Description
GS PAPER III: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
Context: Bernie Madoff, the Wall Street financier who was sentenced to 150 years after being convicted for what came to be known as the largest and most devastating Ponzi scheme in financial history, died in a prison hospital in the US.
What is Ponzi scheme?
- It is a fraudulent investing scam, which generates returns for earlier investors with money taken from later investors.
- This is similar to a pyramid scheme in that both are based on using new investors' funds to pay the earlier backers.
Regulation of Ponzi scheme in India:
- The banning of Unregulated Deposit Scheme Act , 2018 creates three different types of offences
- running of Unregulated Deposit Schemes
- fraudulent default in Regulated Deposit Schemes, and
- wrongful inducement in relation to Unregulated Deposit Schemes.
- Aim: To provide a comprehensive legislation to tackle llicit deposit schemes by completly prohibiting such activities.
- Nine regulators including the RBI, SEBI, the Ministry of Corporate Affairs, and the State governments regulate financial activities.
- A ‘Competent Authority’ will be appointed which has the powers similar to a civil court, including powers to attach properties of the deposit takers.
- It also empowers police to search and seize any property believed to be connected with an offence under the Act, with or without a warrant.
- It also approves creating designated courts to tackle such cases. It enables creation of an online central database, for collection and sharing of information on deposit taking activities in the count.
https://indianexpress.com/article/explained/explained-the-story-of-bernie-madoff-who-ran-the-largest-ponzi-scheme-in-history-7275332/
