Indians lose billions of rupees as they fall prey to online Ponzi scams

The police believe that after the scammers received large sums of money, they blocked the bettors or just shut down everything.

Nirmala Ganapathy

Nirmala Ganapathy

The Straits Times


An ad for Join Trade, an illegal Ponzi app, using morphed photos of celebrities Akshay Kumar (right) and Manish Paul to lure customers. PHOTO: ECONOMIC OFFENCE WING

May 16, 2023

NEW DELHI – In the eastern Indian state of Odisha, police found that 800 people, desperate to make some money, were betting on football matches that they did not watch in a Ponzi betting scam worth 10 billion rupees (S$162.5 million).

Among them was 30-year-old Himanshu Shekhar Pradhan, a cricket lover who had never watched a football match in his life.

He kept betting on football matches being played in other countries, including China, by following instructions relayed over social messaging apps Telegram and WhatsApp.

Within two weeks in August 2022, through commissions earned from bets and referral bonuses for getting others onto the apps, he saw the amount in his electronic wallet double to more than 200,000 rupees.

“I had this nagging feeling that it was some kind of scam, but then I saw others in my village betting and some were able to take out money. I got convinced. We all kept winning and earning commissions without losing a single bet,” Mr Pradhan, who runs a cosmetics shop, told The Straits Times.

He later found out through a simple Internet search that the matches were real, but the results were not. “I feel like I got greedy for money. I went into depression for three months after losing 100,000 rupees,” he said.

The police believe that after the scammers received large sums of money, they blocked the bettors or just shut down everything.

Investigators at the Odisha Police’s Economic Offence Wing found the scammers had worked through an intricate web of shell companies and real bank accounts “borrowed” from people who were willing to lend their accounts for a fee of 10,000 to 15,000 rupees.

The scammers would move the money through the shell companies and bank accounts before converting it into cryptocurrency to move it out of the country, the police said.

Gullible investors were allowed to take out small sums initially so as to extract larger sums of money from them, which is how Ponzi scams typically work.

In such an investment scam, victims are promised high returns and are initially paid with money from new investors. It usually collapses when it runs out of investors or the scammers flee with the money.

The police have found that another half a dozen Ponzi scams currently under investigation follow a similar pattern.

Five Indians, including the director of one of the shell companies, have been arrested, and six billion rupees have been traced in the football scam, which originated in Dubai and Hong Kong.

The police have also released a photograph of Mohammad Saif, a Dubai-based operator who is believed to be in India.

“These kinds of scams have increased in recent months. We found that in these Ponzi cases, the apps are registered in Hong Kong and operated from Dubai,” said Inspector-General of Police Jay Narayan Pankaj of the Odisha Police’s Economic Offence Wing.

He said a majority of those scammed were jobless youth, a growing problem particularly after the Covid-19 pandemic, during which many lost their jobs.

The police are surprised by how people have fallen for the most dubious of scams.

An advertisement for Join Trade, a Ponzi app, used morphed photos of Bollywood star Akshay Kumar holding a sign saying that he deposited 20 rupees and earned 2,000 rupees daily.

In another Ponzi scam, people were asked to shop for items on an online site for a commission. Victims were told the items would not be delivered, but they would make money from investments and commissions.

Mr Singh (not his real name) said he found nothing strange about the scheme and bought jewellery, apparel and shoes. The 51-year-old initially managed to withdraw 2,000 rupees in his e-wallet but ended up losing 800,000 rupees over two weeks.

“I realised my money is lost. I feel bad for myself that an educated person like me got sucked into this,” he said.

After Mr Singh made a police report, three people, including agents who convinced people to invest, were arrested.

The police in several states have been investigating Ponzi app scams.

Overall, India has seen a spike in cybercrimes, fuelled by the Covid-19 pandemic that led to high unemployment, people spending long hours online and greater adoption of digital payment methods.

According to the government’s Computer Emergency Response Team, cybercrimes – everything from hacking to phishing – soared by more than 250 per cent from 394,499 cases in 2019 to 1,402,809 in 2021.

The most prevalent scams in India are those involving phishing, identity theft, online harassment and cyber stalking.

“With the coming of Covid-19, the golden age of cybercrimes has arrived. We are beginning to see new innovative avatars of cyber criminal activities and online scams. We need to have dedicated legal frameworks to deal with the issue of regulating online Ponzi scams,” said Mr Pavan Duggal, a Supreme Court lawyer specialising in cyberlaw and cyber security.

He said the “lack of appropriate international cooperation on sharing the information” between countries linked to online Ponzi scams was also a major challenge.

Fake apps that are openly available online are banned by the government, but others quickly pop up in a continuing challenge for law-enforcement agencies.

When contacted, Google said it is working to keep users safe.

“Providing a safe and secure experience across Google’s products is our top priority, and we continuously update our policies across all our products to keep users safe from emerging threats and bad actors,” its spokesman said.

For instance, in 2022, Google removed more than 3,500 personal-loan apps from its Play Store. Victims of such scams were promised easy loans but found their phones hacked and data stolen amid threats to make them repay the loans at very high interest rates.

Increasing digital literacy remains key, experts said.

WhatsApp in December issued a set of six guidelines, including blocking suspicious accounts, for Indian users. It also launched a campaign called “Stay safe with WhatsApp”, telling users to report unwanted messages and use two-step verification.

The government this year also launched a Digital Literacy Programme aimed at helping at least one member of every household in India become digitally literate.

“App-based investments, ease of banking and the itch to make quick money have amplified the problem today,” said Mr Akshay Garkel, partner and cyber leader at Grant Thornton Bharat, a tax and advisory firm.

He said ways to help people avoid such scams include improving digital and basic financial literacy so they are able to “distinguish between genuine and fraudulent schemes that promise unrealistic returns in a very short timeframe”.

Still, experts warned that these kinds of scams would only increase amid greater adoption of technology.

Indians were already facing a high rate of online fraud at 69 per cent in 2021, according to the Microsoft 2021 Global Tech Support Scam Research report.

Another survey conducted by private firm LocalCircles found that 42 per cent of 11,065 Indians surveyed in financial year 2021 had experienced financial fraud in the past three years.

“When it comes to scams, it’s universal. There won’t be a country that would not fall for such tricks. Look at the amount the US lost to fake call-centre scams, it would be in billions of dollars,” said Mr Rahul Sasi, chief executive of cyber-security firm CloudSEK.

He added: “With the rise in technology, fraud will only go up in the coming years.”

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