Contents

Table of figures......................................................................................................................... 1

Abstract....................................................................................................................................... 2

Introduction:................................................................................................................................. 3

Literature Review:........................................................................................................................ 4

Findings:...................................................................................................................................... 5

Discussion................................................................................................................................. 12

Conclusion................................................................................................................................. 12

References:............................................................................................................................... 13

Table of figures
Figure 1....................................................................................................................................... 8
Figure 2....................................................................................................................................... 9
Figure 3....................................................................................................................................... 9
Figure 4..................................................................................................................................... 10
Figure 5...................................................................................................................................... 11
Figure 6...................................................................................................................................... 11
Figure 7..................................................................................................................................... 12
Figure 8..................................................................................................................................... 12
Figure 9..................................................................................................................................... 13
Figure 10................................................................................................................................... 13
Figure 11.................................................................................................................................... 14
Figure 12................................................................................................................................... 14
Figure 13................................................................................................................................... 15
Figure 14................................................................................................................................... 15
 Abstract

This report looks into the various repercussions and consequences of the so-
called e-crimes which have now come to be known as White Collar crimes. A
brief introduction of these crimes is followed by funneling our approach into one
aspect of these wide ranged crimes known as the Ponzi scheme. A vast literature
was read in regards to understanding the mechanics and trends of this
phenomenon. In order to further enhance our perspectives, a questionnaire was
developed. Furthermore, a comprehensive analysis of the acquired data along
with a sophisticated level of discussion on the matter considering both. The
report will conclude by coalescing the whole scenario in Pakistan regarding it and
will provide any suggestions to avoid or deter such crimes.
Introduction:
A Ponzi scheme is a form of fraud which lures investors and pays profits to earlier
investors by using funds obtained from more recent investors. The victims are led to
believe that the profits are coming from product sales or other means, and they remain
unaware that other investors are the source of profits. The scheme eventually unravels
when the number of new victims is unable to keep up with the repayments, and the
perpetrators of the scheme abscond.

Such schemes are the cause of the loss of millions of dollars to the global economy and
produce a great deal of devastation. A significant amount of loss is also done to the
general public (the victims) as well. Public awareness of the functioning of such
schemes is crucial in preventing people from falling prey to them. Our target would be
look into each case and try to configure the cause and effect each had in the bigger
scheme of things in lieu of the business world. We would also gather relevant
information regarding each case and holistically see as to why these cases remain
unsolved.

Literature Review:
A lot of articles have been written on such Ponzi schemes covering a lot of cases. We
were able to study a few of them and is summarized as follows. Very recently a suspect
allegedly involved in a nearly Rs20 million scam and declared proclaimed offender in
2016 was arrested in 2018.[ CITATION Daw18 \l 1033 ].

LAHORE, March 15: The National Accountability Bureau, Punjab on Thursday declared
SP Mansoorul Haq Rana, his father and 10 others innocent in a preliminary reference of
a billion rupees Canal Motors scam.

KARACHI: The Federal Investigation Agency (FIA) on Friday claimed to have arrested a
suspect for committing “online electronic fraud” amounting to Rs3 billion, said additional
director of the cybercrime circle of FIA Mohammed Younis.

Ponzi scheme: NAB arrests two for involvement in Rs2.5b scam.A team of National
Accountability Bureau (NAB) officials in Khyber-Pakhtunkhwa (K-P) conducted raids
across the province and arrested the accused in a Rs2.5 billion Ponzi scheme under the
guise of Islamic investment.

A sessions court on Thursday convicted Axact chief executive officer Shoaib Sheikh and
22 others in the fake degrees scam case, awarding them a total of 20 years
imprisonment each.The accused were handed down sentences under various charges,
amounting to a collective punishment of 20 years each. However, since all the
sentences will run concurrently, the maximum time each convict would have to spend in
jail is seven years.

In 1991, details emerged of astonishing levels of malfeasance at an institution called the

Bank of Credit and Commerce International (BCCI). Founded in 1972 by a Pakistani
named Agha Hasan Abedi (who served as director until 1990), the bank became
synonymous with fraud on the most massive (and global) of scales. BCCI attracted all
the wrong superlatives: Biggest corporate criminal enterprise, biggest Ponzi scheme,
biggest bank fraud scandal. Many jokingly called it the Bank of Crooks and Criminals
International.

Owners of tobacco company arrested in ‘fraud’ case. Owners of a tobacco company in

Mardan district were arrested on Sunday for alleged involvement in a fraud case of
Rs40 million. The police arrested Bilal Khan and Abbas Khan, the owners of Indus
Tobacco Company, on the complaint of tobacco farmers of Shergarh. The farmers had
stated that two years ago the two brothers purchased tobacco worth Rs40 million from
them on the issuance of company vouchers.

Fake Company Steals over Rs. 240 Million from Hundreds of People in Gilgit-Baltistan.
People of Gilgit-Baltistan have invested around Rs 240 million in a fake online company.
The company goes by the name Pay Diamond and as much as 700 people have
already invested a huge sum of money in it. The investors mostly involve retired
government officials as well as some politicians.

Multi-million fraud detected in Furniture Pakistan. The board of directors of the Furniture
Pakistan Company, a subsidiary of the Pakistan Industrial Development Corporation
(PIDC), is learnt to have been dissolved after the detection of financial irregularities and
inefficiency against the firm’s chief executive officer (CEO).

Findings:
In order to grasp an insight as to what the general public views Ponzi scheme as, whether they
realize the gravity of these crimes or if they have, how much has it affected their concept of
investment. These studies are important because Ponzi schemes are a killer blow to a healthy
pavement of not only society’s local investment into business, but also foreign investment which
is a crucial part of a country’s economic position. A fraud such as Ponzi scheme would curb the
amount of investment inflow into a business and hence, catastrophes can about. In our
literature review, we have identified several cases of Ponzi schemes and a few
corporate crimes. We, therefore, have developed a questionnaire and have gathered
about 407 responses to inculcate the general public’s response into our studies. The
questionnaire attached at the end of this document consisted of about 15 questions.
The following are the findings revealed through it.

Figure 1
The above diagram displays the fact that about 40% of the people weren’t aware of these kinds
of crimes, especially Ponzi scheme. This could unravel a lot of reasons why people are so
prone to these crimes and why these crimes are so prevalent.

Figure 2

This figure shows that since many people are not aware of these crimes, they have not invested
in firms either. This could mean that people are avoiding the risks of doing so since the 60%
who do, most of them have not invested either.
 Figure 3

This question testifies our previous assumption of roughly 60% of people being affected by
them. A 25% is roughly about 80 people who were victimized which is a huge number,
considering that Ponzi schemes are a fairly new concept and most of the people do hesitate to
invest their money in such firms.

Another very important result is indicative that Ponzi schemes are rather flourishing in recent
times. It shall be interesting to see what the 11% who say that the number has decreased have
to say about the whole situation.
 Figure 4

This figure speaks for itself. It is evident that the innocents who are rattled by this wave of Ponzi
schemes never get compensated for it. This is enough to ring bells for the law and order
authorities and really questions those in power as to why people are never remunerated despite
having caught the culprits.

Figure 5

This was an interactive question where we asked our audience to suggest ways they think
would be most effective, and 36% of people have chosen that education is the way to move
forward, which sadly is a humungous issue in itself. This figure could help us identify what might
be the real causes or factors that encourage this crime in our society.
Figure 6

Figure 7

Despite the lack of poor performance of these institutions, it is almost surprising to see that
people still have some sort of trust in FIA, NAB or FBR. Albeit little, people still halfheartedly
trust in the government.
Figure 8

This data shows that people are not generally comfortable investing in such schemes that
promise high rewards. The general trend in the middle is testament to the fact that general
public avoids taking such risks.

Figure 9

It is interesting to note that people generally believe that the culprits of such white collar crimes
will never actually be caught, or that they don’t expect these criminals to be caught. That could
go on to explain why these crimes are so prevalent.
 Figure 10

From this question on in, the focus is more on the rectification part of this issue and how to
resolve this matter. In this case, the general public’s consensus needs to be taken to
understand what can be done about it and more than 61% are of the notion of reporting these
crimes which seems to be good.

Figure 11

This question is primarily based around to test the psychology of the general public to see what
course of action they would take. Most of the people are of the idea of not taking much of a risk
for the sake of making huge sums of money.
Figure 12

Figure 13

Now this is an interesting statistic to be pondered over, there is a balance of 50-40% on each
side of whether a person would stop such an activity happening or may be sometimes. This
again shows a defensive set of mind as far as the general public is concerned. Also, people
would 70% of the time not report the culprits to relevant authorities if they personally know the
criminals. This result too has far reaching consequences which will be discussed later.
 Figure 14

This question gives us insight on the people’s mind and what they consider to be the causes of
Ponzi schemes. It is interesting to note that 17% each of people thought that Ponzi schemes
were violating human rights and or breach the social order of the society. But a major tussle was
seen between religious reasons and fairness which constitutes the main chunk of this pie chart.
However, most thought that fairness was the biggest factor of them all.

Discussion
The survey that was conducted as part of this project yielded very interesting results, that have
in many cases confirmed what we thought and in others, changed our perspective.

When asked if they were aware of Ponzi schemes before the study, a significant majority said
they weren’t. This was in line with our expectations because it is often the case in popular
culture that people hear about notorious cases of scams and frauds, but know little about the
actual mechanisms of how they work. Some people might have a vague idea of a certain kind of
fraud but they might not know its name, which deprives them of awareness.

When asked if they’d ever invested in a firm for profit, a large majority said they hadn’t before.
This is also in line with what we expected since most of the people in the survey were university
students who haven’t yet embarked on their careers. Students also tend to be risk-averse
because of them being short on money to invest.

When asked if anyone they knew had been affected by a Ponzi scheme, a significant
percentage were unsure. This, we believe was because many people, even after being made
aware of Ponzi Schemes, aren’t aware of the precise mechanisms by which a Ponzi Scheme
works. Such understanding requires an understanding of finance and economics, which an
average student lacks. So many students might have heard of a relative being scammed but
might not have known of the exact way it happened.
When asked if they believed the prevalence of Ponzi Schemes has increased in the past few
years, a vast majority said yes. This is probably in line with reality because in the past few
years, the economy has grown much and along with it, the GDP per capita has grown too. This
had lead to people having, on average, more money to invest. As a result, more frauds can
sustain themselves because of the willingness of more people to invest. There might be a
psychological factor at work too, because most students are active on social media, where
negative news is often exaggerated, leading to an inflated sense of risk.

Most people implied they hadn’t been affected by a Ponzi Scheme, which is understandable,
because, as stated before, most are students who don’t regularly invest.

When asked about which way they thought would most effectively tackle Ponzi Schemes, a
plurality pointed to Education and Awareness. This makes sense because of the low educational
attainment in the country, which leads to people being easy victims for such scams. Next to that,
people selected Stricter laws and policies, while a very small minority pointed towards
strengthening enforcement of existing laws. A significant minority pointed to tighter regulations
too. This implies that they think that the existing laws and policies are not enough to deal with
the modern issue of Ponzi Schemes. This is understandable because of widespread discontent
with the system and the belief that top-down reform will make the situation better. But this might
not always be true, since lawmaking and law enforcement are both equally important. A
significant minority chose the punishment of white collar criminals as the most effective means.
This is also a sensible suggestion because the dispensing of justice at the individual level leads
to a just society as a whole, since every case is different.

When asked to rate their trust in the financial instutions, the government, the local law
enforcement and non-official investment schemes from 1-10 respectively, the results were quite
coherent with the generally prevailing narrative. With regards to the financial institutions, most
people felt ambivalent at about 6, while a significant minority trusted them fully. This, we believe,
is because most students don’t have experience with the banking system, and if they do, they
tend to trust it, because, the private financial system is well-established and functioning. As for
the government, there wasn’t wide consensus, with an average around 5. Many people were
ambivalent, but there were also many on the more trusting extreme, because of recent political
uncertainty and instability in the country, which, we believe, has led to increasing polarization of
the political space. Relating to the law enforcement, most people didn’t have trust, at an
average of around 4. Most people tended towards the lower side of the spectrum, with a few
outliers on the opposite end. This is also reasonable because of the popular perception of police
officers as corrupt and untrustworthy. Last, but not least, people were evenly divided about
unofficial borrowers, but most rated below 7. It is instructive how people trust local enforcement
almost as much as unofficial borrowers, hence the lack of reporting of crimes.

When asked about their course of action following a hypothetical scam, people generally
reported that they’d approach law enforcement, which should, in theory, be the ideal route. But
many people also said they’d share it with their families, which might be more reasonable for
those who don’t trust the police, or who might want to use alternative channels for justice.
Amazingly, some said they’d pursue the criminals themselves, which could be a dangerous
path.

When asked how willing, on a scale of 1-10 people were to take risk to make money, a large
plurality rated 0, which aligns with our earlier assumption of the subjects of the survey being
generally risk-averse students. A significant number rated around 5-6, which represents the
more enterprising individuals that always exist in a population, who are thus more prone to
scams.

People were evenly divided on if they’d help if they came across someone being scammed, with
rough thirds saying they would, they mostly would, and they sometimes would. This question
was therefore wrongly framed, since in a variety of social situations, people act differently and it
would be wrong to expect a general answer. But when they were asked if theyd intervene
personally if someone in their family was involved in such a crime, a vast majority said they’d
personally talk to them, which makes sense because the culture is generally family-oriented.

When asked about the fundamental reason why they thought Ponzi Schemes were wrong, most
people either went for the principle of fairness or for religious reasons. This aligns with the
generally conservative attitude of Pakistani society, with a focus on abstract principles and
customs. But significant numbers also chose more liberal answers, such as human rights, or
functionalist answers, such as the maintenance of social order or because the laws say so.

Conclusion
To conclude, this study has revealed a lot about the attitudes of the general public about Ponzi
Schemes, and the system in general. This gives us an insight into the various factors that come
into play when dealing with Ponzi Schemes. It has revealed why people think Ponzi Schemes
are wrong, how much they trust the different public and private institutions around them, and
what course of actions they’d practically take if they were confronted with such situations in real
life. It has also provided us an overview of the general risk-taking tendencies of the surveyed
people, against which the results must be analyzed. It also tested their level of awareness and
showed us the general lack thereof, despite the survey takers being university students.
References:
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https://tribune.com.pk/story/584050/ponzi-scheme-nab-arrests-two-for-involvement-in-
rs2-5b-scam/

https://www.dawn.com/news/703021

https://www.dawn.com/news/1418156

https://tribune.com.pk/story/113956/multi-million-fraud-detected-in-furniture-pakistan/

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https://www.thenews.com.pk/print/319278-owners-of-tobacco-company-arrested-in-
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