 3,000 crore. The findings are more about illegalities and culpability rather than quantum, they added.
The more than a year-long probe by the Serious Fraud Investigation Office has concluded that the group was using collections from new investors to make payments to the previously-enrolled members, rather than from income generated through investments, in typical resemblance to a ponzi scheme.

The activities of these companies were found to be in serious violations of the Companies Act, the Sebi Act, and several provisions of the Indian Penal Code, the Corporate Affairs Ministry said in a statement on completion of probe.
Companies found to have violated the Sebi regulations for 'collective investment schemes' will be prosecuted for violation of Sebi Act, instead of the Companies Act, as the former carried longer terms of imprisonment, it said.
Besides, prosecution will also be initiated by state governments for violations of the Prize Chits and Money Circulation Scheme (Banning) Act, while the probe report and necessary evidence would be shared with CBI to avoid duplication in prosecutions.

The scam, wherein lakhs of investors in West Bengal and neighbouring states were defrauded of thousands of crores through illegal money pooling activities, came to light early last year and has also had political ramifications.
In the wake of public protests, the ministry asked SFIO in April 2013 to probe the case. The agency, which looks into white collar crimes and violations of companies law, investigated more than 60 companies.
The case has become a political hot potato with Mamata Banerjee-led West Bengal government facing flak from various quarters.