Sebi helps US regulator bust social media investment scam

In one of the biggest cross-border regulatory cooperation, markets watchdog Sebi has helped its counterpart in the US bust a major investment scam being run through online social media platforms.
The 'Profit Paradise' scam was being run by two Indians -- one based in Mumbai and another in Hyderabad -- in the name of a 'High Yield Investment Product (HYIP)' wherein gullible investors were being enticed through pervasive social media pitches on Facebook, Twitter, Google Plus and YouTube.
Such FYIP schemes have become very popular on various online platforms, wherein the operators solicit investments in securities, but most of them have turned to be yet another frontier for defrauding gullible investors in name of high and quick returns.

In the latest case, the operators of 'Profit Paradise' were inviting investors to deposit funds that would supposedly be pooled with other investors' funds to make "huge profits" in forex, stocks, and commodity trading.
Although operating from India, they disguised Profits Paradise's physical location by providing the false Internet data, indicating that Profit Paradise's operations were within the United States when they were not.
While probing the case, the US markets regulator SEC (Securities and Exchange Commission) sought assistance from its peers in India, Canada and Hong Kong.

After completing the probe and announcing charges against the two Indians, Pankaj Srivastava and Nataraj Kavuri, SEC said it "appreciates the assistance of the Securities and Exchange Board of India (Sebi) as well as the Autorite des Marches Financiers in Quebec, the Ontario Securities Commission, and the Securities and Futures Commission in Hong Kong."

The case is being seen as one of the biggest in terms of cross-border cooperation among regulators to crack down on illicit investment schemes.
Both Sebi and SEC are members of International Organisation of Securities Commission (IOSCO), an international policy forum for securities regulators that also sets global standards for securities regulation.
Sebi and SEC are also signatory to the IOSCO MMoU which represents a common understanding amongst its signatories about how they will consult, cooperate, and exchange information for capital market enforcement purposes. The MMoU sets an international benchmark for cross-border co-operation.
In the present case also, Sebi extended all necessary assistance to the SEC within the framework of IOSCO-MMoU.

As per latest available data, Sebi received as many as 94 requests from overseas securities regulators for information during 2013-14 -- more than double of what it had got in each of the two preceding fiscal years.