On a rainy Wednesday evening in Mumbai, security guard Manohar Hatankar, school-bus driver Shreyas Birwadkar and law student Vaibhav Sasane met with 15 others to discuss their plight.

They were thinking of ways to get back their money, invested in a scheme called Smart Buy, which now looks like another dubious multi-level marketing gimmick.

Most had quit low-paying jobs, taken in by the lure of high returns. Some even got friends and relatives to invest in the scheme. That very day, their MPs had passionately debated the issue in the Lok Sabha, speaking of the need to protect gullible investors from Ponzi schemes, and unanimously passing amendments to a SEBI law to check such schemes.

The promoters, identified in a police FIR as Sadanand Patkar, Shrikant Gurav, Diptesh Singh and Raj Kanojia, promised investors returns as high as 60 per cent in five months, after tax. The business activities involved dairy farming, strawberry plantation, goat rearing and fish farming, all of which have short gestation periods

The investors allege that over 100,000 people across Maharashtra, mostly from the lower middle class, may have been hoodwinked into investing in the scheme. They assert that the scheme had 130,000 accounts, with some investors holding more than one account. Some had created a chain of 500 people below them. The company, too, is said to have touted such numbers in its presentations.

The promoters changed the name of the company every time the previous one went bust, and even registered the new ones.

Smart Buy Houseware Private Ltd (the product selling company) was converted to Smart Buy Land Developers, which gave way to Sanjeevan and a non-banking finance company called Sarthak.

All this happened in less than three years, according to the investors. Sarthak went bust in just 15 days with investors staying away.

Anatomy of the scam In 2011, Patkar approached investors in suburban Mumbai’s Kandivali and Satara districts with a multi-level marketing scheme. The initial investment amounts were low, at ₹350 per month, said school-bus driver Birwadkar, 40. He had quit his job to market the scheme full-time.

“Patkar was a powerful orator … We were all hooked. When he asked for our full involvement, we just gave in. He even asked us not to read newspapers or watch too much television and instead focus on making it big,” said Sanjay Telange, another investor. “Little did we realise that he was trying to insulate us from the outside world.”

So, what was the company trying to sell? Nothing.

Says Kirit Somaiya, BJP Member of Parliament: “There is no business, whether it is multi-level marketing, a chit fund or a Ponzi Scheme. It is just iski topi uske sir par (taking people for a ride).”

In July 2013, the company asked investors to again invest in Smart Land Developers and arranged a field visit to see plots in Satara and Rajapur, where it would supposedly have the fish farming business.

Fake agreements were signed with investors and more promises made on returns from dairy farming, strawberry plantation, goat rearing and fish farming.

‘Leave it to us’ When the investors questioned the promoters about how the company assured high returns, elaborate calculations were done on white boards. And they were told “to leave it to the promoters,” said Hatankar, the security guard.

Six months later, when the investors asked for their returns, the promoters assured them payment in 15-30 days. But as the investors started asking them questions, the promoters fobbed them off with foul language, the investors allege.

The investors approached the local police in March but could register an FIR only in June, after the local Deputy Commissioner of Police intervened, an investor said.

Following the complaint, one of the promoters, Raj Kanojia, was arrested.

The investors now want the investigation transferred to the CBI. They hope that the Government’s latest step to give SEBI the power to weed out such schemes will help them, too.

Key Points :

*The FIR estimates that 500-550 investors had invested about ₹ 2.5 crore in the Smart Buy Scheme.

*Investors expect the amount invested to be more, as over a lakh investors are estimated to be involved with this scheme .

*Recent Lok-Sabha debate pegs the size of such dubious schemes at a conservative ₹ 1 lakh crore in the country.

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