For the past several years, Mohammed Shafifulla says, he ate a little less every day so that he could save a little more for his sister’s wedding.

The 23-year-old had been saving since he was in Class VII, when he started working part-time in a footwear shop for Rs 20 a day.

That became a full-time job when he dropped out of college, convinced that his five-member family would not be able to survive on the income of his father. By the time he was 21, he had managed to shore up Rs 1.5 lakh. But worried that the money might get frittered away if he kept it at home, he decided to invest it, along with the Rs 2 lakh his mother had got from selling her gold, in a company his mother’s sister spoke highly of: I Monetary Advisory.

The Shivajinagar, Bengaluru-headquartered firm, he was told, had been in the business for 13 years. Every month, investors were paid 1-3% of their investment, which had to be in multiples of Rs 50,000 and he could withdraw his principal anytime, after a 45-day notice. His aunt, he knew, had been getting payments regularly for the Rs 3 lakh she had invested the previous year. Moreover, he was assured that the proprietor, Mohammed Mansoor Khan, was working for the welfare of Muslims and the returns were from profits through trading in gold, not interest, which is forbidden in Islam. Shafifulla was convinced.

Once he had invested, amounts in the range of Rs 3,000 were promptly credited every month, and the family felt secure in the knowledge that a lump sum had been set aside.

However, from January 2019, the sums dwindled, finally ceasing altogether in March. When Shafi, as he is called, inquired at the IMA office, he was told there was a liquidity crunch because of elections. Not entirely convinced, he put in an application to withdraw his principal. There was no sign of money even after 45 days but each time he went to the office he was reassured that his money was safe and that he would get it back by Ramzan. To calm an irate Shafi, the staff gave him an official-looking document in English, purportedly signed by Khan, saying he would be repaid by June 10. On the morning of June 10, however, his supplier called him to say that he heard Khan had died by suicide.

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“I told him not to say that. When he asked me why, I told him I too had invested in IMA,” says Shafi, in the family’s three-room house in a crowded lane in Neelasandra near central Bengaluru. He soon got an audio clip on WhatsApp, in which Khan says his business was pushed to the brink by Congress MLA R Roshan Baig’s refusal to return Rs 400 crore he had borrowed from him, and that he, Khan, would be committing suicide. When a worried Shafi reached the company’s Shivajinagar office, he saw hundreds of panicky investors thronging the road outside. “I went back home after some time. By then my family had got the news and my mother was sobbing, threatening to commit suicide…. It took us so long to save that money. How will I ever get it back?” he asks, in quiet desperation.

Shafifulla is one of over 40,000 people who have registered complaints with the Bengaluru Police against IMA over the past two weeks, ever since news broke that Khan had disappeared. Thousands of victims have been shattered by what investigators now believe was a Ponzi scam, estimated to have caused losses of over Rs 2,000 crore.

To help people register complaints, the police set up counters in Ganesh Bagh, hall of a Jain trust, a 10-minute walk from the IMA offices. Anxious investors came from all over Karnataka and outside, to line up at multiple desks in a long shed under the shadow of an immense rain tree.

There was Riyaz Ahmed Saudagar who had left his home in Dharwad at 4 am to catch a train to Bengaluru, 450 km away, to lodge his complaint. Partially paralysed, with no regular income, he invested Rs 2 lakh in IMA in 2018, after hearing glowing reports from acquaintances in north Karnataka. There was Rafiya (name changed), a single mother from Mysuru, who used to roll beedis for a living and had invested Rs 2 lakh that her brother had given her seven months ago, for her two daughters.

And there was Azam Khan (name changed), who’s in the armed forces and had come down from Gwalior to find out what has happened to his life savings of `11 lakh, all of which he had put in IMA last year at his sister’s recommendation. Clutching his folder of documents, Azam is calm enough when he talks about how he sold his 1,000 sq ft land in Gwalior because its value was not appreciating enough and invested that money in IMA so that he could meet the expenses of his daughter’s wedding later this year. But he can’t hold back the tears when he talks about his wife, who collapsed when she heard about IMA: “She couldn’t bear it… she’s still in hospital.”

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Pawns of Ponzi

Despite laws against them and several well-publicised cases, Ponzi scams — where clients are promised unrealistic returns for depositing their money and new investors are paid using money put in by old investors — continue to proliferate. After all, it’s tough to resist an offer to make a quick buck, especially when it’s marketed as a “sure thing” and people around you are putting money into it.

In the last few years, Karnataka has seen a rash of such schemes targeting the Muslim community in particular, from the Rs 950 crore Ambidant Marketing scam to Nowhera Shaikh’s `3,000 crore Heera Gold fraud. But IMA, investors told each other, was different. Much of this misplaced confidence was inspired by the personality and propaganda of its founder, Khan.

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Hundreds of people who had put money in IMA rushed to its office in Shivajinagar after its owner Khan went out of the radar.

A salesman is only as good as his sales pitch. And Khan’s pitch was beguiling. To attract investments from Muslims, who are forbidden by Islam to accept interest, he said returns would be from the profits his company made by trading in gold, silver and jewellery. Company executives told customers that returns would fluctuate depending on business but it would nevertheless be in the region of 3% a month, to be paid regularly.

With his white attire, greying beard and constant references to Allah and the Koran, Khan exuded the aura of a respectable, pious man in the many YouTube videos and advertisements he appeared in. Investors were further encouraged by some community leaders who said Khan’s venture was compliant with the Sharia. To add to this, he was seen in the company of politicians like Shivajinagar MLA Baig, who would inaugurate his various ventures. Khan even renovated Baig’s alma mater, the VK Obaidullah government school. The message was that here was a devout, well-connected man who wanted to help his community. And they trusted him with their hardearned money.

With the money he collected, Khan opened large jewellery showrooms, first in Shivajinagar and then in the affluent South Bengaluru neighbourhood of Jayanagar. He also opened pharmacies, selling medicines at discounted rates, grocery stores and a hospital — all adding to his image of a “successful,” prosperous businessman.

IMA’s other calling card was that it was a 13-year-old company, conveying long years of experience. It’s a line investors repeat to you, when they talk about why they trusted Khan. Yet, conversations reveal that many of them had invested only in the last couple of years. Small wonder, because public documents show that IMA Bullion Trading Services was incorporated in July 2014 and IM Advisory in December 2013.

Khan built his clients’ trust in a multitude of ways. For one, payments were made without fail on the last day of every month, say investors. These returns, as well as investments, were paid through bank transfers, not cash. There was also a 10% TDS on the monthly returns. “They were even giving Form 16. Will a Ponzi scam ever give Form 16?” asks Mohsin Zaidi (name changed), a GRE teacher who says he invested Rs 13 lakh after watching Khan’s videos.

Unlike multilevel marketing and Ponzi schemes, IMA was set up as a limited liability partnership, where investors became partners, allowing it to skirt the provisions of the Karnataka Protection of Interest of Depositors in Financial Institutions Act, though it had come under the scanner of the RBI and the state police. Investors were not offered bonuses to bring in new clients either.

But since they were receiving returns as high as 36% a year, they voluntarily became ambassadors, talking up the company to family and friends. Most of them were middle-class or poor, but IMA also had wealthy clients, who were impressed by what they heard and the service they experienced.

“When you walked into their air-conditioned office, there would be young, well spoken executives who would patiently answer all your questions,” says Najma (name changed), a Bengaluru resident married to an engineer working in Oman, who invested Rs 10 lakh in November. “After hearing about all the other Ponzi schemes, my husband and I were apprehensive.

But about IMA, everyone had only good things to say. I had also bought gold from their shop earlier, which was of good quality.” She estimates that her extended family, educated and well-to-do, might have together put in around Rs 1 crore. Such was the image Khan created that even now, there are investors who refuse to believe he has abandoned the company.

“I can’t say he’s a bad man. If he had been planning to run away, why didn’t he do so earlier?” asks Kashif Ahmed, 29, who works in a tech company and believes Khan has gone into hiding, fearing politicians. “If he returns today and asks me to invest in his company, I will still do so.” Ahmed, who invested `5 lakh in IMA, had previously lost Rs 3 lakh each in Ajmera and Ambidant, two other Ponzi schemes.

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So far, Khan has eluded capture. A special investigation team has been formed by the Karnataka government and a look-out circular and blue-corner notice issued for Khan, who is believed to have escaped with his family on June 8. So far, 12 of the company’s directors have been arrested and some money and jewellery seized after raids at IMA premises. In another twist, on June 23, Khan uploaded a video on YouTube where he said he was abroad and appealed to Bengaluru Commissioner Alok Kumar to help him return to India and give him protection, claiming his life was under threat. He would, he said, reveal the names of those involved in running his business, reiterated that IMA was not a Ponzi scheme and added that he had assets worth Rs 1,350 crore that could be used to refund investors. As he is the main accused, the police are treating his offer with caution.

What investors are most concerned about is whether and how they will get their money back. The process, say investigators who have worked on such scams, will take time and depend on the identification and seizure of Khan’s assets. “It will also depend on how fast files move.

The investigation will have to be a coordinated effort by various departments, not just the police,” says VC Sajjanar, commissioner of police in Cyberabad and a veteran of multiple Ponzi scam probes. It will be the court, he says, that will decide the quantum of amount to be returned to each investor. The fact that transactions were made through bank transfers should help investigators quantify the scam amount.

Other officers, requesting anonymity, say the speed and success of the probe will also depend on political will.

For now, investors like Shafi are left with more questions than answers. Such as why no politician or community leader has come forward to reassure them. Or, why Khan has not been captured, even after 20 days. Shafi says: “I will fight as much as I can. But if I go out to protest, who will earn for my family?”





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