India grants SEBI regulator streamlined court
If we learnt anything over the roughly three years it took Mumbai’s EOW to file a chargesheet against Speak Asia, it’s that Indian regulators were woefully ill-equipped to deal with the smoke and mirrors that accompanies modern Ponzi schemes.
With millions of dollars at their disposal, those who ran the scheme paid off an army of affiliates and supporters to rally behind their cause. This saw regulatory proceedings against Speak Asia head to the Supreme Court where, under a foundation of lies, they were delayed for months on end.
Eventually the Supreme Court saw through the farce but by then it was well and truly too late. Ditto when the EOW eventually filed a chargesheet against the company late last year.
In the aftermath of one of the more destructive yet not so widely discussed scams however comes some relief.
With its origins dating back to late last year and it having seen three incarnations since, a few days ago a new law was passed granting SEBI access to an expedited court of their own.
SEBI, otherwise known as India’s Securities and Exchange Board, was established in 1988 and is charged with regulating the Indian securities market.
Think of it as India’s SEC, but only up until recently woefully toothless in the enforcement of the India’s online Ponzi scene.
Case in point, when pressed to investigate Speak Asia back in 2011, SEBI at the time refused to, claiming
Speak Asia does not come under its regulatory purview because it has issued no securities till date. “This is a marketing company which has just sold a software through its website for a price.”
The “software” in question was the fraudulent surveys Speak Asia claimed it was being commissioned to send to affiliates on behalf of its clients.
Turns out of course that there were no clients… and that the surveys were just being ripped from Wikipedia entries. In other words, it was your typical Ponzi smoke and mirrors.
Well, SEBI fell for it hook line and sinker. And where they should have properly investigated and shut the scheme down before the end-game circus played out in the Supreme and Mumbai High Courts, they instead left it at that.
Since then and in the wake of similar scams popping up, SEBI are perhaps somewhat wiser. And now thankfully they have the grunt to back it up:
Sebi today said offenders can no longer ignore its orders and drag on the cases for years as the new law would fast-track action against them and ensure refund of money to investors.
These additional powers, as also setting-up of a special Sebi court, would ensure that fraudsters do not go scot-free and the regulator is be able to initiate recovery proceedings against them and even conduct search and seizure operations at defaulters’ premises, Sebi chief U K Sinha said.
And whereas Manoj Kumar, Ashok Bahirwani and friends dragged the Speak Asia case out for a few years, that’s not even the worst of it:
There should be a sea-change from the earlier occasions when offenders would tend to “ignore orders from Sebi” and the legal cases would drag on for years without recovery of any money, Sinha told PTI in an interview.
“The cases have gone for 10-15 years and there no money has been recovered. So except for a little bit of ‘naming and shaming’ for individual or a company, it did not have much impact on them,” he said.
And bear in mind that’s only when SEBI acts. In the caes of Speak Asia, they completely failed to initiate any regulatory action against the company.
After clearance from Parliament earlier this month, the government has notified the Securities Laws Amendments Act, which empowers capital markets watchdog Sebi to take action against all unregulated money-pooling schemes involving Rs 100 crore or more.
The new Act gives Sebi authority to pass orders for attachment of properties, arrest and detaining of defaulters in prison and for disgorgement of ill-gotten money.
It also gives Sebi access to call data records, or any other information from any entity during investigations, while it can now conduct search and seizure operations after permission from a special Sebi Court to be set up soon.
“The new Act clearly defines what can be a Collective Investment Scheme and therefore falls under Sebi jurisdiction. This would make it very difficult for operators of such schemes to circumvent the regulations,” Sinha said.
Sounds good to me, albeit far too late for the hundreds of millions Speak Asia siphoned out of India to locations unknown (somebody should ask Manoj Kumar’s wife where the funds went).
Still, it’s somewhat reassuring to know that should it happen again, SEBI (and presumably other agencies by proxy) now have some grunt behind their investigations. I mean fat lot of good it does publicly shaming a Ponzi shyster if they still manage to evade capture and live the high life with stolen investor funds.
Sinha said the special court should be set up soon as a process in this regard has already been initiated and the regulator has taken up the matter with the government and the Mumbai High Court.
The new powers have been given against the backdrop of a large number of illicit money-pooling schemes, involving funds worth thousands of crores, coming to fore in past couple of years, including Saradha and other scams in West Bengal.
Due to the law only being passed recently, as of yet a scam to test the granted regulatory weight has yet to surface. Indian Ponzis as a whole largely moved offline in the wake of the Speak Asia aftermath.
They’re still around if you hunt for them but otherwise they’ve largely taken a backseat to the current Ponzi shenanigans taking place in South America and Spanish-speaking locales in Europe.
In the meantime, despite a chargesheet against Speak Asia finally being filed by the Mumbai EOW late last year, whether the case is even still open remains a mystery. Ditto the actual status of mastermind Manoj Kumar.
Did he actually die of cancer or is he still sitting on a beach somewhere in Dubai sipping martinis with Harendar Kaur?
Cmon SEBI… totally irrelevant in the face of investor funds being long siphoned off through Singapore, but at least it’d bring some closure to the million or so email addresses (actual number of investors unknown) Speak Asia ripped off.