EOW provide some insight into Speak Asia case
May 2011 saw India’s Economic Offenses Wing (EOW) shut down Speak Asia, the biggest Ponzi / pyramid hybrid scheme in Indian history at the time.
Come December 16th, two and a half years after Speak Asia was shut down, the Mumbai High Court has ordered the EOW finally file a chargesheet against the company.
One might get the sense that over the past thirty months Indian regulators have been sitting on their hands, but the truth of the matter is far from it.
The longevity of the Speak Asia case is unfortunately a symptom of India’s regulatory and legal systems being unable to cope with the scope and magnitude of today’s online scams.
Specific to the Speak Asia case, troubles began back in June 2011, when Speak Asia were granted a restraining order against the Criminal Investigation Department (CID), which resulted in the unfreezing of Speak Asia’s bank accounts.
These accounts were frozen when Speak Asia was shutdown in May, and once given access to them again the company wasted no time transferring $104 million USD out of India.
The CID did appeal the decision and won, however it was a hollow victory as the money held in the accounts was gone.
This money has since been used to fund numerous activities designed to squander police resources and hinder regulatory investigations into the company wherever possible.
This has included lawsuits filed in local, high and even the Supreme Court of India against regulators, funding Speak Asia’s local management and affiliates from evading the authorities, along with payments being made to key affiliates in order for them to continue their activities convincing others to continue to support the scam.
This is achieved primarily through promises of Speak Asia restarting it’s Ponzi activities, along with “exit payments” to be made to affiliate investors who lost money.
How much to date Speak Asia has spent trying to thwart regulatory investigation into the company has not been revealed. Slyly, whilst initiating all of this activity from afar (primarily Dubai and Singapore, where Speak Asia’s executive management are in hiding), the company plants the seed amongst supporters that the regulatory agencies are dragging their feet.
To some degree the effectiveness of planting this seed is understandable (despite having to ignore Speak Asia’s direct and indirect attempts to evade the authorities over the years). Providing some insight into what the EOW are dealing with however, comes an interesting article from the Times of India.
Shortage of manpower in the city’s economic offences wing has witnessed slow disposal of cases resulting (in) thousands of cases, involving Rs 12,395 crore in various economic cases, (getting) stuck in court proceedings.
Records available with the TOI show that since January 1, 2010 to October 2013 the EOW registered 459 economic cases wherein Rs 12,395 crore were shown as cheating/fraud money. The biggest among them are two recent cases; SpeakAsia fraud and the National Sport Exchange Ltd (NSEL).
Most of the officers are burdened with large number of cases. While they have to work a lot to make a case watertight, strength of investigators is very less, said police sources.
Each officer is currently handling more than 10 cases each. “In a single case, we have to record the statement of hundreds of people (in ponzy schems/double the money scheme etc), making seizure, conducting raids, sending the evidence for forensic audit and analysis, etc. the staff shortage delays the investigation,” said an EOW officer.
The NSEL case FIR alone stands a fraud amount of Rs 5,600 crore while the SpeakAsia fraud amount, as per police estimate, is more than Rs 2,276 crore.
It is in this regulatory environment that schemes like Speak Asia are able to launch campaigns of misinformation and thrive.
The EOW, since its inception in 1994, has registered more than 2,000 cases till date. For its 11 units, there are 76 police officers and 174 constables.
“Our priority is to help people by disposing off cases so that the culprits could be punished. However, most of the times the cases do not come on board of charges are not framed.
In fact, in 2012 the city police commissioner had sent a proposal to the state Law and Judiciary department recommending setting up a special court to try the EOW cases. However, the proposal was (still) lying with the state for over a year.
Last month, a reminder has again been sent to the state about the recommendation.
There are EOW units that are working overtime. In case of NSEL, the EOW had to take help from the detection crime branch to raid more than 185 places at a time last month. The team was to raid, video graph, and record the statements of the accused and seal the premises.
“When it comes to bigger investigations where more manpower is required, we have to take help from sister agencies since our manpower is very less,” the officer added. There are over 400 cases which are still under the investigation.
Is it any wonder cases like the Speak Asia one, as clear-cut of a Ponzi scheme they were running, are still dragging on?
This is the sad reality of Ponzi regulation in India today:
“Now a day, people are falling prey to the ponzy schemes and have become greedy. They want their money to be doubled overnight and hence they invest randomly. We have found there are victims who have invested in three to four ‘double the money’ schemes at a time,” said an officer, adding that such victims feel that if they lose money at one scheme, they would recover in another.
The Speakasia case, for instance, has more than 24 lakh investors, called panelists. In this case, there is only one investigating officer who is struggling to file the charge sheet against more than one and half a dozen accused.
After two and a half years and multiple agencies launching investigations the scheme, the Speak Asia case is being written up by one guy. Meanwhile the rest of the department is seemingly drowning trying to investigate similar schemes, with operators counting on impossible workloads bogging down EOW investigators.
At of today, December 16th is exactly three weeks away. And the way I see it things are going to one of either two ways. Either a charge-sheet will be filed (and one hopes it isn’t a rush-job that then later fails in court), or the deadline will be missed and who knows what happens then.
Either way the Indian public lose out. Putting aside India’s Ponzi scheme regulatory problems, should Speak Asia defeat Indian regulators – what then?
They restart their $20 a week Ponzi scheme and have affiliates rope even more investors into the scheme under the guise of conducting surveys for non-existent third parties?
And if Speak Asia are ultimately held responsible for running their Ponzi scheme, does anyone really think Manoj Kumar and the rest of Speak Asia’s management aren’t just going to divvy up what’s left of the $104 million they have and disappear for good?
By virtue of simple mathematics, despite the promises made Speak Asia cannot pay out more than its affiliates initially invested. Such is the fallacy of all Ponzi schemes.
Yet here we are.
What’s really alarming is that breeding ground the current environment of complete inaction or delayed action has fostered. And I use the word alarming because India has a population of over 1.2 billion people. Granted not everyone in India is happy to get in bed with Ponzi schemes and screw others over but, as we’ve witnessed and as per the EOW’s comments above, quite a few are.
Scale that up by way of one of these schemes truly penetrating India at a national level, and the potential economic impact that would result is simply mind-boggling.