Investment Scams and Ponzi Schemes: A Case Study of Pearls Group

Running Head: INVESTMENT SCAMS AND PONZI SCHEMES
0
Investment Scams
and
Ponzi Schemes

INVESTMENT SCAMS AND PONZI SCHEMES 1
Table of Contents
Introduction................................................................................................................................1
What happened?.........................................................................................................................1
How did Ponzi scheme Attract Money...................................................................................2
How did the Ponzi scheme operators allay suspicion / provide reassurance to the investors?
................................................................................................................................................3
How was the scam uncovered?...............................................................................................3
Were the perpetrators punished? Did the regulators do a good job in this case?...................3
Recommendations to avoid future events of similar nature:......................................................4
Why didn’t they catch him? What could the SEC do to improve its ability to detect Ponzi
schemes quickly?.......................................................................................................................5
Steps to catch a Ponzi scheme:...................................................................................................5
Bibliography...............................................................................................................................6

INVESTMENT SCAMS AND PONZI SCHEMES 2
Introduction
A Ponzi scheme named after Charles Ponzi is an investment scheme of fraudulent nature
operated by either individuals or a corporation. Under this scheme the operator fabricates the
reports and distributes the income to the new investor’s generated income from the old
investors. The operators offer returns which are short term, either abnormally high or
consistently unusual (Hobson, 2014).
What happened?
Pearls Group is an Indian based company which owns real estate and operates in residential
construction, property development, infrastructure, commercial and civil, spices and liquor,
insurance, tourism, health and education, agriculture, and media. A case was lodged against
two Pearls Group real-estate firms namely Pearls Agrotech Corporation Ltd. and Pearls
Golden Forest Ltd. by The Central Bureau of Investigation (CBI). Altogether they raised Rs
45,000 crore fraudulently via 5.5 crore investors who were duped in a Ponzi scheme through
collective investment schemes for allotment of agricultural land to the investors belonging to
Punjab, Delhi, Haryana and other states (Express, 2016)
How did Ponzi scheme Attract Money
Nirmal Singh Bhangoo the promoter and director of PGFL gave the investors fake guarantees
and bogus agreements of providing the plots of agricultural land. One of his bases is in
Australia. Further he was surrounded by the tank of opportunities in Australia by Austrade
and he began to expand his operation by acquiring the Spa in Gold Coast and Sheraton
Mirage Resort in Queensland.