Scam and the scapegoat

Mumbai, Nov. 6: A suspected Ponzi scheme promising a 2 per cent monthly return that will double investment in three years has quite literally got market regulator Sebi's goat.

Beetal Livestock and Farm (Private) Ltd has been trying to rustle up investment from gullible rural folk in its large goat-rearing farms spread across the North with the succulent bait of a leg-of-mutton sized returns.

Sebi, however, believes that it is a Ponzi scheme that is a throwback to the infamous teakwood and other plantation scheme scams which ripped investors in the mid-nineties.

A Ponzi scheme lures investors with the promise of high returns and it soon builds up into an unsustainable pyramid where it uses money from new investors to meet obligations to people who joined earlier. The scheme works as long as it draws in more investors than it pays out to, eventually foundering as it can't pull in new investors quickly enough.

The techniques used by Charles Ponzi ' who earned notoriety in the 1920s with his scheme that was built around international reply coupons for postage stamps ' have been used by many other fraudsters who have contrived ingenious schemes to scam gullible investors.

Sebi has been tracking the Gurgaon-based Beetal Livestock and Farm Pvt Ltd for two years.

The company invited people to offer their goats to the company and assured them 2 per cent monthly returns for over a period of three years. The company offered to buy back the goats at the expiry of three years at a price that would be twice the price of the goat.

The market regulator is now mulling action against the company and its directors. The market regulator had served showcause notices to the company and its directors in May which could not be delivered.

Earlier this month, Sebi issued a public notice asking the company and its four directors to collect the showcause notices by November 10, failing which it warned that it would start ex-parte proceedings against them.

Beetal was incorporated as a private company under the Companies Act, 1956 in May 2010 and goat farming was listed as its main object.

Under the terms of the scheme, Beetal would be a custodian for rearing and nurturing the goats. The investors were promised a fixed monthly amount from the date that they signed the goat care agreement. For this purpose, the company gave post-dated cheques and bank guarantees.

In terms of the agreement with the investor, offspring delivered by the goats would become the property of Beetal and it would have absolute discretion for the sale of produce from rearing of goats.

Sebi has been maintaining that since the scheme run by Beetal is a collective investment scheme (CIS), it has to obtain registration from the regulator. However, the company, which was not registered as CIS entity with Sebi, had solicited investments in the goat-rearing business through newspaper advertisements a couple of years ago.

Sebi regulates CIS, which involves pooling in of money from multiple investors for a specific objective.

THE SCHEME

lBeetel assured 2% monthly returns for over 3 years for rearing goats. The company would buy back the goats after 3 years at twice their price

lOffspring delivered by the goats would become the property of Beetal and it would have absolute discretion to sell the produce from rearing of goats

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