$120 Million Ponzi-Scheme Busted in India.

The Economic Offences Wing (EOW) of India's Odisha Police has announced the arrest of a key figure in a massive pan-India Ponzi scheme that defrauded over 300,000 investors across at least ten states, with the total financial loss estimated to be over $120 million. Pratap Kumar Rout, the alleged Odisha head of the fraudulent company, Hedgex Fund LLP, was apprehended following a deep dive investigation into the operations of the multi-state fraud.

The company, registered in the state of Goa in 2023, operated a classic Ponzi model, luring investors with promises of impossibly high returns, ranging from 11% to 18% per month, supposedly through investments in the forex market. The scheme would pay small, initial returns to early investors to build trust and momentum before abruptly ceasing operations and going incommunicado. One complainant, reported being duped of over $111,000 of his retirement savings after being promised consistent monthly returns.

While the total scale of the fraud is estimated at over $120 million nationally, authorities have found that in Odisha alone, the scheme managed to dupe over 12,000 people of approximately $16.7 million. The illicit money was collected through a mix of bank accounts, cash, and hawala channels, often obscured using mule and third party accounts.

The scam’s reach spanned multiple states, including Andhra Pradesh, West Bengal, Assam, Uttar Pradesh, and Delhi. The probe has revealed that Hedgex Fund LLP utilized a network of associated entities, including Kaushalaya Foundation, Lavya World, Frix Market, and Lavya International, to further its fraudulent activities.

Speaking on the widespread nature of such frauds, the International Journal of Business and Management Invention, noted in a 2016 paper that "Ponzi schemes promise large returns on investments that are unachievable because they are solely derived from new investor funds," and that deception over expected financial returns is what makes these schemes illegal. The source further highlights that a lack of financial literacy and the allure of high commissions often leave the common person exposed to these sophisticated financial crimes. Authorities continue their investigation to expose the full nexus involved in the operation.

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