SCAMS

1. 2. 3. 4. 5. 6. VAISHALI LAPASIA MANSI MODY PANKHURI PANDYA BINOY PAREKH HITESH RAMDASANI SAHIL SHROFF

What is the IPO Scam?
‡ It involved manipulation of the primary market by using fictitious benaami accounts ‡ Key Operators: Financiers and market players

Yes Bank Scam ‡ Roopalben Panchal of IndiaBulls Securities was allegedly the mastermind of the scam ‡ She had allegedly opened and was controlling nearly 15.000 fake demat accounts and subsequently had raised finances on the shares allotted to her through Bharat Overseas Bank branches .

The Scam ‡ Illegally obtained IPO shares reserved for retail applicants ‡ 1000s of benaami demat accounts ‡ Transferred the shares to financiers ‡ Sold on the first day of listing ‡ Made windfall gains .

How it was detected? ‡ Sebi .Detected irregularities ‡ Roopalben Panchal.was the main culprit .

Consequences ‡ SEBI has banned 24 entities involved from the primary and secondary market ‡ 85 Financiers barred from the market ‡ 12 DPs can¶t open fresh demat accounts .

186 12.3 Suzlon Energy Tata Consultancy Services Jet Airways National Thermal Power corporation .619 1.Few Others Company Fictitious accounts 21.74 2.52 1.09 0.853 % share of total allotted to retail investors 3.692 14.

Total Jhol«..Rs 32 Cr .Rs Jhol«..

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NH Securities started by his father. ‡ Managed family business.Ketan Parekh Scam ‡ Chartered Accountant by profession. ‡ Known as the ³Bombay bull´. .

communication. ‡ KP and his associates bought low priced stocks belonging to companies which listed high growth and small capital bases. . entertainment) stocks in early 1999 along with the dotcom boom.The Rise ‡ Emergence of ICE (information.

Global Telesystems. KP¶s umbrella company Triumph International held stakes in ABCL. Zee Telefilms. Crest Communications and PentaMedia Graphics later known as the infamous K-10 scripts .The Rise ‡ By July 1999. HFCL. Tips and Pritish Nandy Communications. Mukta Arts.

³Panther Fincap´ & ³Classic Share and Stock Brokers´ to borrow money. .His Allies ‡ Madhavpura Mercantile Co-operative Bank. ‡ KP used three main companies under his umbrella company called ³Panther Investrade´ .

His Allies ‡ These companies had up to 200 Crores of line of credit with Madhavpura bank against which KP gave a collateral of shares worth 300 Crores plus ‡ MMCB issued pay orders to these companies which were discounted at BoI for a hefty fee ‡ Total Borrowings amounted to more than 1000 Cr .

His Allies ‡ Global Trust Bank ‡ GTB issued loans to KP against shares as collateral security ‡ KP with support from GTB¶s then CMD Ramesh Gelli rigged the prices of GTB scrip just before the merger with UTI Bank ‡ Total Borrowings amounted to 250 Cr with Gelli going on record saying that GTB had not given more than 100 Cr to KP .

His Allies ‡ Zee Telefilms ‡ Subhash Chandra ‡ Funding to KP = 365 Crores ‡ Himachal Futuristic Company Limited ‡ Vinay Maloo ‡ Funding to KP = 304 Crores ‡ Global Telesystems ‡ Manoj Tirodkar ‡ Funding to KP = 228 Crores .

‡ KP used as much as 16 fictitious companies to borrow money .His Allies ‡ Other traders ‡ Market speculations and continuously increasing prices of K-10 stocks led to massive volumes of trading ‡ This in turn increased the K-10 stock prices tenfold.

Anand Rathi and Nirmal Bang ‡ They placed sell orders on all K-10 scrips ‡ KP tried to buy back all the stocks sold by the cartel but volumes were too large for him to handle ‡ Stock prices started falling .Shankar Sharma.The Fall ‡ In 2001 all K-10 scrips were overvalued ‡ The Bear Cartel .

directly from KP .The Fall ‡ Market crashed by 176 points in March 2001 ‡ SEBI launched investigation into volatility of market ‡ RBI declared Madhavpura Bank as a defaulter due to which BoI demanded the latest pay order of 137 Crores discounted by it.

2001 by CBI and released on bail in May ‡ Arrested again on December 2. . KP arrested on March 30. 2002.The Fall ‡ Scam uncovered.

. Rs 2250 Cr ..Total Jhol«. Jhol«.

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000 Crs .Harshad Mehta Scam ‡ Founder of GrowMore Research and Asset Management Company Limited ‡ Popularly known as µBig Bull¶ ‡ Followed a µReplacement cost theory µ model ‡ Scam in 1992 ‡ Arrested on June 5. 1992 ‡ Charged with 72 criminal offence ‡ civil suits were charged ‡ Estimated scam Rs 4.

Metorpolitan Co-operative Bank (MCB) .The Plan ‡ ‡ ‡ ‡ ‡ Buying stocks in large quantity Triggering the price of shares Ready forward (RF) deal Making false bank receipt (BR) Getting fake BRs from Bank of Karad (BOK).

Favorite stocks ‡ ‡ ‡ ‡ ‡ ‡ ‡ ACC Apollo Tyres Reliance Tata Iron and Steel Co. (TISCO) BPL Sterlite Videocon .

The Scam ² RF Deal ‡ Usage of flaw in RF ‡ The RF .secured short-term (typically 15day) loan from one bank to another. ‡ Given against government securities ‡ The buyer and the seller go through broker ‡ They don¶t know who is buying or who is selling .

‡ BOK.BR ‡ Non movement of securities ‡ Instead.The Scam . gave the buyer of the securities a BR. the seller of securities. the borrower. i.e. MCB to issue fake ‡ Money was transferred .

The Fall ‡ Fall of market ‡ On April 23. 1992. journalist Sucheta Dalal exposed him .

. Rs 4000 Cr . Jhol«..Total Jhol«.

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Satyam Fiasco« ‡ ‡ ‡ ‡ ‡ ‡ Satyam was established in 1987. 9 % market share 40.1 billion It is the first company of India listed in three International Exchanges i. 4th fastest growing IT company in India. NYSE. DOW and EURONEXT .e.000 employees Revenue $2.

Murthy . S. A.MANAGEMENT FOUNDER CEO : : Mr. Raju Ramalinga Mr.

HOW IT HAPPENED ‡ Maytas Acquisition. ‡ Investors Aborted. ‡ On 7th Jan. . Chairman resigned after announced involvement in fraud.. ‡ Board Members Resigned. 09.

WHAT WENT WRONG? ‡ Inflated figures for cash and bank balances of INR 5. ‡ Window Dressing V/S SCAM .361 crore reflected in the books). ‡ Operating Profit were artificially boosted from the actual 61 cr. that was fictitious.040 cr. 376 cr. to 649cr. (as against INR 5. ‡ Satyam also showed an interest earning of Rs.

. ‡ It surely could have hurt Indian Companies like Infosys.IMPACT ON INDIAN IT INDUSTRY ‡ Indian stock market slipped over 7% on 7th Jan. TCS and Wipro and other Indian IT service players to win business across the globe. . this hurt the prospects of foreign money flowing into India. ‡ Undoubtedly. 09.

HDFC ‡ Regulator ± SEBI . Bank Of Baroda.PARTIES INVOLVED ‡ Promoters of Satyam ‡ Satyam Board of Directors ‡ Auditors ± PWC ‡ Bankers ± ICICI.

.Share Prices«.

.Satyam CFO Vadlamani Srinivas (R) being brought to the Chanchalguda prison after his arrest in Hyderabad.

Satyam's Management ‡ Founder Mr. Raju Ramalinga made a public surrender on 7th January and was arrested. ‡ But could only two or three people have managed to cook the books for years of a company so large? ‡ Highly unlikely . ‡ Satyam's CFO Srinivas Vadlamani had been arrested.

Directors and Independent directors .

including independent directors was essentially that of 'noddersµ ‡ The Satyam board. . ‡ Despite the shareholders not being taken into confidence. ‡ The decision of acquisition was reversed 12 hours later after investors dumped Satyam's stock. the directors went ahead with acquisition.Board of Directors ‡ The role of the company's directors. including its five independent directors approved the founder's proposal to buy 51 per cent stake in Maytas.

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PWC.Satyam's Auditors ‡ So what were the auditors. ‡ Not just the cash. even they even signed off on the non-existent interest that accrued on the non-existent cash balance! ‡ The company officials said they relied on data from the reputed auditors. . doing? ‡ Signed Balance sheets which showed cash reserves which were non existent.

REGULATORS .

‡ What can be done?? ‡ Analysts say the market watchdog lacks the teeth for ensuring compliance on governance.SEBI ‡ The SEBI in December given a clean chit to Satyam saying that it had not found any violation of norms relating to takeover and corporate governance in its preliminary surveillance of the deal involving the acquisition. .

The Bankers .

ICICI Bank. . HDFC Bank.300 crore (Rs 53 billion) in its banks.BANKERS ‡ Satyam's banks -. Bank of Baroda ‡ Satyam's books showed cash to the tune of over Rs 5.

INDIA·S STEPS TO SAVE SATYAM ‡ The Indian Government had provided temporary direct or indirect support to the company. has appointed 3 members board for Satyam consisting of heavy weights from India's corporate sector. . ‡ Govt. Tech Mahindra won the bid by quoting Rs. Satyam found a new owner after nearly 3 months. SEBI approved for 51% sale of stake. ‡ On 13th April.59 per share. ‡ 0n 06th March.

Rs 8000 Cr ‡ ..Total Jhol«.

‡ Ponzi did not invent the scheme.PONZI SCHEME ‡ Is a fraudulent investment operation that pays returns to separate investors from their own money or money paid by subsequent investors. . rather than from any actual profit earned. ‡ The scheme is named after Charles Ponzi who became notorious for using the technique in early 1920.

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Reasons For Ponzi Being Successful
‡ Those who actually got paid reinvest their money in the scheme. ‡ Those running the scheme do not actually have to pay out very much . ‡ Targets are laymen. ‡ Promoters ask scheme to be kept secret to ensure competitive edge, may also be used to hide the nature of the scheme.

Reasons For Failure Of Ponzi
‡ The promoter will vanish. ‡ If investment slows and the promoter starts having problems paying out the promised returns. ‡ Promoter fails to validate the claims when asked to do so by legal authorities. ‡ External market forces, eg- a sharp decline in the economy

1928 ‡ Former chairman of NASDAQ Stock Exchange ‡ Founder of Bernard L.. ‡ Born on 29th April.Who Is Bernie Madoff???. Madoff Investment Securities LLC (1960) ..

and his popularity increased each year. .The Scam« ‡ In early 1990¶s Madoff told family and friends: ³you invest your money in me and I assure you consistent returns of 810%´ ‡ Investors believed the 10% was put into their account and spread the word that Madoff was reliable.

The Scam« ‡ People reinvested the money ‡ If someone took out the money. Madoff paid him with other peoples¶ money ‡ Continued to give higher returns for almost 10 years .

Feeder Funds« .

people started taking money out of the scheme ‡ Madoff couldn¶t pay them back ‡ His sons found out and informed the authorities .The Catch« ‡ Due to economic slowdown in 2008.

Magnitude of the Scam« ‡ Scam worth almost 50 billion USD ‡ It Affected thousands of investors: white collars blue collars (pension money) NGOs .

2008 ‡ Faces 150 years of charges ‡ Home auctioned to help out victims ‡ SEC under the scanner .The Outcome« ‡ Madoff arrested on 11th dec.

Questions Raised« ‡ Why didn¶t any investor try to find out where Madoff is investing the money?? ‡ Why didn¶t SEC discover the scam earlier?? ‡ How did the scheme continue for almost 10 long years?? .

Ponzi V/S Madoff Madoff scheme lasted for 10 long years before it failed Madoff showed consistent returns of 8-10% and also losses sometimes Ponzi scheme failed within 1 year in 1929 Ponzi showed higher returns of 25-40% 25and so it failed in short term .

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