Introduction
Question arises as why there is a need to do these kind of special investigations which presumably be categorized as FRAUD and hence question comes why people make such FRAUDS?
In order to go slow while answering all these questions, let’s start expanding our awareness level about the Frauds that are happening around us and get a sense of how Fraudster think like so that we may gradually start getting clearer on why Forensic Accounting would require to be aware about all that is happening within Business/ Industries and trends which are making threats for potential FRAUDS.
Let’s have a look at one of the very basic and widely effected FRAUD schemes which stolen million of small investors hard earned money-
The Ponzi Scheme – A Fraud
The Ponzi Scheme has been named after an Italian Swindler and con artist in US & Canada who promised to his investors a profit of 50% within 45 days, or 100% profit within 90 days. However there can never be such a business or Investment scheme which can drives this lucrative returns.
It eventually works like by paying earlier investors from the receipt of funds from newer investors, it runs for sometime and soon the scheme becomes so popular, it eventually gets busted and Investor looses their hard earned money.
Why these type of schemes starts and eventually got failed?
Because there is no actual investment which is being made to either in a business or in another investment house. The purpose to create such scheme is to make money by doing fraudulent commitments to the Investors and run away once the scheme started taking new heights. It is historically found that the promoters of such scheme were used the collected money for their own personal use and ultimately ran away.
There are many examples available around the world where such schemes offer very attractive returns, usually significantly higher than the average market return and that creates an attraction among prospective Investors and that’s how they got trapped into it.
Examples of such scheme which has happened in India in recent past
⇒ Speak-Asia Scam (2013)
Facts:
It pretended to be an online marketing company which provided money against filling up some surveys which subsequently turned to be in massive FRAUD. This company presumably paying decent money to existing investors by using money from new joiners. As per various news agencies it was estimated around over INR 2,200 Crore scam. The overall investor affected by this scheme was over 24 lacs individuals.
⇒ Saradha Chit Fund Scam (2013)
Facts:
The scheme was reportedly providing 50% p.a. returns or making double in 2-3 years time. As per various news agencies, the scam was over INR 200 billion by which over 17 lacs individual investors got affected. The scheme was presumably be doing kind of same PONZI process.
⇒ Stock-Guru Scam(2012)
Facts:
The scheme was reportedly providing 20% per MONTH return by investing in some stock related scheme etc. The scam was over INR 1,100 crores by which over 2 lacs individual investors got affected. The reason of discussing some of the examples of FRAUD related to PONZI schemes is to aware about the FRAUDS that usually happens where it is very easy to attract such Victims who really wants to see their money growing like anything and that is where the trapping starts. The objective of the FRAUDSTERS who actually done/ conducted such fraudulent activities could be to make HUGE money in very short period of time and it shows that there is very less relation between the NEED and COMMITTING FRAUD…all these FRAUDSTERS who have done these BIG SCAMS were not that NEEDY for MONEY and were having a decent family backgrounds.
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