The Enforcement Directorate (ED) arrested three promoters of a south India-based company over money laundering charges in connection with a Rs 6,300 crore alleged ponzi or chit fund fraud case where lakhs of investors hailing from various states were duped, the agency said on Wednesday.
The three persons-- Avva Venkata Rama Rao, Avva Venkata S Narayana Rao and Avva Hema Sundara Vara Prasad, are the "main accused" in the case and promoters of the Agri Gold group of companies. "They have been arrested for their involvement in committing the offence of money laundering," the ED said.
The three were arrested under various sections of the Prevention of Money Laundering Act (PMLA) on Tuesday and a special court in Hyderabad remanded them in 14 days judicial custody.
The agency also conducted raids at the premises of the promoters and auditors of the company in Vijayawada and Hyderabad and seized Rs 22 lakh cash, property documents and digital devices, the central probe agency said in a statement.
The ED initiated probe against the accused after going through various police FIRs filed against them in the states of Andhra Pradesh, Telangana and Karnataka for allegedly duping about 32 lakh investors after funds worth Rs 6,380 crore were collected from them.
Investors from states like Odisha, Tamil Nadu, Maharashtra, Andaman and Nicobar Islands and Chhattisgarh have also been duped through this ponzi scheme, the ED said.
"The scam was perpetrated by Avva Venkata Rama Rao through Agri gold group of companies. He had earlier worked in the golden forest CIS (collective investment scheme) fraud and having learnt the tricks of the trade in that scheme, he hatched a well-planned conspiracy," the agency alleged.
"He along with his seven brothers and associates set up more than 150 companies and started collecting deposits from general public with a promise of providing developed plots/farm lands or withdrawal at a high rate of return on maturity/pre-term," the agency charged.
It alleged the accused "engaged" thousands of commission agents to lure people with various schemes for hefty commission and managed to collect Rs 6,380 crore from a total of 32,02,628 investor accounts.
"In the end, the gullible investors neither got plots nor could recover their deposits. The group collected deposits illegally from across the country," the ED alleged.
The agency said Agri gold group of companies "did not obtain permission from the RBI to collect such deposits."
"SEBI has reported that the business of the Agri Gold Farm Estates India Private Limited (a group company) was nothing but a CIS and ordered the company to stop taking further deposits and return the money to the depositors,” the ED said.
"Instead of complying with the directions of the SEBI in letter and spirit, accused Avva Venkata Rama Rao opened new companies and started collecting deposits in the names of new companies on the pretext of real estate business with the help of an army of commission agents, thus, turning this into a ponzi scam," it alleged.
The ED said its probe found that the accused "never developed lands sufficient to give plots to all the investors."
"Even by their unverified claims, at the end they had only 5.5 lakh plots available with them," the agency said.
"Considering the huge discrepancy in the amount of land available, the group should have used all their resources in identifying, buying and developing more land parcels," it said.
"Instead, Avva Venkata Rama Rao and his family went on a siphoning spree and illegally diverted the public deposits and invested in myriad verticals and in private companies which were directly owned by their family," the ED alleged.
It said the accused "also set up companies abroad" and diverted large amounts of funds to off shore entities.
"Their names also figured in the Paradise Papers leaks (global data on offshore holdings of various entities that came to light in 2017) and they had incorporated companies with the help of the infamous law firm Mossack Fonseca in the Cayman Islands," the ED said.