This is the scam which is now in news headlines due to it’s proportion of scam. Few of you might already know about this scam but thought to share through this post to those who are not aware of this and what we can learn from such schemes.
This company was started it’s operation in the year of 2010 without registering with regulatory bodies such as SEBI or RBI. It was once again a MLM company and as usual it offered a high returns saying that investors money will be invested in stock market and you may earn a high return as much as around 120% in a year. You just need to invest Rs.10,000 as investment and Rs.1,000 as registration fee. This is the minimum limit and their is no higher limit. Suppose you invested Rs.10,000+Rs.1,000 (Registration fee) then you get 20% of your investment i,e Rs.2,000 each month for the next 6 month and the remaining Rs.10,000 in the next six months. So in a year Rs.22,000 with the investment of Rs.11,000. It also started Multi Level Marketing (MLM) offering with providing 3% per month income through referring a client to them.
This business spread across India and now the scam was estimated worth of Rs. 1,100 crore. They lured high profile investors and celebrities too with arranging promotional events in India and abroad too. Their clarification was simple regarding how they generate such a high returns, “If you have gained Rs1,000 somebody has lost Rs1,000. If you have lost Rs1,000 somebody has gained Rs1,000. Most of the people you meet say (around 90%) that we have lost a lot of money in the financial markets. But that means around 90% people you do not know have made huge profits. For every seller there is a buyer.”. But people never understood that in that 10% earners too how many of them are under the category of 90% lot of times.
Simply with greed people started to invest and after accumulating huge cash, promoters of company absconded and recently they were arrested. The same type of scam with low intensity happened in the nearby town of me called Ilakal, where one collage clerk started this scheme. Same way of doubling your investment in 6 months. But after few years, no one know till day, where that clerk.
So what we as investor can learn from such scams?
1) Always remember that risk is directly proportional to return. So when returns are high then automatically risk too high.
2) Ask before investing how the returns they will generate, either it may be high or low. But always concentrate on the style of the business they are into and how they will give your money back.
3) Even though regulators are strict on such matters but still their is a possibility that without any one notice such scams may start. Hence it is always advisable to check whether the product and organisation with which you are dealing with are regulated and registered or not. If not then as a loyal citizen of India better to bring to the notice of regulatory bodies.
4) When any celebrities are invested, it does not mean that you also need to follow blindly. Either they may not worked fully on the chosen investment or if they loose too it may not affect that much to their financial life. Hence never follow your friends, relatives or any celebrities blindly. Even such companies may lure by stating that so and so celebrities are invested with them.
5) You notice from above minimum requirement of investment, it is just Rs.11,000. What it mean? It shows that they planned in a better way such that if they set minimum requirement as Rs.1,00,000 or Rs.5,00,000 then they might felt hard to garner retail investors. Hence they set Rs.11,000 which usually middle class or even lower middle class people not feel the heat if they loose too. This is the trick which they used and worked well in getting the retail customers.
6) Finally it is the financial literacy which protect investors. Without which I think it is not possible even to regulators also to avoid such scams which may happen in any corner of India with any notice. Hence educate yourself before entering into any investment.