Understanding IMA Scam, Mohammed Mansoor Khan: The I Monetary Advisory (IMA) was an investment company that had its headquarters in Bengaluru. In the IMA scam of 2016, Forty thousand investors have lost funds to Rs 1000 crores, which unraveled as Ponzi Scheme in June 2019.
An investment scheme that appeared to follow the Islamic principle, run by a religious man named Mohammed Mansoor Khan, gave returns for many years until it suddenly stopped. Warnings had been raised by RBI against IMA in 2016.
However, they had been ignored. Mohammed Mansoor Khan named a few politicians and developers who were benefactors of his generosity. He held them responsible for destroying his business.
Foundation of the IMA
The father of I Monetary Advisory (IMA) was a company co-founded in the year 2006 by Mohammad Mansoor Khan and a business partner named Iliyas, because of which they gave the name Iliyas-Mansoor Advisory. This company was never successful and had been dissolved in 2008.
Founded in the year 2013, Mohammed Mansoor Khan’s next company had kept the same initials – IMA. According to records of the Ministry of Corporate Affairs of India and in contrary to the claims made on the website of the company, I Monetary Advisory Private Limited had been showcased as an Islamic banking company.
Mansoor Khan encouraged ulemas and other individuals with influence in the Muslim community to believe that IMA was a continuation of the same company that had been founded in the year 2006 and was a successful business of many years’ standing, promising them that the company would build many hospitals and schools.
The Ponzi Schemes
Ponzi schemes promise high returns or payouts. Initially, they keep their word to trap their first set of victims; then, several people join to keep the flow of the fund ticking. There might or might not be a business of service or product sales involved in this program.
Then when many individuals have joined, it is unable to keep those returns. There are Pyramid schemes or Multi-Level Schemes where early subscribers bring in other family members and friends. It essentially entails paying the duped till the cover has been blown, and finally, the cycle comes to a halt.
The name Ponzi scheme has come from Charles Ponzi, a man who defrauded hundreds with such a scheme as far back as in the 1920s. Ponzi was inspired by the Ladies Deposit scam of the 1880s in which Sarah Howe had served a three years’ jail term.
Examples of various Ponzi Schemes that took place in India:
- Speak Asia Online: Unravelled In 2011
- Emu Farms: Unravelled in 2012
- Saradha chit fund scam: Unravelled in 2013
How Did The IMA Scam Take Place?
Established in the year 2006, the IMA hit the big time in 2015 and managed to thrive in spite of the warnings against its fraudulent schemes given from the income tax investigations by RBI.
In thirteen years, thousands of investors, mainly Muslims, had invested in IMA Jewels in a guarantee of high returns. Investors who were ‘partners’ didn’t get ‘interest’; however, a share in ‘profit.’ At the peak, IMA gave out a monthly ‘profit’ of 7%. All the payments were made by cheque, increasing their trust.
- IMA encouraged its customers to invest money that were in the multiples of Rs 50,000. Each month, investors were being paid 1-3% of their investment, and he could withdraw his principal anytime, after a 45-day notice.
- To attract investments from Muslims, who Islam forbids to accept interest, he mentioned it was a halal investment; returns would have been from the profits his company made by trading in silver, gold and jewellery.
- Investors said they put in money on hearing from friends and relatives that they were being paid regular returns.
- The company had been set up as a limited liability partnership, with the investors becoming shareholders instead of the company’s depositors.
- In August 2016 Reserve Bank of India (RBI) had sounded a warning about the parent I Monetary Advisory (IMA). The Karnataka Police was informed about the supposedly fraudulent practices of the Bengaluru-based private financial firm. However, the company was given a clean chit by the Karnataka police as IMA was registered with the Registrar of Companies and was giving interest-free financing options for new startups businesses and that there were no complaints against them.
- After the demonetisation took place in November 2016, the IMA office was searched by the income tax authorities. The IT department is known to have informed the Enforcement Directorate (ED) about possible fraud taking place at the firm. However, this too didn’t seem to lead anywhere.
- Toward the end of 2018, the RBI once again summoned to the government of Karnataka. This time, they alerted the top bureaucracy about the IMA investing funds raised from investors overseas that violated the RBI guidelines.
- The government of the state referred this matter with the police and revenue department over violations of the Act of Karnataka Protection of Interest of Depositors in Financial Establishment (KPID) 2004. A public notice through newspapers was issued by an assistant commissioner of the revenue department warning the investors and asking them to approach this department with complaints. No one complained.
- Sometime in October 2018, the IMA’s business began unravelling, according to an admission made by the runaway Mohammed Mansoor Khan himself on a social media video made on June 23. He stated that the downfall of IMA started in October itself. However, he did not let the investors of the company know. He also mentioned they had suffered losses in the range of Rs 2000 to 3500 crore, and then there had been a delay of payment in returns for a month.
- Mohammed Mansoor Khan’s IMA tried obtaining a Rs 600 crore loan for getting over the crisis by raising funds via banks and NBFC. He met the state revenue minister RV Deshpande, seeking for a no-objection certificate (NOC). MLA R Roshan Baig facilitated the meeting. Deshpande had claimed that Baig had vouched for Khan as a ‘man of good character’ and a resident of his own constituency. However, the NOC was not given. Khan claimed, “One IAS officer delayed the NOC because I did not pay an amount of Rs 10 crore in time,” in his June 23 video on a social media platform.
- According to revenue minister Deshpande, no action had been initiated against IMA since the November 2018 notice as there was no police report in this matter. There was no police report since IMA showed investors as being shareholders of their firm. Consequently, the Act of Karnataka Protection of Interest of Depositors (KPID) in Financial Establishments, 2004 did not apply, for instance, the revenue department has claimed.
- Khan posted a YouTube video at this point in which he threatened slandering proceedings against the officials. He said that IMA is a company of limited liability partnership, and it is not under the ambit of the KPID Act. He further said this is an attempt of sabotaging the image of the IMA company. He assured the investors that their money was still in safe hands.
- Troubles for the investors begun from March 2019 when the payouts shrank or halted; the company had claimed polls had created for a liquidity crunch.
- On 9 June 2019, Khan’s first audio clip surfaced. He mentioned in the recording he must be dead by the time the public gets to hear it. He accused politicians and police officers for extorting money and forcing to him leave India. Khan also mentioned his business had been pushed to the brink by the Congress MLA R Roshan Baig’s refusal of returning Rs 400 crore that he had borrowed from him.
- As investors rushed to IMA officers on hearing a clip of the founder saying he was going to commit suicide, they were faced with shuttered premises.
- Forty thousand investors have lost their funds to the tune of Rs 1000 crore through investments made in the range of one or two lakh rupees to even Rs 10 to 25 lakhs and more.
- On 11 June 2019: The state formed a 20-member Special Investigating Team that was led by BR Ravikante Gowda, a senior IPS officer.
- SIT of the Bangalore police had recovered jewellery worth Rs 11.72 crore from IMA Jewel stores.
- The seven directors of IMA were also arrested by the SIT team as well as obtained an Interpol blue corner notice against the founder, Khan, who at this point had been suspected to be in a country in middle east Asia.
- On 23 June 2019: Khan posts a video, saying he wanted to come back on June 16, but he couldn’t. Promises of repaying all the investors.
- On 15 July 2019: Releases the video, claiming he’s facing health issues, including heart problems. Also claims he will return to the country within the next 24 hours to seek help from the judiciary and police for distributing money to the investors.
- The SIT team, via their sources, found him in Dubai. These officers flew to UAE and pretended of being dry fruit merchants. Finally, they met Khan and persuaded him to return to the country and submit himself.
- On 19 July 2019: Mohammed Mansoor Khan lands at Delhi airport from Dubai and has been arrested
- On Mansoor Khan’s return from Dubai, Enforcement Directorate (ED) has taken the IMA founder into their custody from Delhi airport. At present, the matter is being heard under a Bengaluru Court.
Politicians Affected
The claims supposedly made by Mansoor Khan on WhatsApp entangled politician R. Roshan Baig in the affair by asserting that Baig had failed to return Rs. 400 crore in money that was intended to fund one of Baig’s political campaigns.
Roshan furiously denied Khan’s accusations through a Twitter post. He asserted that the only relationship that he had with IMA Group companies was “as a legislator”. Related to the work that IMA had done with a school that was in his constituency.
Baig stated that after his then-recent political fallouts, few of his adversaries had made a full-fledged attempt of assassinating his character by an orchestration of a series of events by the use of underhand methods. He also stated that the entire hit job had been carried out using a baseless, un-investigated audio recording.
However, a week later, Baig had been suspended from the Congress Party. An official party statement described his activities as “anti-party activities” for his suspension.
Newspaper reports were speculating that members of Baig’s party had considered the claimed linked to IMA being the final straw that tipped the balance against a party member who had been severely critical of the party and the leadership and who had already threatened of leaving.
Other projects connected to Baig were a mushaira and the printing of a newspaper and Haj training camps, all funded by the IMA.
Another politician who is known to have links with the IMA’s Mansoor Khan is Zameer Ahmed Khan, the Congress Leader – the minister for the infrastructure and Haj in the current Congress-JDS government. Zameer Khan is reported to have met Mansoor Khan on May 28th, a few days prior to the IMA founder disappearance. An election affidavit filed by this minister also showcases that he sold a property to Mansoor in 2017-18 for Rs 9.38 crore.
A publicly documented instance where Mansoor Khan was supposedly subjected to extortion over the functioning of the IMA occurred in the year 2017 when the IMA founder had lodged a police complaint against the CEO of Janashri TV, a private television channel alleging extortion.
In his 14th April 2017 complaint that he made to the Commercial Street police Mansoor Khan stated that he paid Lakshmi Prasad Vajpai, the CEO of the channel, Rs 10 crore into his seven bank accounts and gold worth Rs 30 lakh in order to stop airing the negative stories regarding the operations of the IMA group.
The complaint also professed that the channel executive later started to demand Rs 25 crore and a Toyota Fortuner in order to prevent the broadcasting stories about the IMA Group.