Protection against

Banking and
Financial Fraud
CHAPTER

LEARNING OUTCOMES
will enable students
The learning from this chapter
and its types
get an understanding of financial fraud
online frauds, the biggest
gain deep insight into Ponzi schemes and
threat at current times
to avoid
knowledge of different red flags to identify fraud and measures
them
learn about the remedies available for financial fraud

INTRODUCTION
We are currently living in the era of digitalization. With the emergence of the
internet, the physical world has set foot into the digital world. India too is not
behind in digitalizing itself by promoting the "Digital India" campaign. Many
industries like banking, insurance, education, etc. are very keen on adopting digi
tization. In the previous chapter, we have seen how the digitalization of payment
systems has transformed banking activity. They are able to cater to customers
in a much more efficient. But nothing is perfect in thís world and the same is
the case for digital payments as well i.e, with technology comes vulnerability.
While digital payments offer timeliness and comfort, it is prone to fraud as well.
Nowadays we see so many headlines about people losing their hard-earned
money to financial fraud. The reason being people lack knowledge on how to
differentiate between a genuine offer and a financial offer. They are also not
aware of the remedies which the government has to offer to the public in such
circumstances. This chapter aims to make students aware of the different types
of financial fraud and the necessary knowledge to avoid them.

7.1
 7.2
UNIT 2 : BANKING AND
DIITAL, PAYMENT
FINANCIAL FRAUDS
Financlal frauds are a situation where a person
or harms your
financial health steels your money,
the government to make through deceit. Despite the many or capita
Scammers, people
the number of frauds aware of the ill
intentions attempts
of fraudsters
is still
in the past three years,
only 45% of Indiansever-increasing. According to a and
reason being despite many warnings people experiencedcontinue to
financial
hold
repor
fraud.
information like debit/credit card pin, their
their mobile phones rendering them internet banking login passwords, sensitive
vulnerable. As long as they continue etcto ai
carelessly, fraudsters willkeep on coming up with new ways to scam the
publie
Mass
Marketing
Fraud
Identity Online Job
Theft Fraud
Financial
Investment Frauds
Credit and
Fraud (Ponzi Debit Card
Scheme) Fraud
Lottery
Scam

Types of Financial Frauds

The diagram above provides a list of various types of financial fraud which are
common in India and well as abroad.

PONZISCHEMES
According to the U.S. Securities and Exchange Commission's Office of Investor
Education and Advocacy, APonzi scheme is an investmentfraud that pays existing
investors withfunds collected from new investors." In other words, a Ponzi scheme
is a fraudulent investing scam, which pays returns to existing investors from the
funds collected from new investors, promising high rates of return with little
investment
risk to investors. Necessarily, such types of schemes thrive on new profits
business earning
to pay the existing returns and there is no operationaldries up, the scheme fails.
base
from legitimate purposes. As soon as the client
promoter convinces Anil to invest
Example: In January 2022, a Ponzi scheme return each month. He pays Anil
6,00,000. The promoter promises a 10%
money. Anil receives 60,000 each month
60,000 each month using Anil's own Rather, he encourages his friends
doesn't suspect anything.
as promised. He
 PINANCIAL PRAUI) 7.3
CH 7:PROTECTION AGAINST BANKING AND

months, Anil's fríend Shruti invests

colleaguesto invest to0. After three will
5,00,000after hearing about
and Anil's great returns. These five lacs rupees
interest to Shruti and Anil.
used| to pay nothing
be
continue to come in until April. In May, Anil and Shruti hear discon-
returns number has been
The promoter. They try to contact him but his 3,60,000 and
fromthe
promoter has taken off with the money. Anil loses ?
nected. The 9,00,000 out of the scheme without
loses ? 4,50,000. The promoter gets origíinates
Shruti Thiss is how Ponzi schemes work. The term Ponzi'
anything! convicted of five years in
doing swindler named Charles Ponzi, who was
fromthe 1919-1920.
prisonfor duping his clients during

Charles Ponzi

carried out the biggest and the largest

Hedge fund manager Bernard Madoff clients of approximately $50 billion. In
Ponzischeme in history, deceiving 4800 crores have been duped
India, as of 2013, it is estimated that approx.?7,500 87 cases. Saradha Group,
from the Indian investors from such schemes in over India.
based in West Bengal, are the largest Ponzi player in
Exchange Commission
Apart from the warning signs issued by the Securities and
(SEC) (See Knowledge Box 1), some other red flags are:
Doubtful Business Model: Since there is no actual business operating, the
schemes are run under the mask of a unique product or service offering
huge returns. Investors shall stay alert to this kind of business model.
Pressure to Invest: Investors are pressurized to invest within a short
period of time (say 5-10 days) to avoid missing the offer. Such a hurry
shall raise suspicion in the dealer.
The FOMO' Tactic: Swindlers usually make investors feel that many people
have already invested in their scheme and they shall miss out if they get
late in applying. Using emotional appeal, they create a story telling how
they got benefitted and how the investor can be benefitted similarly.
Investors' Testimonials and Professional Institutional Attestation:
To increase the credibility of a Ponzi scheme, the scheme is said to be
74 UNIT 2 :BANKING AND DIGITAL PAYMENT

reviewed by a reputed institution. Further, the experience of

is shared to increase trust among newinvestors. Interestingly,
the
investor testimonials and the attestation cannot be verified by a comm inbootveshtors
man.

Precautions to be taken against Ponzi schemes:

" Follow investment advises from only trusted financial intermediarie
Allfinancial intermediaries like advisors, brokers, and dealers have to ge
themselves registered and keepa track record of their past performance
It is advised to the investors to employ only registered professionals wi
high credibility.
offers promie
" Be suspicious of unsolicited offers: Lucrative investmentafter deliberat
bechosen
ing very high returns are a red flag and must wary of such
caution has been taken in this regard. Stay alert and be
offers.
institution/person offering it: Verifythe
" Verify the scheme and the offering such a scheme
authenticity and reliability of the professionals
firms can be verified. Moreover
and
License and registration of securities precautions.
background checks can be conducted as
Swindlers usually use sophisti
Understand the basics of investment: schemes. A financially
common masses to their
cated terms to attract the offers and can avoid falling into the
wary of such
literate man becomes
trap. in one
as you can to avoid the loss of all investments
Diversify as much
place. can attain a credit rating
for
financial institutions
Rating assigned: All look out for the credit ratings assigned to
shall
their business. Investors riskiness of their investments.
the
the offerors to know Usually, hidden costs
Terms and Conditions':
Reading the fine print of the fine print of terms and conditions, that
inserted in explain
and conditions are advisable to ask the intermediary to
investors rarely read. It istranslated into simpler terms by a trusted fi
them
them to you or get
nancial advisor.
any such scammer: Filing the com
complaint against step to be taken to
Report or file a is the most important
wrongdoers
plaint against the investors.
protect the rest of the questions about your investments,
When in doubt, ask
Ask questions:
return, and risk.
 CH. 7 : PROTECTION AGAINST BANKING AND FINANCIAL FRAUD 7.5

Knowledge Box 1
Identifying Ponzi schemes
Securities and Exchange Commission (SEC) has identifiedthe following red
The watch for:
flagsto
High returns with little or no risk: There is a positive relation between risk
and return i.e, higher the risk higher is the return Thus any investment offering
higher returns at minimal to no risk are a big red flag and must be avoided at
any circumstances.
Overly consistent returns: Volatility is the essence of an investment. Their
ualue tends to go up and down. Be suspicious of investments which always offer
nositive returns irrespective of the market sentiments.
IUnregistered investments: Registration of an investment option with the SEC or
ather authority ensures authenticity of the investment avenue. An unregistered
investment will most probably be a Ponzi scheme which should be avoided.
Unlicensed sellers: Licensing of investment professionals and firms is a key
requirement now a days. Majority of the Ponzi schemes are found to be managed
by unregistered professionals and entities.
Secretive, complex strategies: Opt for avoid investments options which are
complex and difficult to understand and lack publíc disclosure.
Issues with paperwork: Always check whether the amount you have invested
is utilized as promised.
Difficulty receiving payments: Ponzischemes often provided you with lucrative
options so that you don't cash out your investment like offering higher return. Be
aware of investments which have a reputation of frequent defaults and difficult
cash out.

(Source: https://www.investorgov/protect-your-investments/fraud/types-fraud/
ponzi-scheme )

ONLINE FRAUDS
'Lucknow family loses 16 lakhs in an online fraud, '2 fraudsters target 5 ATM in
Bengaluru, copy card details, Many B'lureans lose cash to swim card swap fraud.
These are the kind of newS one comes across while reading the
watching television. And this is just the tip of the iceberg! So manynewspaper or
of online fraud go unreported and unidentified because of a incidents
lack of awareness
among people.
Financial inclusion measures by the government and the
transactions have made people rely on electronic channelsdigitalization of financial
for their daily financial
needs. This dependability is intensified post-COVID period.
better accessibility to technology in online banking and Furthermore, with
man is offered the convenience of doing payment, the common
everything from anywhere with
d ciick. But this convenience comes
with a catch! This situation also offers just
nu
erous opportunities for hackers and tricksters in
stealing your own money.
 DIGITAL PAYMENT
UNIT 2 BANKING AND
7.6

scenario, even a single tap or a single click at the wrong place

you alakhs of your hard-earned money, resulting in huge financial loss..Tts
costsuch
In
is called online fraud, ie, whenever a fraudster illegally and unethically steas
account
money by transferring funds from your account to his
your
This situation is aggravated nowadays as people are exposed to various schemes
online throughtheir sparm folders, online newsletters, and social media. Exposur
multiplies exponentially through the use of artificial intelligence and machine
applications. Further, investors also rely on several social media
learning in decision-making
websites for investment
platforms and local ads and vulnerable and a suitable target for online fSuch
actions might nake a person India
depicts Operation wise fraud cases over the years in
The tahle below
Wise)
Fraud Cases (Operations
(Amount in crore:
2020-21 2021-22
2019-20
Area of Operation Amount Num- Amount
Num Amount Num
ber of Involved ber of Invotved
ber of Involved Frauds
Frauds
Frauds

1,36,812 3,839 S8,328

1,81,942 3.497
4.608 (42.2)
Advances (47.5) (99.0) (965)
(52.9) (981) 21 1077
535
2445 23
34 (1.8)
Off-balance Sheet
(0.3) (0.4) (0.2)
(04) (1.4) 7
4 129
8 54
Forex Transactions (0.1) (0.1)
(0.1)
(0.1) 3,596 155|
2,545 119
2,677 129 (39.5) (0.2)|
Card/Internet (34.6) (0.1)
(30.7) (0.1) 434 471 493
616 504
530 (0.3) (5.2) (0.8)
Deposits (0.3) (6.8) 2
(6.1) 3
2
Inter-Branch Accounts 2
93
39 649
63 329 (0.2)
371 (7.1)
Cash (4.5) 158
(4.3) 85 201
39 163 (0.3)
201 (2.2)
Cheques/DDs, etc, (2.2) (0.1) 1
(2.3) 4 16
7 14
22 (0.2)
Clearing Accounts (0.2) 100
(0.3) 278 54 300
173 (0.2)
250 (3.3) 60,414|
Others (0.1) (3.8)
(2.9) 7,359 1,38,211 9,103
8,703 1,85,468
Total
 FRAUD
CH 7:PROTECTION AGAINST BANKING AND FINANCIAL. 7.7

be observed from the

above table, almost 40% of frauds in 2021-22
As can the foorm of online frauds involving more than? 155 crores, which
werein
higher than volume (2545) and the number of frauds (? 119
Is considerably place in 2020-21.
crores) that took
Further, the figures below illustrate several banking frauds related to online
transactions reported in India over the years and by state respectively for the
Financial Year 2021.
20,00 000
1,744,140
16
iNA)
18 00,00 1.619,600 trom
oayne blhon
16.00,000 1.414,590 14 raude
digital on
INR)14,00 000 bartkung
of
of ion 12 00 000 value
value
b § 10,00 000 Transacton
cardintemet
(in 08
Transaction
8,00.000
06
6,00 000
D4
4,00,000

2.00,000 02

0
2019 2020 2021

Transaction value ot dgtal payments (n biiion INA)

Trancaction value of frauds trom card'internet banking (on bilthon INR)
Source: Pwc (https://www.pwc.in/industries/financial-services/fintech/dp/combating-fraud-In-the
era-of digital-payments.html)

Telangana 2,100

Odisha 687

Maharasttra 624

Andhra Pradesh 524

Utar Pradesh 329

Rajasthan I48

Bhar 117

Cu;arat

Tamii Nadu

Madhya Pradesn 48

Source: Statista (https://www.statista.com/statistics/1097957/India-number-of-online-banking-

 PAYMENT
UNIT 2 : BANKING AND DIGITAL
7.8

Types of online banking frauds

Phishing: Many a time, people receive unsolicited messages and emals
with an unknown link that directs them to afake website. The fake web-
authorized one but is intentionally made to
site appears to be an
people's information to defraud them.
col eat
Vishing: Fraudsters misrepresent themselves as bank executives
" call. They pressure people to share their confidential information citing
to avoid penalties or attractive schemes or blocking an un:
an urgency
authorized transaction etc.
Applications: Certainapps and app links
Frauds through Unauthorized
after clicking some random link
on the
downloaded immediately
are has been downloaded while
even knowthat an app
site ads. Users won't sensitive information in the background.
collecting all their
it will be pinhole cam
Skimming devices like adummy keypad or number ac v
" Skimming: ATM Machines that record the card
are installed in the
information is used by fraudsters to ce
user. The
as the PIN of the people.
money from
duplicate cards and dupe to the bank account, is obtainel
SIM Card, linked
SIM Cloning: Aduplicate
fraudulent transactions.
the
unknowingly, scan the QR code that
to carry out
People may,
QR Code Scanner: done by another person.
Such scannine
authorizes financial transactions person.
losses to the
might lead to huge Social Media Platforms: Deceiver
or Fake ldentity on fishes out their
" Impersonation people on social media and slowly
befriend innocent used to cheat people.
confidential information that is
AGAINST ONLINE
FRAUD
SECURITY
PROTECTION AND
(January 2022) revealed some mind-al
Indian Banking Fraud Survey data theft and cybercrime
The Deloitte India. First of all, the
tering facts about
online fraud inexperienced by people. Moreover, out of alone,
experienced fraud internet banking frauds
are the most 14% related to mobile and 78% ofthe
total banking frauds, and 9% were phishing scams.
13% were identity or data theft,
move in an upward direction in the
while expect this trend to gravity of the situation. To tackle the
surveyed also
people
years, thus, pointing towards the also prepare to protect themselves
next two online fraud, one
must
increased chances of
against such heinous
crimes.
incidents, 'awareness'isthe key. Someo
oneself from online frauds and be taken to avoid online fraud are
To protect actions that can
precautions and security
the
 CH. 7 :PROTECTION AGAINST BANKING AND FINANCIAL ERAUD 7.9
" Use official and verified mobile phone applications only: Many atime.
an application offers you the service of connecting your bank account
with their app to enable faster checkouts. Such ease shall be exercised
only with authentic apps.
+ Use of secure websites: While using the internet in a computer system,
peopleshall use onlythe domains containing alink starting from 'https:/.
The 's' in the hyperlink stands for 'secure, which ensures that a website
is safe to browse.
htps://www.bajajfinservin/insights/10-ways-to-safeguard-yourself-from
online-frauds
htp://www.bajajfinserv.in/insights/10-ways-to-safeguard-yourself-from
online-fraudsxxx

Donot share your bank details, one-time password (0TP) or any sensitive
information with strangers or financial intermediaries you don't trust.
" Don't mke hasty decisions while responding to unsolicited calls or
emails. Messages and emails from fraudsters offer you exciting offers and
schemes for you to click on them. Rather, as a precaution, the links in
such unsolicited mails and messages (also called phishing emails) should
not be opened to avoid fraud.
Gather knowledge about different types of online frauds taking place.
Protect your accounts and social media with a strong password and/or
biometric authentication to enable two-level security.
" Avoid using public computers or wifi.
Install an efficient antivirus for your cell phones and computers that
provides complete security against online fraud and threats. Additionally,
one can install anti-spam software, firewall, and anti-spyware software
for enhanced protection.
" Conduct research on the intermediary before sharing your details or
before investment decision-making.
" In case there is a breach of security, immediately get in touch with your
bank and ask them to block your cards and internet banking for the time
being.
 Deihi Poiicg & WATCH FOR
Wise Words Dolhy Palice
CYBER Wise Words
FRAUBS

Penston e

ACYSER C8NIRL NAY CON YOU Rssako

BNOOLIHFE ERRNINSS
a
PRrtgyr ecta keod, ca

Source: Omcial Thvitter and Facebook aceount of Delt Police

Initiative by Delhi Police to spread awareness regarding cybercrimes and
online frauds

Ye send Sitive deris

t b i cans nymber
parsgtese
Fnabl ths faxtity of 2 ReseraESs Enaits fro
Pubtic Wi-0as they cS be
whrevernd wherrCV intercepted
Seilablg

Suss3ya,kmD.exe,
fa.txt,ts«

Don't opesforvarti USe a gaad Antmware

So>twsre in yY ystem
an inkattRchments tn And keep it updates sgu
URSoicited ksaits 33siy

Cyber Security Tips by Union Bank of India

Secure Net-Banking Tips

password.
Do not disclose your customer id and
memorize your password as soon as you log in first time into yo
Change and
net banking account. network
internet banking from cyber cafes or public Wifi
Do not access
hotel/airport etc. internet banking acou
feature while logging into your monltora
Use virtual keyboard login to
check your last net banking login upon every
Always cross
unauthorized logins.
 FINANCIAL. FRAUD 7.11
AGAINST BANKING AND
CH. 7: PROTECTION

SecureATMBanking regularly.
card with anyone and change your
PlIN
share your PIN or shield the kevpad
Do not
machine and use your body and hand to
Chand close to the ATMBeware of strangers around the ATM.
PIN.
as vou enter the card or handling your
cash.
help for using the ATM
Do not take strangers
transaction slip immediately if not required.
Shread the immediately.
is lost or stolen, report it to your bank
If vOur ATM card ATM, check the credit entry
in
or card into your
When you deposit acheque days. If there is any discrepancy, report
it to your
uour account after a couple of
bank. transactions.
number with the bank to get alerts for your
Register your mobile bank im
in the ATM or cash is not dispensed, call your
If your card gets stuck
mediately.
Secure Phone Banking
ATM/IVR PIN,OTP, net banking password, CVV (card verification
Do not disclose
banking officer.
value) number while talking to phone
Ensure secrecy while entering PIN (personal identification number).
"
officer while in public
Avoid giving verification details to the phone banking
places.
account holder. Do not
The phone banking channel must be used only by
transfer the line or hand over the phone to any other person after completing
self-authentication.

Secure Online Shopping Tips

Always shop or make payments through trusted/reputed websites.
Do not click on links in emails. Always type the URL in the address bar of the
browser.

Check the URL before entering your private details in a website.

" If you are a frequent online shopper, signup for Verify by Visa and Master Card
secure code program.
Check your account statements regularly and bring any fraudulent transaction
to the notice of the bank.

Check for PAD LOCK symbol on the webpage before starting to transact.
" Do not click on links in emails or on referral websites to visit the online shop
ping site. Always type the URL in the address bar.
" Do not enter your confidential account information such as Credit Card Num
bers, Expiry Date, CVV values, etc. on any pop-up windows.
 UNIT 2 :BANKING AND DIGITAL PAYMENT

Use One Time Password (0TP) received on the

Visa and Master Card secure code password as mobile phone
Source: http://www.cybercelldelhi.in/netbanking.html
0TP are
instead
more secure.
Steps to be taken in case vou become one of the
victims of
According to the Reserve Bank of India, if you are a victim
are required to notify your bank
immediately. On the
of
receipt such onlinonle ine
the bank will resolve the
complaint
The bank is also required to
within 90 days of
reimburse the amount of loss,
of
receipt of t
the tnfrianuadu,yr
negligence of the customer himself. The reimbursement policy
on RBI guidelines, the bank's board policy,
to notify the bank about the and the time taken by
dependingcompla
further udpeposent
fraud. the
Remedies available in case of Online Fraud in India CUSton
Reporting time Action by Bank
Within 3 days Reimburse within 10 days of receipt of complaint
4-7 days Penalty up to:
(a) 25,000: Credit card with ? 5 lakhs limit
(b) 10,000: Savings account, prepaid transactions
account, an overdraft account, and accounts for
with an annual balance or limit of 25 lakhs individua
(c) 5,000: Basic Savings BBank Deposit on the
depending upon the type of bank account andcustomecredi
card held by the customer.
Beyond 7 days Customer's liability will be determined in accordance with
bank's policy approved by the Board.
Thus,it is of utmost importance that people should not only be aware of the latr
technological advancements in the field of banking but they shall also beawan
of banking frauds and prepare themselves toavoid falling prey to these frautk
Case Study 1 : G.O.A.T Ponzi-Man: Ponzi scheme by Bernard Madoff
In most of the cases of Ponzi Schemes, it is said these tend
to self-destruct quickly as soon as the flow of funds in the
formof new investors dwindles. But Barnard Madoff was
an exception, he ran a Ponzi scheme, which was
estimated
to be operating for about 20 years.
It all started in 1960 when Madoff (Born: on April 29th,
The Mastermind Bermat
1938 in New York) started his sole proprietorship business, Madoff (Source: CNBC)
BernardL. Madoff Investment Securities LLC, by serving as
investors and legally
an intermediary between institutional his brother, also made a superior technog
stock. He, along, with
dealing in unlisted prices. The business saw upward growth am
the best
that supported trading at he was earning approximately $100 milion in ay
immediately. By the late 1980s,
 FINANCIAL FRAISD 7.13
AGAINST BANKING AND
CH. 7: PROTECTION
success,
Chairman of NASDAQ in 1990, 1991, and 1993. His
Bernard became the source of his credibility
of consistent returns were the invest millions of funds.
Mr and promise
networking,fame, was able to attract hundreds of investors to knowledgeable invest-
which he most
through
and respectability made him one of the generate high and consístent
exclusivity claimed that he used to
His specialists of his time. He split-strike
split-strike conversion ínvestment strategy. (A
ment
returns (10-12%)
by using a share by purchasing a
involves minimizing losses on an underlying
Investment strategy When in realíty, he just used the investor'sfund to pay the
simultaneously). by the
a put option wantíng out. The redemption was being funded very nicely corpus of
existing
investors crash of 2008. The market fell and so did the
investors' fund until the
newinvestors.
fraud and confessed all his wrongdoings.
new
Madoff revealed his
December 10th, 2008, financial analyst Harry Markopolos was one of the earliest
On
Investigations reevealed that
ignored by the regulators at the time. At the
was billion in the client's assets. The
bistle-blowers in May 2000,wasbut recorded with $64.8
arrest, the fund His several colleagues
time of his devastating impact on Madoff's clients and family.
fraud had a claiming to be acting alone. His elder son, Mark
Madoff exposed. Many
ere sent to prison, despiteexactly twoyears after Bernie's fraud was the
Modoff. committed suicide themselves. Finally, after all the investigations and
killed 150 years
LaF Madoff's investors also
sentenced Bernard Madoff, prisoner No. 61727-054, tohomes and
hearings, the
Courts
$170 billion in 2009. His three
forfeit breath
imnrisonment and forced him to the U.S. Marshals. Madoff took his last
off by
four boats were also
auctioned
while still serving the 150-year of imprisonment for
82)
on April 14th, 2021 (agedand securities fraud.
mainly money laundering seven
thousands of investors with almost no savings. After
A S65 billion fraud left
September 2021, 39,494 of Madoff'svictims (i.e, 81.35%
rounds of distribution until their losses out of Madoff Victim
Fund.
reimbursed for
of victims) were Ponz
Indian experience of Ponzi Swindlers - Gain Bitcoin
Case Study 2 : The
Scheme
has revealed the most
India's biggest crypto-Ponzi scheme making more OE GAInBITCOn
innovative style of duping the investors, i.e.,
by Economic Times
money by virtual money. Reports involving more than
Suggest that the scam is as large asfrom different states,
one lac investors, filing 40 FIRS mastermind behind
and INR one trillion in funds. The
cardiac arrest on
the scam, Amit Bhardwaj died of
in March 2018
January 15th, 2022, and was arrested Bhardwaj, along with his 'Seven Stars,
that had its roots planted in 2015.
for ascam guaranteeing a mnonthly return of 10% in
operated GainBitcoin in India and in abroad, enticed by the lucrative and
Bitcoin-on-Bitcoin deposits for 18 months. Investors were His experience in Infosys,
strategies.
Consistent returns through multi-level marketing
Bitcoin-based e-commerce platform), and
his 2014's venture HighKart (India's first investors to invest in the scheme.
accentuated the
his technical knowledge further
Eventually, the scheme became a huge success.
 MENT

The investors were required to

in returns. Initially, the ínvest their funds in bitcoin and
return
from the new members. But things
of exlsting investors was theyby the
funded were pald
slowly started falling
reasons: First of all, the central bank of India, i.e., the apart
the operations on the trading of Reserve
06th, 2018. Consequently, fewer cryptocurrencies in India via its
the Ponzi pyramnid started to investors were inclined to get into the
of
1nyestmen
BankmainlyIndia,due
to bwg
circular datedban ed
limited supply of Bitcoin, was crumble. Secondly, the flaw in the
2017 who then filed a petition on first identified by one of the users,
Change.org against the company.
nesslscheme
busiZakhi and
model,
The first FIR was, then, filed with Pune Police in Suresh,
more investors came forward and filed the FIR, 2017. With the decoding the fraud
of
which led to Amit
2018. The ED seized all the documents and
locations including some of the attorneys and Bhardwaj's arrest
systems of the company and raided In
officers' firms related to
The current on-going investigation revealed that over
60,000 user IDs Gain Bisevera
tcoin.
were traced involving more than 6,00,000 bitcoins
(with a current valuationand email
1trillion). The numbers themselves provide evidence of lDs
of the
Further, the ED claims the mastermind is still in possessionmagnificence
of approx
the scam.
of the
passwords of all crypto-wallets. However, with the
of all these wallets seems like a bleak light to the death of Amit username
Bhardwaj, and
to unfold its
end of the tunnel. The fraud is a
cards due to delays in investigation and frequent changes in the benchl recovery
by the Judiciary.

REVIEW QUESTIONS
1. What do you mean by financial fraud? What are the different types of
financial fraud?
2. Explain, in detail, the concept of the Ponzi Scheme and preventive actions
tobe taken in order to avoid falling trap to such a scheme.
3. Discuss the various types of online fraud and the precautionary steps to
be undertaken to protect yourself from online fraud.
4. What are RBI guidelines for a victim of online fraud?
5. Mention tips for secure digital transactions.
6. Critically analyse the case study of 'G.0.A.T Ponzi-Man: Ponzi scheme by
Bernard Madoff' and examine the measures that could have been taken
at that time to avert the scam.

PRACTICAL EXERCISES

ASk yOur relatives and friends if they have ever experienced bankiny
raud and how was their redressal procedure and the measures, the9
have taken afterwards to avoidthem in the future.
 PROTECTIO
CH. 7 :
studíed in the chapter, try to
online fraud cases you have and prepare a report on your
Similar tothe incídences on the internet
such
2.
find more learn from the same.
estimet findings and
house helper and her
son is currently
and is
in class 11th. In
very stressed out
ban e
me and
3. Ms
one
Renu
year
is your
she needs money
for his
acquaintances
about it. One of her
college
informed
the
fees
her about an
amount invested in
one
investment
year. She
to triple prepare
ccheme which promises such a scheme. You are required to
opinion on
should invest in a such schene or
asked for your on whether she
ashort presentation
festraund not.

NeColrna.
orox
Cam.
and
ery
yet
ch