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Ponzi Scheme and All About Sharada Scam

Published on Tuesday, December 16, 2014
Schemes and scams are so common these days, so much that they are now thought to be synonymous!

Here is a brief history of how a ponzi scheme got its name and the latest ponzi scam of India – The Sharada Scam.


  • The Ponzi scam is named after Charles Ponzi, a clerk in Boston, USA, who was the first person ever to operate such a scheme in 1919. 
  • A Ponzi scheme is a fraudulent investment scam, where unsuspecting investors are promised high rates of return and little risk. 
  • Because of such a lucrative offer – high return and low risk – many investors, including pensioners and working class people part with their hard earned money, savings and pensions in hopes to increase their money!
  • In a Ponzi scheme, money is collected from a first set of investors. Then when the time comes to pay returns to them, the schemers raise the money needed from a second set of investors – to pay to the old investors! And the cycle goes on – raise money from new investors to pay off the old investors. No actual investment is taking place!
  • This type of ‘scheme’ only works for the first few ‘investment –cycles’, as when new investment reduces or stops then the entire pyramid collapses – and that is when it makes the headlines! 
  • And here we come to Sharada Scam that first came to our attention in 2013 and still continues to hog the headlines…


·         Properly known as the Saradha Chit Fund Scam; it is a financial fraud committed by the Sharada Group, which is a consortium of more than 200 private companies, based in West Bengal. Sharada Group is Kolkata based and its MD is Sudipta Sen.

·         The crackdown on Sharada was effected by SEBI and possibly because the funds to pay-off investors started to dry up.

·         In the aftermath of the scam becoming public the State Govt. of West Bengal, SEBI, CBI all entered and constituted investigations into the scam.

·         The State government also set up a fund of INR500 crores to ensure that low-income investors did not lose their money.
·         Through the scam the scammers amassed approximately Rs. 2,459 crores – from the Eastern Region of India, including states like Chattisgarh, Jharkhand, Bihar, Odisha, Tripura and Assam! No wonder West Bengal is known as the ‘Ponzi Capital of India’! Or, ‘Bonzi’!

·         To showcase that its business operations were legit, Sharada group promoted itself through newspapers, donating police bikes and automobiles, ambulances to State Government, investing in local football clubs, organizing festival pandals etc.

·         The scamsters included political persons too, and some from the ruling party of the state Trinamool Congress(TMC); which is headed by Mamata Banerjee, the Chief Minister of WB.

·         Apart from CBI, a Special Investigation Team (SIT) and Justice Shyamlal Sen Commission have been constituted to probe the scam; later on Enforcement Directorate was also involved in the investigations.

·         Because of the involvement of ruling party leaders and ministers – the Sharada Scam has now in taken a political angle too; specially with the arrest of Madan Mitra (TMC) who is the Transport Minister of WB and a close aide of the Chief Minister!

·         With the 2014 elections and BJP wanting to gain a foothold in WB – Sharada scam and arrest of TMCs ministers has now led to the investor fraud becoming more of a political power showdown and to get access to the vote banks.

·         Currently TMC & Central Government are involved in political spats and accusations, volleying blame at each other – in the end the poor investors are the ones who remain clueless and worried about the fate of their money.

There you go readers; I’ve tried to make it as concise as possible, with the main points.

The interviewees from states other than WB need not know the names of all the people involved. But if you are from WB – then you should probably know the names of all the famous personalities who were directly or indirectly involved/ associated with the scam.

That is all for the day and have a good one!

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