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The Securities and Exchange Commission has charged two India-based operators — Pankaj Srivatsava and Nataraj Kavuri — with exploiting investors offering a high-yield investment scheme via Facebook, YouTube and Twitter.
The SEC’s Enforcement Division has alleged that the two anonymously solicited investments for their purported investment management company — Profits Paradise — offering “guaranteed” daily profits. They invited deposits that would be pooled for trading in the foreign exchange markets as well as in stocks and commodities.
They created a Profits Paradise website and related social media sites to describe the profits as “huge,” “lucrative,” and “handsome,” and characterised the risks as “minimal.”
4,000 investors“Srivastava and Kavuri used excessive secrecy in their effort to swindle investors through social media outreach and a website that attracted as many as 4,000 visitors a day,” said Stephen Cohen, Associate Director of SEC’s Division of Enforcement. “Our investigation stopped the constant solicitations once the website disappeared, and successfully tracked down the identities of the perpetrators behind those fraudulent solicitations. They also communicated under the fake names of ‘Paul Allen’ and ‘Nathan Jones’.”
After the SEC began its investigation, the Profits Paradise website was discontinued.
According to Tejesh Chitlangi, Partner, IC Legal, “The activities carried out by the two Indian residents as explained under the SEC order, if proved, may be tantamount to fraud under Indian laws and attract liability independent of the actions likely to be taken under the US laws. SEBI may also investigate if any investments have been wrongfully solicited from Indian residents and if there is any violation of Indian securities laws.”
SEBI extends assistanceThe Securities and Exchange Board of India assisted the SEC in the investigation.
Fraudulent collective investment schemes are not uncommon in India. Some of the well-known schemes that tried to attract gullible investors include chit funds, emu and goat farming and investments in potato.
According to sources, an empowered SEBI now has a division to collect information from various sources, including whistleblowers, on such schemes and go after the perpetrators.
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