One thing commendable about financial fraudsters is that they always come up with creative and innovative ideas to lure gullible investors, the regularity of investment frauds has shown how vulnerable our society is to such abuse. The recent expose of two significant investment frauds IMA and Bikebot are a case in point
Term it as greed over good senses or lack of awareness; such investment schemes continue to flourish in our country with returns too good to be true and promise of the moon. If we look at the business plan of Bikebot scam, which has duped over Rs 1,400 Crore of investors’ money, the scheme looks dubious at first sight.
The Noida-based firm, Garvit Innovative Promoters Ltd. which had come out with the Bikebot plan, promised to double the money in a year, plus additional bonuses. By this way, it has attracted more than 2 lakh people to invest Rs 62,100 each (entry-level plan) in the multi-level marketing scheme.
The investors are promised a monthly return of Rs 9765 against the one-time investment of Rs 62,100, and if the amount is more than the three times of an entry-level plan, then the investors are entitled to additional bonuses of Rs 4,590 which doubles with every increase in plan amount.
Now, if we also look at the case of IMA which targeted the Muslim community and took advantage of sharia law. They promised investors a monthly return of 3-5 percent, which comes out to be as high as 36-60 percent in a year. Further, to make the scheme look genuine, all transactions were done through the banking system, and even, TDS was deducted on profits.
If we look at both the cases, the Bikebot case was quite easy for investors to identify compared to the IMA case, which played with both sentiments and investor’s money. So, after these two high-profile investment fraud cases, is it guaranteed that such incidents will stop?
The answer is no, and it will continue to flourish in one way or another, as it did happen after Saradha and Rose Valley. The cryptocurrency sector is also not alien to such scams and is already rocked by some big investment fraud cases like BitConnect, GainBitcoin, etc.
Deception, manipulation, or wrongdoings are not new and has existed in societies for centuries and will continue to exist. Even we have read in many mythological stories.
Every such incident should be an eye-opener for investors and check what could be learned, to avoid falling into such a trap.
Learn how to mange your money & create wealth, Download your FREE eBook nowHere are the FIVE lessons that you should learn from these scams.
Do your due diligence
As per reports in the media, the IMA conspirators rolled in many Muslim clerics, even those who don’t possess the required knowledge of investing certified the schemes as sharia-compliant. This helped them to attract many investors within a short period.
Relying on recommendations is not a bad thing, but you should always do your due diligence and perform it competently. Blindly relying on recommendations is akin to gambling, where the possibility of losing money is highest.
Also Read: 7 Investing Mistakes to be avoided by Young Investors
Invest in securities you understand
Warren Buffet is one of the greatest investors we have in our times, and he has not done anything extraordinary to reach this position. His investment strategies are straightforward, invest in businesses that make sense to him, and he fully understands it.
In the case of Bikebot scam, investors should have asked questions about the business plan, how they were going to make money, etc. If the business model is not clear to you and is challenging to get through, you can always avoid it instead of following the crowd.
Avoid schemes that are too good to be true
If any scheme is guaranteeing you very high returns with no risk, then it most probably is a Ponzi scheme.
Every Ponzi scheme, whether it is Bikebot, IMA or Saradha, all have a common feature embodied in them, low risk and regular high income.
Also Read: Complete Investment Guide On Shariah Investment Portfolio In India
Know the people
While investing in a company/stock, any good advisor will recommend you to check who is in the management. Because people run the company, and you must understand their working style, ethics, history, and reputation.
In most Ponzi scheme companies, the owners have a dubious background which investors fail to check.
Check Regulatory Approvals
Approval of regulatory bodies such as SEBI, RBI, or any competent authority is what all Ponzi schemes miss. In the case of IMA, it should have obtained necessary regulatory clearance from SEBI, as it is raising funds from the public and terming them as their business partners.
Affiliation to the regulatory body helps investors in the long term and impose faith in the system. In the case of dispute and other matters, investors can directly approach the statutory authority to resolve their cases. But, if you see, all the investors who have lost all their money in Ponzi schemes have very few options left and chances of their money getting refunded are too low.
Conclusion
Time and again people have been falling prey to Ponzi schemes & I believe fraudsters will continue to thrive as long we the investors are greedy.
Protecting our self from investment fraud is not that difficult provided we apply common sense, however as Voltaire once said: “Common sense is not so common.”
Mymoneysage has been working towards investor awareness and education through our free blog and wealth management software that is helping thousands of investors to take the right decisions with their savings and investments.
