Ponzi scheme like investment schemes in India – causes, impact and solution

Shubhasree Bhadra and Kamakhya Narain Singh

Journal of Money Laundering Control, 2023, vol. 27, issue 2, 348-362

Abstract: Purpose - News items like “A whopping 2 lakh gullible investors were cheated…….” amply illustrate the extent of problems and hardships caused by financial frauds related to Ponzi schemes, collective investment schemes (CIS), unregulated deposit schemes, etc. In India, over the years, many Ponzi and unregulated investment schemes have taken place, causing huge economic and financial loss to Indian economy. This paper aims to examine why investment such schemes like Ponzi schemes and CIS become popular, how such schemes got operated in different periods and what could be done to safeguard the interests of investors. Design/methodology/approach - The analysis is done based on secondary data and research work of various researchers, organisation and institutions, which are available in the public domain. Findings - This paper has tried to analyse various characteristics of such fraudulent schemes, like their modus operandi, promotional activity, background of promoters and legal process involved in recouping financial loss of millions of investors. This paper also examines the demand-side factors that are responsible for popularity of those schemes in India. Noting the regulatory changes and other initiative taken by regulatory authorities to control the supply of unregulated investment schemes, this paper indicates potential actions, which could be undertaken to make people aware about the risks and issues related with such fraudulent schemes. Originality/value - This paper gives an overview about various aspects of unregulated investment schemes, which have duped numerous people at different point of time. To the best of the authors’ knowledge, this research work is original and has not been published in any other journal.

Keywords: Financial inclusion; Financial education; Ponzi schemes; Collective investment schemes; Investor education and protection; Unregulated deposit schemes (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jmlcpp:jmlc-02-2023-0040

DOI: 10.1108/JMLC-02-2023-0040

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