survey company was suspiciously similar to a Ponzi scheme.

In a story on Speak Asia in May 2011, ET Wealth had pointed out how the business model of the survey company was suspiciously similar to a Ponzi scheme. In the weeks that followed, the Speak Asia bubble burst and top functionaries were taken into custody for financial irregularities.


Tucked away in a small corner of the story was information on another case of cheating: the Stock Guru scam by Ulhas Khaire. Earlier this month, the police arrested Khaire and his wife Raksha for allegedly cheating almost 2 lakh investors of Rs 1,100 crore.

These are only two cases in a minefield littered with scams and fraudulent schemes. Speak Asia went bust because it made the cardinal mistake of appearing in the limelight.

The company launched a multimedia blitzkrieg and tapped the upper layer of the urban market, thus inviting a scrutiny by the authorities. Other, similar survey companies continue to operate in smaller towns and semi-urban areas without any hitch. Hundreds of unauthorised outfits are collecting money from the public by promising 40-50% returns.

Awareness is the first level of defence against such scams. In the following pages, we look at some of the most common types of scams and tell you how you can avoid them. Some of these fraudulent schemes have obvious red flags. In other cases, the catch is more nuanced and you have to be more careful.

Take the projections of companies with a pinch of salt. For instance, teak plantation companies like to calculate the returns from trees based on the retail price of wood. So, if you own 100 trees and each tree yields around 40 cu ft of teak, you have about 4,000 cu ft of wood.

The retail price of this wood can certainly fund your retirement, but you must remember that cutting the trees, transporting them to the factory, waiting for the wood to dry and mature, and ultimately sawing it into logs will incur their own cost. As a planter, you won't even get 50% of the retail price for your produce. Keep this in mind when you invest in a plantation company. As Prime Minister Manmohan Singh warned, money doesn't grow on trees!


Don't be lured by supernormal returns

The best way to double your money is to fold it in half and keep it in your pocket, goes an old joke. The victims of the Stock Guru scam may not find this amusing. Nearly 2 lakh small investors poured in an estimated Rs 1,100 crore into the scheme, convinced that it would earn them 20% per month. Many of the victims were poorly educated and financial illiterates, such as Karnal-based Sandeep Sharma.

This high school dropout claims to have lost Rs 1.25 crore in the scam. However, even well-educated professionals and seemingly savvy businessmen did not question how Ulhas Khaire could pay 20% per month for six months and return the principal in the seventh month. "We were blinded by the greed of high returns," admits Ankur Sachdeva (see picture). The Delhi-based businessman has spearheaded the efforts of Stock Guru victims to bring Khaire and his wife Raksha to justice.

Earlier this year, investors in the Gold Sukh scheme in Jaipur suffered the same fate. The scheme had promised to pay investors up to 150% returns in 18 months by investing in gold futures. It was obviously a sham and the scheme promoter, Narendra Singh, made off with Rs 200 crore. However, the long arm of the law caught up with him in Vietnam, from where he was extradited to India. Singh died of a heart attack in a Jaipur jail in September this year.

Similarly, there are stock advisory companies that promise to more than double your money in 3-4 months. A telemarketing executive will call you with a plan that turns your Rs 10,000 into Rs 30,000 in 3-4 months.