Saradha Scam – Chit Fund Scheme of West Bengal

India witnessed a chit fund scheme scam in 2013 that promised investors, mostly poor people from the Naxal-belt in eastern India, a 50 per cent per annum return on their investment, i.e. double the money in three years, popularly known to be the Saradha Chit Fund Scam.

This Saradha Group scam had its base in West Bengal and was executed by the mastermind Mr. Sudipto Sen, the Chairman of the Saradha Group of Companies. The Saradha group of companies was incorporated in 2006, and the name Saradha group was kept in the name of Sarada Devi, the wife of spiritual Ramakrishna Paramahamsa, of West Bengal. They were very much followed religiously and spiritually by the West Bengal people. And Sudipto Sen used her name for his company to gain confidence and also develop the faith of the investors in his schemes. The Saradha Group promised investors huge returns on their invested amount. He used to do this by issuing Bonds and Debentures. Sudipto Sen recruited numerous agents who used to sell his Bonds and Debentures. These agents were paid commissions for selling his schemes, and they belonged to the local rural communities. Between 25% and 40% of the deposits was returned to these agents as commissions and gifts. And very soon he had a wide agent pyramid set up for himself. The Saradha groups used a nexus of more than 200 companies to launder money from the local rural population of West Bengal, Orissa, Jharkhand and a few of the North Eastern states of India.

This Saradha Group in West Bengal was alleged of cheating more than a million investors by running Ponzi schemes and thus executed the scam worth more than 10,000 crores, which was also marked as one of the most ranked corruption cases in India. Now let us understand the details of the scam and its execution.

Sudipto Sen 

Sudipto Sen was the chairman and managing director of the Saradha Group, often described as a soft spoken and charming personality. Prior to his life, his name was Shankaraditya Sen and he was also considered to be a part of the Naxalite movement in West Bengal. He later changed his name to Sudipto Sen to portray his decent image. He also associated himself with various land development projects in West Bengal, which also proved a good move to attract new investors and customers to his investment schemes. 

Though very little is known about his past life, he is said to be the son of Nripendra Narayan Sen and Ranu Kana Sen and was born on 30 March 1959 as mentioned in his passport. But there were rumours that Sudipta was the son of Bhudeb Sen, another name in the history of West Bengal, who was famous for his chit fund company called Sanchayita in the 1980s who fled with crores about 10 years ago.

Saradha Group Ponzi Scheme Journey

He opened Saradha Group in 2006, and launched various investment schemes that promised huge returns. He was able to gain the confidence and faith of customers, as the schemes promised big returns which could fulfil the middle class dream of having big money. He nicely played with the innocence of the middle class by luring ponzi schemes and also by appointing big famous names of West Bengal as the brand ambassador of his brand. He managed to have a very big network of agents who would work for him to collect money from the customers and would pay them the commission. Initially he raised money in form of redeemable bonds and secured debentures, but as per the Indian Securities regulations and Indian Companies Act, a company cannot raise capital from more than 50 people without issuing a proper prospectus and balance sheet after due permission from Securities and Exchange Board of India (SEBI). So in 2009, when red flags were raised upon its working, Sudipto Sen opened 239 companies to confuse SEBI and thus operate peaceful chit fund schemes.

The Saradha group used various tricks and methods to raise funds. Several Collective Investment Schemes (CIS) including tourism packages, forward travel and hotel booking timeshare credit transfer, real estate, infrastructure finance, and motorcycle manufacturing were used as trap by his group. Many of the investments were also sold in the form of a chit fund, as chit funds are regulated by the state government and not the SEBI. So he found an easy way out to execute his fraudulent activities. But his activities were being watched by SEBI then also.

By this way he was able to raise about 2500 Crores in a few years time. The Group continued to raise capital from ordinary people and the bulk of its investors put in around Rs 50,000 each. He was able to maintain the goodwill and name of the Saradha Group as he appointed big names in its brand ambassador list, they had Mithun Chakraborty, the then famous Bollywood actor from West Bengal and Satabdi Roy, the actress and TMC leader and MP from West Bengal. He even recruited TMC MP, Kunal Ghosh as the CEO of the media group. The company used varied marketing means to build its brand. Apart from celebrity endorsements, the company used to sponsor cultural events such as Durga Puja and invest in popular football clubs, ownership of media outlets and companies to attract more investors. 

Under the leadership of Kunal Ghosh, the Saradha Group acquired Bengali news channels like the Tara News and Channel 10. The group also added several general entertainment channels to its group namely, Tara Music and Tara Bangla, Tara Punjabi, TV Southeast Asia, and one FM radio station. They also acquired several established local television channels and newspapers to gain investors’ interest and faith. They owned eight newspapers in five languages namely, Sakalbela, and Kalom (Bengali newspapers), Seven Sisters Post and Bengal Post (English newspapers), Prabhat Varta (Hindi newspaper), Ajir Dainik Baturi (Assamese newspaper), Azad Hind (Urdu newspaper), and Parama (Bengali weekly magazine). The Saradha group scheme expanded to Odisha, Assam, and Tripura, and the number of investors reached close to 17 lakhs.

In 2011, Saradha Group bought Global Automobiles, a heavily indebted motorcycle company.  It also bought other companies like West Bengal Awadhoot Agro Private Ltd and Landmark Cement to showcase them to their agents and depositors and hence convince them that the Saradha Group had diversified interests and is running successfully with various other sectors.

The Political & Police Connection 

Though SEBI kept an eye on the Saradha Group activities of raising funds, it was very much obvious that this kind of big fund-raising activities could not have been possible without a deep political connection. It was believed that Sudipto Sen had close connections with the TMC leaders and other high officials of the West Bengal government. Sen was smart and wise enough as he paid huge money to several politicians and police officers, so as to ensure no alarm could be raised against him. He also employed wives of police officers to prevent investors from raising alarm against his investment program. This was also one of the main reasons that the Saradha group was able to survive for so long.

Various other ministers were involved with the Saradha Group’s activities such as MP Srinjoy Bose was involved in the media operations, the Transport Minister, Madan Mitra headed the employees’ union of the group. It was also said that Sen spent almost around Rs. 18.6 million to buy paintings by Mamta Banerjee. And to this Mamta government issued a notification that public libraries should buy and display the Saradha Group newspapers. The group also had financial dealings with Ganesh Dey, who was the confidential assistant of the finance minister of the former Left Front government. Even politicians outside West Bengal benefited from the Group. The Saradha group gifted patrol motorcycles to Kolkata Police and the government deployed and distributed ambulances and motorcycles sponsored by the Saradha group in Naxal-hit areas of the state.

The Saradha Group Collapse

SEBI was persistent in its investigation against the Saradha Group from 2010. Since its action led Sudipto to change his methods of fund raising to collective investment schemes (CIS) through tourism packages, hotel booking, real estate, infrastructure finance and motorcycle manufacturing. The petty investors had no idea and they were never informed about the true nature of their investment, and were told to get high returns after a fixed period. SEBI warned the West Bengal government about the Saradha group chit fund activities in 2011.

Since public warning were being raised by the MPS of West Bengal about this CIS activity of the group, the CBI also probed in, but no other actions were taken during that time. These warnings came from MPs Somendra Nath Mitra and Abu Hasem Khan Choudhury and TMC leader Sadhan Pande. The RBI also asked the West Bengal government on 7th December 2012, to initiate action against the companies that were indulging in the financial malpractices. Fortunes of the group started shattering towards the end of 2012, after various complaints began pouring in about its alleged payment defaults. In 2013, as Sen ran out of ideas to cheat the investors, as the company’s incoming funds became less than outgoing funds. Lack of funds to pay out the agents became the turning point of the fall of the Saradha Group.

Sudipto Sen was then finding it difficult to calm his agents and his depositors who were constantly demanding their investment and money back. The scam, which came to light on April 6th, 2013, through a written letter by Sudipto Sen was worth over Rs 10,000 crore. After writing this letter Sen became absconding. The police began filing FIRs against Saradha Group and the officials involved in the group. The letter also hinted at Mamta Banerjee, the Chief Minister of West Bengal. On 22nd April, Mamta Banerjee announced a four-member judicial inquiry commission to probe into the scam, and also set up a relief fund for the investors. 

After detecting the scam, the state government set up a Rs 500 crore relief fund for small investors who had put money in the scheme, to prevent them from going bankrupt. On April 23, 2013, Chairman and MD Sudipto Sen, along with Debjani Mukherjee, the Director and Arvind Singh Chauhan, were arrested from Kashmir. After their arrest, SEBI asked Saradha Group to immediately stop raising any further capital and return all deposits within three months.

In the written confession, Sudipto Sen also confessed that several Trinamool Congress MPs were also involved in the scam. According to few reports, MPs Kunal Ghosh and Srijoy Bose, former West Bengal Director General of Police (DGP) Rajat Majumdar and Sports and Transport Minister Madan Mitra were allegedly involved in the scam.

The West Bengal chit fund scam brought together various government agencies like SEBI, RBI, the income tax department, finance ministry as well as the corporate affairs ministry to investigate the scam together to get deeper information. In a few weeks time several officials of Saradha Group were arrested and several properties were seized.

In May 2013, the Central Government set up an inter-ministerial group with members of the corporate affairs ministry, SEBI, Reserve Bank of India and officers from the Income Tax Department. This group was meant to unify the regulations of investment schemes, since those were governed by different laws and regulation and were more prone to fraud and regulatory loopholes. The SEBI Act was also amended so that SEBI had the power to search and seize without prior magisterial permission to investigate illegal money collection schemes.

The West Bengal state government then set up a Special Investigation Team (SIT) to probe the case. The SIT was headed by the then Kolkata Police Commissioner Rajeev Kumar and he was involved in the investigation for about a year. The case was transferred to the CBI in 2014 at the request of the Supreme Court. As per the CBI, the SIT headed by Kumar had not handed crucial documents to the CBI, and they further suspect Kumar as a potential accused in the case as he along with his colleagues were avoiding the agency investigation.

So when the CBI tried investigating Kumar and tried to approach him at his Kolkata residence, they were stopped by the Kolkata police, which again raised an alarm against him. So the Supreme Court then ordered the CBI to further investigate him and find out his links with the Saradha scam. This was done in Shilong and during this time Mamta Banerjee staged a three day protest against the CBI’s move in a bid to save democracy.

The Group allegedly also had connections with Congress leader and former union minister Matang Singh, and the Assam BJP leader Himanta Biswa Sharma, who was then in the Congress. The ED questioned Sharma’s wife Rinki in February 2015 for accepting money from the Saradha Group to run advertisements on her TV channel in Assam. The agency also questioned TMC MP Arpita Ghosh in the case. Senior BJP leader Mukul Roy, who was then TMC general secretary, was also questioned by the CBI in connection with the scam in 2015.

Though after so much interrogation and investigation Sudipto Sen was finally jailed for seven years and various cases remain pending on his name. The CBI in their effort to retrieve the money of the investors are still trying to bring back the money sent abroad, so that the small and middle class investors could get a sign of relief after this scam. During the post scam phase, every next home had a bankrupt depositor or an agent. People who were once friends became enemies. Happy households became miserable and even traders lost interest in opening shutters. 

According to various media reports, around 210 agents, depositors and executives/ directors of various money pooling companies have committed suicide after the Saradha Group’s collapse. These kind of luring schemes and high yielding investing options sometimes seem attractive and a game changer for a common man, but the common man should wisely identify the potential threat that could be associated with these luring schemes, and hence take every single step wisely, and just not get misled.

Saradha Scam – Chit Fund Scheme of West Bengal

India witnessed a chit fund scheme scam in 2013 that promised investors, mostly poor people from the Naxal-belt in eastern India, a 50 per cent per annum return on their investment, i.e. double the money in three years, popularly known to be the Saradha Chit Fund Scam.

This Saradha Group scam had its base in West Bengal and was executed by the mastermind Mr. Sudipto Sen, the Chairman of the Saradha Group of Companies. The Saradha group of companies was incorporated in 2006, and the name Saradha group was kept in the name of Sarada Devi, the wife of spiritual Ramakrishna Paramahamsa, of West Bengal. They were very much followed religiously and spiritually by the West Bengal people. And Sudipto Sen used her name for his company to gain confidence and also develop the faith of the investors in his schemes. The Saradha Group promised investors huge returns on their invested amount. He used to do this by issuing Bonds and Debentures. Sudipto Sen recruited numerous agents who used to sell his Bonds and Debentures. These agents were paid commissions for selling his schemes, and they belonged to the local rural communities. Between 25% and 40% of the deposits was returned to these agents as commissions and gifts. And very soon he had a wide agent pyramid set up for himself. The Saradha groups used a nexus of more than 200 companies to launder money from the local rural population of West Bengal, Orissa, Jharkhand and a few of the North Eastern states of India.

This Saradha Group in West Bengal was alleged of cheating more than a million investors by running Ponzi schemes and thus executed the scam worth more than 10,000 crores, which was also marked as one of the most ranked corruption cases in India. Now let us understand the details of the scam and its execution.

Sudipto Sen 

Sudipto Sen was the chairman and managing director of the Saradha Group, often described as a soft spoken and charming personality. Prior to his life, his name was Shankaraditya Sen and he was also considered to be a part of the Naxalite movement in West Bengal. He later changed his name to Sudipto Sen to portray his decent image. He also associated himself with various land development projects in West Bengal, which also proved a good move to attract new investors and customers to his investment schemes. 

Though very little is known about his past life, he is said to be the son of Nripendra Narayan Sen and Ranu Kana Sen and was born on 30 March 1959 as mentioned in his passport. But there were rumours that Sudipta was the son of Bhudeb Sen, another name in the history of West Bengal, who was famous for his chit fund company called Sanchayita in the 1980s who fled with crores about 10 years ago.

Saradha Group Ponzi Scheme Journey

He opened Saradha Group in 2006, and launched various investment schemes that promised huge returns. He was able to gain the confidence and faith of customers, as the schemes promised big returns which could fulfil the middle class dream of having big money. He nicely played with the innocence of the middle class by luring ponzi schemes and also by appointing big famous names of West Bengal as the brand ambassador of his brand. He managed to have a very big network of agents who would work for him to collect money from the customers and would pay them the commission. Initially he raised money in form of redeemable bonds and secured debentures, but as per the Indian Securities regulations and Indian Companies Act, a company cannot raise capital from more than 50 people without issuing a proper prospectus and balance sheet after due permission from Securities and Exchange Board of India (SEBI). So in 2009, when red flags were raised upon its working, Sudipto Sen opened 239 companies to confuse SEBI and thus operate peaceful chit fund schemes.

The Saradha group used various tricks and methods to raise funds. Several Collective Investment Schemes (CIS) including tourism packages, forward travel and hotel booking timeshare credit transfer, real estate, infrastructure finance, and motorcycle manufacturing were used as trap by his group. Many of the investments were also sold in the form of a chit fund, as chit funds are regulated by the state government and not the SEBI. So he found an easy way out to execute his fraudulent activities. But his activities were being watched by SEBI then also.

By this way he was able to raise about 2500 Crores in a few years time. The Group continued to raise capital from ordinary people and the bulk of its investors put in around Rs 50,000 each. He was able to maintain the goodwill and name of the Saradha Group as he appointed big names in its brand ambassador list, they had Mithun Chakraborty, the then famous Bollywood actor from West Bengal and Satabdi Roy, the actress and TMC leader and MP from West Bengal. He even recruited TMC MP, Kunal Ghosh as the CEO of the media group. The company used varied marketing means to build its brand. Apart from celebrity endorsements, the company used to sponsor cultural events such as Durga Puja and invest in popular football clubs, ownership of media outlets and companies to attract more investors. 

Under the leadership of Kunal Ghosh, the Saradha Group acquired Bengali news channels like the Tara News and Channel 10. The group also added several general entertainment channels to its group namely, Tara Music and Tara Bangla, Tara Punjabi, TV Southeast Asia, and one FM radio station. They also acquired several established local television channels and newspapers to gain investors’ interest and faith. They owned eight newspapers in five languages namely, Sakalbela, and Kalom (Bengali newspapers), Seven Sisters Post and Bengal Post (English newspapers), Prabhat Varta (Hindi newspaper), Ajir Dainik Baturi (Assamese newspaper), Azad Hind (Urdu newspaper), and Parama (Bengali weekly magazine). The Saradha group scheme expanded to Odisha, Assam, and Tripura, and the number of investors reached close to 17 lakhs.

In 2011, Saradha Group bought Global Automobiles, a heavily indebted motorcycle company.  It also bought other companies like West Bengal Awadhoot Agro Private Ltd and Landmark Cement to showcase them to their agents and depositors and hence convince them that the Saradha Group had diversified interests and is running successfully with various other sectors.

The Political & Police Connection 

Though SEBI kept an eye on the Saradha Group activities of raising funds, it was very much obvious that this kind of big fund-raising activities could not have been possible without a deep political connection. It was believed that Sudipto Sen had close connections with the TMC leaders and other high officials of the West Bengal government. Sen was smart and wise enough as he paid huge money to several politicians and police officers, so as to ensure no alarm could be raised against him. He also employed wives of police officers to prevent investors from raising alarm against his investment program. This was also one of the main reasons that the Saradha group was able to survive for so long.

Various other ministers were involved with the Saradha Group’s activities such as MP Srinjoy Bose was involved in the media operations, the Transport Minister, Madan Mitra headed the employees’ union of the group. It was also said that Sen spent almost around Rs. 18.6 million to buy paintings by Mamta Banerjee. And to this Mamta government issued a notification that public libraries should buy and display the Saradha Group newspapers. The group also had financial dealings with Ganesh Dey, who was the confidential assistant of the finance minister of the former Left Front government. Even politicians outside West Bengal benefited from the Group. The Saradha group gifted patrol motorcycles to Kolkata Police and the government deployed and distributed ambulances and motorcycles sponsored by the Saradha group in Naxal-hit areas of the state.

The Saradha Group Collapse

SEBI was persistent in its investigation against the Saradha Group from 2010. Since its action led Sudipto to change his methods of fund raising to collective investment schemes (CIS) through tourism packages, hotel booking, real estate, infrastructure finance and motorcycle manufacturing. The petty investors had no idea and they were never informed about the true nature of their investment, and were told to get high returns after a fixed period. SEBI warned the West Bengal government about the Saradha group chit fund activities in 2011.

Since public warning were being raised by the MPS of West Bengal about this CIS activity of the group, the CBI also probed in, but no other actions were taken during that time. These warnings came from MPs Somendra Nath Mitra and Abu Hasem Khan Choudhury and TMC leader Sadhan Pande. The RBI also asked the West Bengal government on 7th December 2012, to initiate action against the companies that were indulging in the financial malpractices. Fortunes of the group started shattering towards the end of 2012, after various complaints began pouring in about its alleged payment defaults. In 2013, as Sen ran out of ideas to cheat the investors, as the company’s incoming funds became less than outgoing funds. Lack of funds to pay out the agents became the turning point of the fall of the Saradha Group.

Sudipto Sen was then finding it difficult to calm his agents and his depositors who were constantly demanding their investment and money back. The scam, which came to light on April 6th, 2013, through a written letter by Sudipto Sen was worth over Rs 10,000 crore. After writing this letter Sen became absconding. The police began filing FIRs against Saradha Group and the officials involved in the group. The letter also hinted at Mamta Banerjee, the Chief Minister of West Bengal. On 22nd April, Mamta Banerjee announced a four-member judicial inquiry commission to probe into the scam, and also set up a relief fund for the investors. 

After detecting the scam, the state government set up a Rs 500 crore relief fund for small investors who had put money in the scheme, to prevent them from going bankrupt. On April 23, 2013, Chairman and MD Sudipto Sen, along with Debjani Mukherjee, the Director and Arvind Singh Chauhan, were arrested from Kashmir. After their arrest, SEBI asked Saradha Group to immediately stop raising any further capital and return all deposits within three months.

In the written confession, Sudipto Sen also confessed that several Trinamool Congress MPs were also involved in the scam. According to few reports, MPs Kunal Ghosh and Srijoy Bose, former West Bengal Director General of Police (DGP) Rajat Majumdar and Sports and Transport Minister Madan Mitra were allegedly involved in the scam.

The West Bengal chit fund scam brought together various government agencies like SEBI, RBI, the income tax department, finance ministry as well as the corporate affairs ministry to investigate the scam together to get deeper information. In a few weeks time several officials of Saradha Group were arrested and several properties were seized.

In May 2013, the Central Government set up an inter-ministerial group with members of the corporate affairs ministry, SEBI, Reserve Bank of India and officers from the Income Tax Department. This group was meant to unify the regulations of investment schemes, since those were governed by different laws and regulation and were more prone to fraud and regulatory loopholes. The SEBI Act was also amended so that SEBI had the power to search and seize without prior magisterial permission to investigate illegal money collection schemes.

The West Bengal state government then set up a Special Investigation Team (SIT) to probe the case. The SIT was headed by the then Kolkata Police Commissioner Rajeev Kumar and he was involved in the investigation for about a year. The case was transferred to the CBI in 2014 at the request of the Supreme Court. As per the CBI, the SIT headed by Kumar had not handed crucial documents to the CBI, and they further suspect Kumar as a potential accused in the case as he along with his colleagues were avoiding the agency investigation.

So when the CBI tried investigating Kumar and tried to approach him at his Kolkata residence, they were stopped by the Kolkata police, which again raised an alarm against him. So the Supreme Court then ordered the CBI to further investigate him and find out his links with the Saradha scam. This was done in Shilong and during this time Mamta Banerjee staged a three day protest against the CBI’s move in a bid to save democracy.

The Group allegedly also had connections with Congress leader and former union minister Matang Singh, and the Assam BJP leader Himanta Biswa Sharma, who was then in the Congress. The ED questioned Sharma’s wife Rinki in February 2015 for accepting money from the Saradha Group to run advertisements on her TV channel in Assam. The agency also questioned TMC MP Arpita Ghosh in the case. Senior BJP leader Mukul Roy, who was then TMC general secretary, was also questioned by the CBI in connection with the scam in 2015.

Though after so much interrogation and investigation Sudipto Sen was finally jailed for seven years and various cases remain pending on his name. The CBI in their effort to retrieve the money of the investors are still trying to bring back the money sent abroad, so that the small and middle class investors could get a sign of relief after this scam. During the post scam phase, every next home had a bankrupt depositor or an agent. People who were once friends became enemies. Happy households became miserable and even traders lost interest in opening shutters. 

According to various media reports, around 210 agents, depositors and executives/ directors of various money pooling companies have committed suicide after the Saradha Group’s collapse. These kind of luring schemes and high yielding investing options sometimes seem attractive and a game changer for a common man, but the common man should wisely identify the potential threat that could be associated with these luring schemes, and hence take every single step wisely, and just not get misled.