Karnataka sees over 1k financial frauds since 2011

Mangalore Today News Network

Bengaluru, December 30, 2024: Karnataka has reported over 1,000 cases of financial fraud since 2011, involving scams that duped investors and depositors of thousands of crores of rupees. Of these, 587 cases were reported in Bengaluru alone.

The frauds span non-banking financial companies (NBFCs), small chit funds, as well as fraudulent investment schemes.

Between 2011 and 2024, the state reported 1,022 financial frauds. After Bengaluru, Mysuru city reported the second-highest number of cases (79), followed by Kodagu (41) and Mysuru district (25), according to the data available with DH.

A defining moment came in 2018 when Bengaluru was rocked by four major financial scams involving TGS Construction Pvt Ltd, Dreamz Infra India Pvt Ltd, Vihaan Direct Selling Pvt Ltd and Vikram Investments.

The Vikram Investments case, a Ponzi scheme, defrauded 2,420 investors, including high-profile individuals such as former cricketer Rahul Dravid, badminton great Prakash Padukone and Olympian Saina Nehwal.

Since 2019, these cases have been investigated under the Banning of Unregulated Deposit Schemes (BUDS) Act. Prior to that, they attracted the Karnataka Protection of Interest of Depositors in Financial Establishments (KPIDFE) Act.

Bengaluru saw only a few financial fraud cases between 2011 and 2014, but numbers surged in 2015, when 23 such cases were reported. The cases peaked between 2015 and 2022, before plateauing out in 2023 and 2024, the data shows.

The two biggest surges occurred in 2018 (106 cases) and 2021 (100 cases).

The Criminal Investigation Department (CID) is handling 653 cases involving losses of Rs 50 crore or more, while local police are investigating the remaining cases.

CID DGP MA Saleem attributed the sudden spike and subsequent fall in cases to increased public awareness.

"After a few sensational cases came to light, people became more vigilant and began filing police complaints," he told DH.

A CID investigator explained that many frauds originated in the early 2000s as middle-class families began investing their savings in small chit funds, which later grew into NBFCs.

Madhura Veena, Superintendent of Police (Deposit Fraud Investigation Division) at the CID, attributed the 2021 spike to the economic slowdown caused by the pandemic.

According to her, small chit funds and even established businesses faced headwinds during the economic downturn.

Data bears this out.

In 2021, criminal cases were filed against 43 financial institutions and small financial firms, compared to the usual 18–20 cases per year before that. That year also reported the most victims and the highest financial loss.

The Vashista Credit Souharda Sahakari Ltd scam, which came to light in 2021, involved an estimated Rs 257 crore. Also, most FIRs in the Popular Finance scam were also filed that year.

Despite their best efforts, the authorities have struggled to recover the embezzled funds.

A CID official noted that the BUDS Act, which replaced the KPIDFE Act in 2019, has made asset seizure and impoundment a lengthy and complex process.