Khushi Rastogi
In the infamous and recent IMA scam, a private firm called I Monetary Advisory Group had allegedly promoted a Ponzi scheme offering high returns in range of 36 to 64% on their investments, at very low risk. The investment schemes floated were represented as being in line with Sharia principles of Islam.
In a span of 5 years, the company and its founder, Mohammed Mansoor Khan attracted thousands of Muslim investors belonging to middle class. The success of the firm, which invested in gold bullion trading, real estate, healthcare and other businesses, also attracted patronage from local politicians. IMA firm was widely viewed as means for conveniently converting black money into white money.
The firm fall trap to slowing economy and lack of investors; in around October 2018 the IMA firm came under the radar of RBI and other agencies. But as Mansoor Khan had strong political ties with influential politicians in Karnataka, his firm managed to evade action till June 2019 despite being accused of siphoning off nearly Rs 4,000 crore of funds for the personal benefit of the owners of the firm.
However, soon after the action was brought upon him, he went underground leaving an audio message for the police. In the message he blamed R. Roshan Baig (MLA from Shivajinagar, Karnataka for the fall of the firm.
Khan alleged that Baig borrowed Rs 400 crore from the firm and failed to return it. He has also accused other politicians and officials of bleeding IMA resources.
Mohammed Mansoor Khan
Mansoor Khan, a Management graduate who returned from the Gulf, co-founded IM Advisory (Illyas-Mansoor Advisory) in 2006. The company offered to deliver 7-8% returns upon investments to its “Partners”. However, the business failed and company was dissolved in 2008. In 2013, he launched I Monetary Advisory Private Limited which was represented as an Islamic Company.
He deliberately kept the initials – “IMA” of his previous company to mislead his clients into believing that it was a continuation of the same company founded in 2006 having a successful business of several years’ standing, promising them that the company would build hospitals and schools. Later under this IMA umbrella he further diversified his business.
Ties between Mansoor Khan and Roshan Baig
R. Roshan Baig is a former seven-time member of the Karnataka Legislative Assembly (representing Shivajinagar) and Minister from South Indian state of Karnataka. He has been in close connections with Khan and the IMA group since IMA funded Rs. 16 crores under a special PPP MoU for construction of a government school in Shivajinagar. Baig reportedly aided to resolve problems faced by IMA firm, at government level.
His son is reported to have close links with IMA group too. However, it was claimed by Baig that all his ties with IMA were restricted to the school funding. Karnataka C.M. H D Kumaraswamy ordered the creation of a Special Investigation Team (SIT) to probe the IMA scam, after Khan went underground.
Modus Operandi
To invite investments the primary strategy he used was to represent his company as an Islamic company. He aimed at investors coming from a specific religious denomination and to gain their trust he teamed with local maulvis and Muslim netas to speak for him.
He presented himself and his employees as a devout Muslim; make donations to masjids and madrassas; every investor would be gifted with a holy Quran. As he expanded his business in areas like- jewellery, realty and infrastructure etc. soon Mansoor Khan and IMA became a household name among Muslim investors.
His modus operandi was the Ponzi Scheme[1] which he floated among his investors, ensuring them of 36-64% on investments, at negligible risk. Ponzi schemes are an investment fraud which generates returns for the earlier investors from the money invested by the new investors.
It is similar to a pyramid scheme as it is based on using new investors’ funds to pay the earlier backers. However, just like a pyramid scheme, a Ponzi scheme also bottoms out when there is a lack or absence of new investors.
If there are no new investors, then the company will be unable to generate new income out of which it will pay the promised high returns to original investors. Thus, a Ponzi scheme depends on constant flow of investors and when the flow runs out, scheme failed. This scam is also famously known as the “Ponzi scam of India”.
Initially Khan’s Ponzi scheme furnished the promised high returns to his investors which allowed him to expand his business. But bound to fail, his scheme faced a major slump in after 2017, when the returns started shrinking from 9% to 7%. In 2019, investors panicked when the returns fell down to 1% and then simply died out.
Investors were left dry and shocked with IMA’s office shut down. Khan was flooded with investments withdrawal requests and after police investigation into the matter, he went underground.
Probe and Arrests
Mohammed Mansoor Khan was arrested on July 21,2019 by the Enforcement Directorate (ED). He was sent to judicial custody. However, on 29 October, 2020 he was granted bail by the Karnataka High Court on the ground of his ailments for seeking better treatment at hospital.
The SIT constituted by Karnataka Government is probing into the matter before handing it to CBI. As on this date, over Rs 3,000 crore are outstanding in the form of principal amount and interest in respect to 76,000 investors.
Further, the former minister Roshan Baig was arrested by CBI on November 21, 2020 and detained in quarantine centre at prison.
Timeline of Recent Updates in IMA scam case
- October 17,2020 – State Government issued orders suspending 3 police officers accused of protecting interests of Mansoor Khan instead of protecting the interests of investors.
- October 28,2020 – Karnataka HC grants bail to prime suspect Mohd. Mansoor Khan on the ground of ailments.
- November 13,2020 – Special Officer IMA scam, Harsh Gupta declared that authority will accept the claims of IMA scam victim investors from November 25 to December 24, 2020 (can submit through online mode). No applications to be accepted after stipulated period.
- November 21,2020- CBI arrests former Karnataka minister Roshan Baig.
- November 22,2020- CBI searches Roshan Baig’s house.
- November 24,2020- CBI questioned IPS officer IGP Hemant Nimabalkar.
- November 26,2020- Roshan Baig Hospitalized.
- December 1,2020– Roshan Baig back in prison after hospital stay; Bail not granted.
- December 5,2020- Bail granted by Special Courts for CBI cases.
Persons Accused/Suspected – (Current Status)
Mohd. Mansoor Khan – Main Accused
- Arrested on 19/07/2020 at the Airport by Enforcement Directorate (ED) and SIT, at the airport.
- Remanded to judicial custody of ED for further questioning.
- Stayed in jail/judicial custody till 28/10/2020.
- Bail granted by Karnataka HC on 28/10/2020; Ground – physical Ailments
- Current status: Has been released on bail after signing a bond of for Rs. 5 lakh and two sureties for the same.
R. Roshan Baig – Accused
- Special Courts on 5/12/2020 granted him bail on account of lack of prima facie materials suggesting his alleged involvement; also, upon medical grounds.
- Current Status: Out on bail after executing a bail bond of Rs. 5 lakhs with 2 sureties; Bail subject to other conditions.
Hemant Nimbalkar (IPS Officer, then posted as IGP) – Accused
- Karnataka Government has sanctioned his Prosecution by CBI- section 197 of the Criminal Procedure Code and also under section 170 of the Karnataka Police Act.
- The order states that IGP Hemant Nimbalkar showed undue interest to favour Mohammed Mansoor Khan, the MD of IMA, and he wanted to protect the activities of Khan and save him from any action by the government.
- Current status: A supplementary charge-sheet submitted against him by CBI; after questioning.
Ajay Hilori (IPS officer – the then DGP) – Accused
- Karnataka Government has sanctioned his Prosecution by CBI- section 197 of the Criminal Procedure Code and also under section 170 of the Karnataka Police Act.
- Alleged of demanding and accepting illegal gratification from Mansoor Khan.
- Current status: A supplementary charge-sheet submitted against him by CBI
EB Sridhara (the then DySP, CID); M. Ramesh (the then police inspector); P. Gowrishankar (the then police sub-inspector) – Accused
- Allegations;
- protected interests of Mansoor Khan instead of the interests of investors and depositors;
- submitted improper enquiry reports and recommended no actions against IMA;
- received bribes/valuable things from IMA.
- Current status: The state government has issued orders suspending the three officers on October 17, pending Joint Departmental Enquiry against the trio.
Total Estimated Loss and Affected parties
The total loss to the investors is estimated by police is at Rs. 2,500 Crore with the Enforcement Directorate stating that based upon an analysis of 105 bank accounts related to IMA it believed that Mansoor Khan had received ₹4,000 crore.
The total value of the immoveable and movable assets of IMA available for auctioning and settlement of claims by depositors stand at Rs. 475 Crore, which is only one-third of the estimated outstanding claims of Rs. 1,400 Crore.
Somehow it also affected the political affairs as Roshan Baig was suspended from the Congress party for indulging in “Anti-party activities” which is speculated to especially be in regard to the mushaira in Bangalore palace; Haj training camps and the schools which were all funded by IMA, in presence of Baig. Funded by IMA, Baig had held a mushaira in the Bangalore Palace in March 2019 to celebrate 20 years of the Bangalore and Hubli edition.
V.K. Obaidullah School was left with an uncertain future as it was heavily funded by IMA group. Mansoor Khan in 2018 had threatened to pull off his support from the school by stopping funding. On surfacing of this scam, the 92 staff that it (by then) employed stopped turning up to work, prompting the government to transfer state teachers from other schools in order to make up. IMA name and logo were removed from ‘Frontline Multi-speciality Hospital’ and subsequently faced acute shortage of funds for paying off debts.
It must be noted that both these institutions were located in Shivajinagar and were partly administered by the state government, even though they received heavy funding from IMA.
Further, the collapse also affected the Bangalore and Hubli edition of The Siasat Daily, a franchise operated under the banner of the main paper, whose printing IMA had been financing since 2017.
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Promising high rates of return or profits at no or low risk is characteristic of a Ponzi Scheme. ↑