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Top 10 Investment Scams

Indian financial industry has always been successfully able to trace every prospect offered by the
India's fiscal policy both in terms of alteration and expansion. In spite of all the endeavors
implemented to develop the financial market, it still remains fatally faulted due to lack of three major
key elements namely inadequate management, stringent accountability, and proper punishment.

As a result, the capital market of India has remained one-dimensional and has staggered from one
investment scandal to another. A straightforward listing of the top 10 investment scams narrates the
account of why Indian investors were left annoyed by the scamsters.

A brief about Top 10 Investment Scams in India

1. The Securities Scam


The capital market witnessed its foremost investment scandal in the form of securities
scandal in the year 1992. It revealed the utter anarchy and lack of administration in the
prevailing fiscal market. The money market at that time permitted funds to be relocated with
impunity from financial institution and corporates into equity and consequently witnessed
crores of bank's capital to transfer into brokers' account. This illegal market practice was
later asserted as "legal and acknowledged".

In an attempt to punish the tricksters, a special court was initiated and scrutinized around
70 cases registered by CBI. Surprisingly, not even a single trickster was found guilty by the
dreadfully sluggish judicial system. As a matter of fact, the scamsters made frequent
attempts to re-enter the market with same set of traps and resulted in losses to investors.

2. The IPO scam


Soon after the entry of international organizational investors, the Control over Capital
Issues was banned as the market saw heavy bull trend resulting in the revitalization of the
secondary market from the previous scandals. The ban of Control over Capital Issues
unlocked the prospects of massive scandal in Initial Public Offerings (IPO). The scam was
executed in two parts; the first part was carried out by the firms that increased their market
costs to incur profits in order to sponsor lucrative projects. The second part saw the unison
of small time merchants, CAs, investment bankers and traders to hoist new firms and
heave public capitals.

The IPO scam prevailed for three long years from 1993-1996 and finally saw its downfall
when the costs of the registered firm started deteriorating.
3. Favored share scam
The scandal was an outcome of the extensive cost fixing on the derivative market. Besides
increasing fresh capital, advocates of Indian firms promptly coordinated general body
authorizations to transfer shares to themselves on a privileged basis and at a considerable
reduction to the market, thinking that the share prices would never see the ground.
Conglomerates started this trend and accrued profits of nearly 55o crores until Securities
and Exchange Board of India (SEBI) formulated strict guidelines to abandon the market
practice.

4. CRB's cardboard scam


The ` 1000 crore finacial multinational named as Chain Roop Bhansali (CRB) was the only
biggest firm and most impudent of all to benefit and disappear in the loosened market
ambiance of mid-1990s. The services offered by his firm entailed FC collection, mutual
fund, banking, etc. The clearances obtained by the firm for the trading of these services
required sufficient inspection by SEBI and the RBI and the fact that they managed to qualify
shows the supervisory weariness of the regulators. Facilitated by the clearances and
profitable credit ranking, CRB accrued greater profits based on high value financing. The
CRB collapse not only affected the investors but also the other finance firms.

5. Plantation firms' scam


Since few firms in mid-90s were subject to no guidelines, the plantation companies during
that time also got away with profit protrusions. The plantation firms projected themselves as
a part of IPO and assured massive returns. The investors were lured and the companies
accrued profits from fake campaigns of around ` 8000 crores plus.

6. Mutual Funds scam


After several mutual fund scams, the UTI bailout reflected the lack of proper guidelines in
the Indian capital market. Since UTI was initiated under its own regulations, it was the tax
payers who suffered the loss of ` 4800 crore in the process. After three years, the company
was back purchasing Ketan Parekh's controlled scrips and incurring massive losses in the
process. The evidence of the private mutual funds performance has also been inconsistent
after hitting the downfall in 1999 and 2000. It took a considerable amount of time for capital
market to win back the trust of mutual fund investors.
7. The 1998 scam
The scamster of 1992 scam, Harshad Mehta came back with a bag of tricks again in 1998.
This time he lured investors through a website by trading stock tips. His unremitting
manipulation of several shares resulted in the much expected collapse of Bombay Stock
Exchange.

8. Home Trade scam


Initiated in 2000, Home trade invested rs 24 crore in promotional campaigns to attract
investors. The scam affected 8 co-operative banks that lost ` 82 Crore in EPF scheme. The
Chief Executive of Hometrade, Mr. Sanjay Aggarwal was convicted by Nagpur Police later.

9. DSQ Software Scam


In the year 2000 and 2001, the Managing Director of DSQ Software, Mr. Dinesh Dalmia,
was held responsible for ambiguous mergers and prejudiced allocation of the amount of
upto ` 595 Crores. He was later convicted in the year 2006.

10. Satyam Scam


After manipulating the firm's documents for several financial years, the former Chairman
and Chief Executive of Satyam Computers, Mr.Ramalinga Raju, was arrested for
committing scam, following unethical practice and forgery. He showed greater profits and
committed fraud of ` 700 crores.