Jaipur: The special operations group (SOG) has requested the Enforcement Directorate (ED) and Securities and Exchange Board of India (SEBI) to look into the Kolkata-based liquor baron Manoranjan Roy’s multi-crore Ponzi investment fraud as the accused had raised Rs 1,600 crore from over three lakh investors across India in violation of Reserve Bank of India (RBI) guidelines. Roy and his associates had set up 30 branches of his shell companies in Uttar Pradesh, 28 in Bihar apart from several other small offices across many cities in north India. The SOG also sealed several of the company’s offices in Ajmer and other part of the Rajasthan to prevent company officials from destroying evidence.

“The initial interrogation has revealed that Roy had offices across many cities in India. But majority of these were located in Uttar Pradesh (30), followed by Bihar (28) , Madhya Pradesh (20) and Rajasthan (11). We cannot verify this information on our own as we don’t have jurisdiction in other states, therefore, we have asked central agencies to look into the matter,” said SOG IG Dinesh M N, adding that the SOG was probing the company’s investment fraud committed within Rajasthan.

Chairman of Pincon group Manoranjan Roy was arrested from Banglore on Friday. His associates Binay Singh was nabbed from Kolkata, Raghu Shetty from Varanasi, and Hari Singh from Agra for their involvement in the Rs 56-crore investment scam in Rajasthan in which they duped 25,000 investors. “The Pincon group had no bank account in Rajasthan. The cash collected from Rajasthan was deposited in a bank account in Agra. For initial three years, small returns on interest and debentures were given to investors to encourage them to invest large amounts,” said SP Sanjay Shrotriya.

The investigators suspect Roy to have illegally raised Rs 56 crore by private placement and securities in Rajasthan through 11 branches located in Ajmer, Bharatpur, Niwai and Chaksu, etc.

According to SOG, the accused had set up multiple shell companies such as LRN Finances, ASK Financial Services, Greenage Food Products Ltd, Bengal Pincon Housing Infra Ltd, LRN Universe Private Ltd and Universal Multi-state Credit Co-operative Society to cheat people. These companies never fulfilled the norms under the articles of association (AOA). These companies raised capital through private placement in violation of RBI norms which mandates that only 49 investors can invest in such a company. Similarly, debentures were floated by these shell companies and all transactions were carried out in cash.

The investors’ Money was routed by Roy into the accounts of Pincon Spirits Ltd, a public listed company which sells country liquor to West Bengal Government.

When investors started asking for money, they were told that the money has been ‘reinvested’ in another company. They were offered fake incentives to justify the ‘reinvestment’. But the company in which the money was ‘reinvested’ was liquidated by Roy.

The money raised illegally was used to attract more investment by Roy to Pincon which had a credit limit of Rs 400 crore. “About a decade ago, Roy had taken over a spirits company and renamed it as Pincon Spirits. But he needed money to boost investment and get loans from the bank,” said an official.

Box 1: All About the Kingpin

1. Manoranjan Roy paid Rs 3 crore as tax to West Bengal government every day

2. The money raised illegally was used to increase investment. Pincon had a credit limit of Rs 400 crore

3. The SOG said Pincon supplied desi liquor to the West Bengal government

4. Roy’s Pincon had recently received a contract to sell foreign liquor in Karnataka

5. The SOG has directed to seal all offices of Pincon in the state

6. Multiple raids are being conducted across north India at the company’s offices

7. In Rajasthan, the company had branches in Chomu, Kaman, Ajmer, Niwai, Kota, Jaipur, Bandikui, Bhratpur and Hindon

Box 2: Agents/advisors given expensive gifts

SOG officials said that advisors and agents were hired by Manoranjan Roy to attract investors. Company literature and investment broachers were given to them. The advisors were also taken for a visit to Pincon Spirits and given expensive phones. SOG said this was done to gain the trust of agents and advisors.

Box 3: Shell companies ‘offered’ several financial services

The SOG investigation reveals that LRN Finance offered services like lease finance, bill discounting, assets finance and bill factoring on paper which they never carried out. The only bank account the company operated was closed in 2014 and the money siphoned off.

Box 4: Private placement fraud

One of the technical aspects of the entire Ponzi fraud was the use of ‘private placement’. As per RBI rules, a non-banking financial institution (NBFC) can only have 49 subscribers. Instead, thousands of people were asked to invest their money.