27March

Crowd Funding's Dark Avtaar

Jacques Kallis is affectionately dubbed “Dozy” by his team mates owing to his droopy eyes and generally retiring demeanor when he does not have the cherry in his vice like right fist. But the Kolkata Knight Riders’ (and indeed South Africa’s)man for all seasons should have woken up with a start after the events surrounding the collapse of the Saradha chit fund. If Dozy is still groggy, let me point him to the logo that he sports on the right side of his barrel like chest when playing for KKR. Rose Valley was an entirely unknown name in West Bengal till ten years back. The reported owner of the group, Gautam Kundu, is allegedly the proud owner of a Rolls Royce now among a fleet of similar desirable cars on the back of a business that is dreadfully similar to that of Saradha.

I am not sure whether Shah Rukh Khan and his KKR management team conducted a due diligence on Rose Valley before giving them pride of place on the team’s jersey. A call to the Securities Exchange Board of India would have sufficed. A couple of years back, SEBI had barred Rose Valley along with eerily agriculture theme based blade companies ( Botanist Biotech, Greenage Agrotech, Penacia (sic) Plantations, Rainbow Greenfields and Sonali Agro) in West Bengal from accepting deposits from the public in the guise of collective investment schemes.

Chit fund regulations clearly enunciate that they can accept deposits only from their share holders but not from the general public. The counter strategy adopted by these Ponzi operators has been to project all their depositors as share holders. To escape from RBI’s clutches whose remit does not extend to corporate securities, these organized robbers next hit upon the debenture route (an instrument that is not classified as a deposit) in a prolific manner but SEBI woke up finally and clamped down on such thinly disguised deposit raising products. Of course, you have to credit Sahara with inventing the debenture option to mobilize Rs 25,000 crores which is now a sub judice matter. Yet, Sahara’s financial innovation found many enthusiastic clones in the wastelands of India that votes for muscle men and banks with thieves.
Young educated Indians are now seeking crowd funding for their game changing ideas but chit funds have been playing this murky game for many years where the swindler takes it all leaving no room for dividends or other investor rewards.

Now that the debenture/bond route is under close scrutiny, financial engineers at Saradha, Rose Valley and their dubious peer group companies had conceived of the outrageous idea of masking deposits as advances towards purchase of land or even consumer durables. Now if one were to gross up all the land that is being supposedly bought by the unsuspecting savers of West Bengal, we may well have to spill over into Bangladesh and Nepal for adequate acreage! And if the rush for consumer durables is really as robust as the receipts from the chit funds suggest, Rakesh Jhunjhunwalla would have tanked up on companies that make screens and picture tubes by now.

Shah Rukh Khan is neither the first nor the last celebrity to have endorsed an enterprise with patently evil intent. Remember the HomeTrade swindle of 2002? SRK, Rakesh Roshan and Sachin Tendulkar were plugging for this mala fide company atop every billboard in Mumbai. To be fair to Indian celebrities, they are not the only ones that are culpable of sleeping with public enemies. West Indian cricketers had profited from their association with the now disgraced and jailed Ponzi operator, Allen Stanford.

The International Cricket Council presumably has an Anti Corruption Unit. Does their remit include the IPL? If yes, how come their antennas did not go up at the very sound of Rose Valley? It is quite another matter that the entire super structure of the IPL is built on a toxic foundation of tax evaded wealth routed through islands that have more registered companies than their population. It is ironic that India’s most formidable IT services company jostles for space with faceless jewelers on the outfits of Rajasthan Royals players when they could have easily bought the franchise without even blinking!

Early reports emanating from Kolkata suggest that the mastermind of Saradha was a pro peasant Naxalite during his college days. Obviously, his sympathy for the underprivileged has vaporized alongside the sharp erosion of values in India. If Charu Majumdar and Kanu Sanyal were still around, they would probably not have stopped at a hot pursuit of the fugitive called Sudipto Sen. Committed Naxalites don’t take prisoners, especially if he is a drifter from the lofty cause.

Posted in Talent Market Trends

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