A new generation of Ponzi schemes in the guise of investment in Nidhi schemes, cryptocurrencies are on the rise in rural Bengal and could implode in the next five years unless corrective measures are taken, a joint research conducted by two universities of the UK and one of Calcutta, has warned.

The year-long academic effort to track reasons for recurrence of Ponzi schemes in Bengal by NUJS Calcutta, the University of Leicester and the University of Sheffield also suggested that people are likely to fall prey to a new gang of unscrupulous operators.

The researchers proposed changes to the legislation, political will and public awareness campaigns in a bid to curb the menace of Ponzi scams.

“The same playbook used from the 1970s has allegedly been deployed. Young graduates are being recruited in an agent pyramid with attractive commissions to raise capital as quickly as possible,” the paper, unveiled on Wednesday, said.

A Nidhi is a class of non bank finance company which if registered under the Companies Act enjoys exemption from core provisions of the RBI Act, including requirement of registration, maintenance of liquid assets and creation of reserve funds.

“The purported rapid success of these new scams show that the general population has already forgotten about the 2013 implosion (Saradha scam) and is again ready to go on yet another ride of promises and despair….We hope that the reformed economic offences directorate of the state would be able to investigate the allegations about this new breed of Ponzi scams and stop the next set of implosion, which if left unchecked will happen sometime between 2028 and 2030,” the researchers argued.

According to the members of the All Bengal Chit Fund Sufferers Welfare Association, who were present at the unveiling of the paper, many unregistered entities in the guise of Nidhi companies have started cropping up in Hooghly, Howrah, West and East Midnapore and Nadia and a few hundred crores have already been collected from individuals. They also pointed out how cryptocurrencies are peddled as get-rich-quick plans.

“Some of the agents and affiliates of the earlier Ponzi schemes are now trying to woo hapless people to invest in Nidhi schemes and cryptocurrencies like bitcoin. And they are successfully raising money,” said Rupam Chowdhury, state president of the All Bengal Chit Fund Sufferers Welfare Association.

Legislative changes

The paper, co-authored by Navajyoti Samanta, Shouvik Kumar Guha, Somabha Bandopadhyay, Kanchan Yadav, Atish Chakraborty, Arjita Mukherjee and Srinjoy Das, has also proposed a set of amendments to the Banning of Unregulated Deposit Schemes Act, 2019 and its implementation in the state.

“Getting hold of the agents and middle-men is not the solution, the absolute liability of directors, promoters, brand ambassadors and others involved in the propagation of these schemes must be defined more clearly,” the paper said adding criminal liability under BUDS Act must be made cognizable and non-bailable.

The paper has also proposed widening of the definition of deposits to include debentures, preferential shares, gold bonds, property purchase documents; creation of a single regulator and interministerial group to keep track of different kind of investments; creation of a special bench to act as the appropriate authority to try cases and strengthen the surveillance network by adding grassroot organisations who would be able to signal the start of a scam.

Retired Justice Ranjit Kumar Bag said there is a need for political will to change the mindset of people.

“Bringing in legislation alone will not address the issue. We need to create awareness and there has to be political will to do so,” he said.