Top 10 Biggest Financial Scams of India
INTRODUCTION
India is a country with a large population and a growing economy. As a result, people have many opportunities to make money through scams. The increasing number of scams in India is stealing away the hard-earned savings of many people.
These are when people are lured away from their hard-earned money by evil people that promise to make them rich. At any given time, many scams seem to be circulating. In this blog, we have compiled a list of the top 10 biggest financial scams in India :
The 2G spectrum scam began in 1996 when the then-telecommunications minister of India, A Raja, announced that the government would auction off 2G spectrum licenses. Raja claimed that this auction would raise money for the government and help to improve telecommunications in India. However, Raja and his team did not intend to auction off the licenses. They instead used the licenses to create fake companies and sell them to telecommunication companies at high prices.
?These companies then used the licenses to build illegal networks under Indian law. This caused massive financial losses for the government and led to widespread unemployment. It also damaged relationships between India and other countries, including China and France. The 2G spectrum scam is one of India's biggest financial scandals.
The Commonwealth Games scam of India is an alleged corruption scandal that occurred during the construction of the Jawaharlal Nehru Stadium, also known as the "JLN Stadium," for hosting the 2010 Commonwealth Games in New Delhi, India. The project cost approximately US$210 million (approximately Rs. 1,200 crores) but was not completed fully before the games began. Using his arbitrary authority as the head of the organizing committee, Suresh Kalmadi was involved in misappropriating the funds throughout the planning stage. The sanctioned amount was initially 1000 crores rupees. However, it was later raised to 2460 crores, and the funds were siphoned in the areas of bus services, metro services, and the opening ceremony. Despite the expense, the venue's upkeep was delayed, suitable amenities were lacking, numerous last-minute issues and the program management experienced a severe setback. A Central Vigilance Commission investigation followed, which resulted in Kalmadi's removal from the committee, his arrest on April 25, 2011, and his expulsion from the Congress Party.
Satyam Scam is an accounting fraud that involved the fraudulent sale of optical fiber assets by Satyam Computer Services, a computer services company in India. The scam was discovered in early 2009 and led to the bankruptcy of the company and the arrest of its founder and CEO, Ramalinga Raju. On February 27, 2013, the Indian IT firm Satyam Computer Services Ltd. (formerly Satyam Computer Services (India) Limited) filed for bankruptcy in the United States. The investigation revealed that Satyam executives had inflated profits and sold off assets to cover up $2 billion in debt payments. As a result of the fraud, Satyam shareholders lost over $1 billion. Satyam executives knowingly committed fraud by creating false financial data. And because Satyam was claiming to be acquiring another company with a large backlog of orders, it was especially important to create the illusion of financial stability. The lawsuit claims that "plaintiffs were misled into believing that Satyam was a financially sound company, when in fact it was not.
In early December 2009, Harshad Mehta promised investors high returns on investments in his new company, which he said would be based in the United States. However, the money that was supposed to be invested never materialized, and many involved people lost their money. He used the Ready forward transaction, a short-term financial vehicle for banks where brokers serve as the middleman. Harshad Mehta found the RF deal's vulnerabilities and exploited them to make money. He employed RF deals as a chain system, which enabled him to amass a significant amount of funds. He fabricated receipts for banks and elevated equities through stock manipulation. He began to experience losses when the market began to crash and could not repay the banks for their money. Harshad Mehta was detained by CBI and charged with multiple crimes, including money laundering, securities fraud, and conspiracy. The scandal has caused significant financial damage to many people and institutions involved, resulting in several high-profile officials' resignations. As of now, it is unclear how much money has been lost as a result of this scam, but it is estimated to be in the billions.
It is regarded as India's largest corporate fraud and rocked its financial system. The well-known jeweler and designer Nirav Modi is the main suspect in the 14,000 billion rupee fraud. Thanks to funding received through a buyer's credit from the Brady House branch of Punjab National Bank, which operated as the importer's bank, Nirav Modi's business Firestar Diamonds started to expand and grow internationally in January 2018. Normally, collateral or cash margin is required for the letter of undertaking, which serves as a bank guarantee and is subject to the responsibility to pay the loan amount if the borrower defaults. This enables a person to obtain loans from a bank's abroad branch. A fraud that lasted six years resulted from an unauthorized reissue of an LOU for jewels that were issued beyond the standard 90-day validity period, fake audits, certain personnel who conspired, and the use of shell businesses. Nirav Modi, who now stands incarcerated, fled to London. Although he has filed an appeal, an extradition pact between India and London has been approved to extradite him.
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?In 2001, ABG Shipyard, a firm connected to the ABG group, was engaged in the shipbuilding and repair industry and obtained financing from a group of 28 banks led by ICICI Bank, IDBI Bank, and SBI Bank for five years, from 2012 to 2017, but did not utilize the funds for the intended purpose. The CBI claims that ABG Shipyard was labeled as a non-performing asset, or NPA, in 2013 for non-repayment of loans because of financial difficulties brought on by the global financial crisis in 2008. As a result, SBI discovered the fraud in January 2019 and reported it. According to an Ernst and Young audit, loan funds were misallocated and detoured to be invested through foreign subsidiaries or shell companies, resulting in a criminal trust breach with the intent to make money illegally off the loan funds. The CBI filed an FIR in February 2022 after requesting explanations regarding the allegation SBI had submitted in 2021.
The notorious case of Vijay Mallya's money laundering of bank loans totaling Rs. 9081 crores (estimated amount, including interest) is well known, making him the first businessman to be pronounced a Fugitive Economic Offender(FEO). Mallya owned Air Deccan in 2012, during the collapse of the world aviation business, and as a result, he had to borrow money from 17 banks. He never paid back these loans, and he managed to avoid capture by fleeing the nation. He owes more than Rs. 1600 crores to the State Bank of India alone. Before his 2016 arrest, he fled to Britain, but a warrant was issued for his arrest, and he was arrested and later released on bond, which totaled 65,000 pounds and required him to turn up his paperwork.
A transaction for Rs. 1,437 crores involving AB Bofor and India in 1986 by an agreement to purchase 400 150 mm Howitzer cannons. A Swedish audit report claimed that AB Bofor used bribes to influence several Indian authorities involved in the transaction. All of these accusations were swiftly refuted by the Indian government. However, an article published in "The Hindu" exposed the fraud, which led to the investigation and discovery of the fraud. When the Rajiv Gandhi Government abruptly halted the probe, Bofors decided to send a delegate to handle the situation.
The Hinduja brothers, Ottavio Quattrocchi, an Italian businessman, and other individuals were named in an FIR alleging abuse of authority, fraud, criminal conspiracy, and forgery. The CBI then began an investigation into the matter. Five Swiss bank accounts were frozen, and 18 names of potential middlemen were provided. The case was later dismissed due to a lack of evidence and investigation flaws.
A sophisticated money robbery of Rs 2800 crores in the form of stocks was committed from April 2016 to October 2019. Karvy Stock Broking Company quickly became one of the most well-known retail brokerage companies, and investors began using Karvy for their transactions and conversions to Demat accounts. Without the investors' approval, they fraudulently obtained various bank loans using the securities they had placed in the company's trust to finance their real estate firm, Karvy Realty.
The diverted sum was never disclosed in documents issued to the National Stock Exchange to avoid being discovered. SEBI issued a circular requesting stock broking firms to abstain from pledging securities, but Karvy omitted to do so, and an investigation was launched, and a scandal came to light. Karvy was removed from membership in the Bombay Stock Exchange and the National Stock Exchange, auctioning the company's securities, and an inquiry into possible financial fraud by the Union Ministry of Corporate Affairs.
In Kashmir, a search on a terrorist base took place in the 1990s. It disclosed the details of this fraud. Two Jain brothers, commonly referred to by the name Hawala siblings, are key to the plot of this con. During questioning, the terrorist admitted to the police that the Jain siblings and their family served as conduits for the Hawala payments their organization received. Based on the interrogation, the CBI searched Surendra Kumar Jain, his siblings, family members, and companies. Politicians, including L K Advani, Arjun Singh, Yeshwant Sinha, and Madan Lal Khurana, who were reportedly channeling illicit funds to terrorists via the Jain brothers, were also brought to light by the fraud. Bribery totaling about $18 million was committed.
Conclusion
The amount of funds that these fraudsters have so far stolen is absurd. The growth of our country may have benefited from this money. Our country must continue to come first. Strict regulations should be passed against these fraudsters to prevent future scams. As you read this post, other scams are possibly occurring, but we aren't yet aware of them. The government should devote much effort to stopping these scams to spare us from more such losses.