51 lakh citizens lost Rs 15,483 crore in investment frauds, Mumbai police re-starts Economic Intelligence Unit

In the absence of a financial crime intelligence unit and the lack of oversight, a fertile ground was created for foreign nationals, including those behind the Torres scam, to establish operations in Mumbai, offer unprecedented financial returns, and dupe unsuspecting investors — all without the police having any prior knowledge or intelligence about the scheme. Thus, such mass frauds flourished without any checks.

As per the police commissioner’s order, the new EIU cell would be headed by a senior inspector (SrPI) rank officer assisted by two sub-inspectors or assistant inspectors and eight men (constables).

51 lakh people lost Rs 15,500 crore in 10 years in Mumbai

Underlining the need for having an intelligence unit for financial crime, the police commissioner’s standing order stated, “In the last 10 years since the formation of the Economic Offences Wing of the Mumbai police, there have been approximately 100 cases (96) registered under the provisions of the MPID (Maharashtra Protection of Interest of Depositors) Act. These cases involve a defrauded amount of approximately Rs 15,500 crore and over 50 lakh victims. The magnitude of the problem is therefore evident. In this context, it is felt that a mechanism for preventing the occurrence of such offences be brought into force.

How EIU will function

The mandate of the EIU will include, collection of information regarding ongoing deposit schemes operating in the jurisdiction of the zone on a monthly basis. This report must be sent by the Zonal DCPs by the fifth of every month (to the EIU). In addition, the EIU must also suo motu collect such information from field and social media sources and put them up before the joint commissioner of police, EOW. The data collected (by EIU) will later be categorised into regulated and unregulated schemes. In the case of the latter, a primary inference regarding the applicability of the BUDS Act (Banning of Unregulated Deposit Schemes) may be drawn. If the scheme is found to be in the nature of an unregulated deposit, the zonal DCP should forward it to the JtCP, EOW only for information. He/she should proceed with further action under the BUDS Act, wherever applicable.

Based on the inputs collected and due permission from the commissioner, appropriate discreet enquiry may be done (by the EIU). “If there is indication of fund diversion for purposes other than those from which assured returns may be reasonably expected, this fact must be noted. Alternatively, it may be a case of multi-level marketing or incentive-based referral schemes. All schemes categorised under the Red Category would be brought to the notice of the JtCP EOW by the EIU through proper channel, on file. The JtCP would then submit it to the CP Mumbai, who would decide the appropriate legal recourse to be adopted, the commissioner’s order reads.

Previous unit was dissolved over corruption

In the year 2020, the EOW‘s ‘Intelligence Cell’, which was in operation since the formation of the EOW, was dissolved following corruption allegations. Since its disbandment, the EOW has lacked a dedicated mechanism to gather intelligence on large-scale financial crimes and investment frauds. Former police commissioner Sanjay Barve, who once called EOW the “Settlement Branch”, believed that the Intelligence Unit, under the then Deputy Commissioner (DCP) of EOW, had been assigned more investigative cases than it was designed to handle. Despite the unit’s primary mandate being the gathering of intelligence, not conducting investigations, Barve raised concerns about the overreach. Additionally, amid corruption allegations against some officers, Barve decided that the Intelligence Unit was no longer necessary. At his direction the unit was dissolved.

EIU lacks power?

Sources within the police force have indicated that the newly formed EIU provides less rights to the officers working in it. If you are re-forming a crucial unit after 4-5 years then it should be upgraded once, but that’s not the case with EIU. The order for new EIU also does not speak anything on their specialised training. The old unit, which was specifically tasked with gathering intelligence on individuals and schemes targeting gullible investors with promises of high returns, consisted of a team of four to six highly trained and well-informed officers, supported by a group of tech-savvy constables. These officers underwent regular training by industry experts to enhance their ability to gather intelligence on economic offences. The old Intelligence Unit (of EOW) coordinated with the Fraud and Recovery Intelligence, Risk Containment Units, and Vigilance Units of major financial institutions, including the RBI and commercial banks. Through collaboration with these vigilance units, the Intelligence Unit was able to advise organisations on preventive measures against fraud and gather advance information on suspicious transactions. This early-warning system allowed the police to monitor potentially fraudulent activities before they could escalate.

After mass frauds like Torres, and CA Amber Dalal ponzi schemes surfaced, many had felt the need to revive the economic offences intelligence unit. Many officials argued that dissolving such an essential unit over corruption allegations was a poor choice. They contend that there are alternative measures, such as transferring or disciplining the rogue officers, rather than dismantling an entire unit that had a critical role in addressing rising financial crimes.

Major ponzi schemes & investment frauds in Mumbai

* Torres ponzi scheme mass fraud: In this cashback form of investment fraud, people were lured into investing money, promised weekly interest ranging from 4 to 12 per cent. Nearly 15,000 victims from Mumbai, Thane, Navi Mumbai and Mira Road lost around Rs 150 crore to a well-organised fraud allegedly committed by Ukrainian-based masterminds.

* Amber Dalal case (2024): CA Amber Dalal defrauded 2,009 investors of ₹1,100 crore through a ponzi scheme, promising monthly returns of 1.5%-1.8%. Assets worth ₹67 crore were attached by the ED after his arrest.

* Heera gold investment fraud (2018): Prime accused Nowhera Shaikh of Heera Gold group of companies along with her associates allegedly carried out an investment fraud in which over 250 people were duped to the tune of Rs 18 crore. Shaikh is facing multiple fraud cases across India for allegedly duping thousands of people to the tune of Rs 500 crore across the country.

* Conman Chandrashekhar (2015): Chandrashekhar, posing as an MP, duped 500 people of ₹19 crore via Lion Oak India. He was arrested along with actress Leena Paul.

* Qnet scam (2013): Around five lakh investors lost ₹1,000 crore in a pyramid scheme run by Michael Ferreira and others under QNET.

* City Limousine Scam (2007): Over 65,000 investors were swindled of ₹980 crore in Mumbai alone, with total liabilities exceeding ₹2,885 crore.

* SpeakAsia scam (2010): The company duped 24 lakh investors of ₹2,276 crore, funneling ₹900 crore abroad through fraudulent marketing surveys.

* Sai Prasad scam (2017): Nearly 20 lakh investors were defrauded, with ₹3,000 crore worth of properties seized for repayment across India.