Noida fraud case: a fraudster made 3700 crores via an online trading scam

Trading is no exception in this age of the internet, where everything is done online. There is no doubt that the internet has made trading simpler in recent years; you can trade from anywhere and at any time, and everything is at your fingertips. It has, however, rendered you vulnerable to fraudsters. The Noida Fraud case is an example of these sorts of internet trading scams, and the purpose of this page is to examine the fraud and clarify the legal options available to victims of similar crimes.

Noida fraud case: a fraudster made 3700 crores via an online trading scam

Introduction


Trading is no exception in this age of the internet, where everything is done online. There is no
doubt that the internet has made trading simpler in recent years; you can trade from anywhere
and at any time, and everything is at your fingertips. It has, however, rendered you vulnerable to
fraudsters. The Noida Fraud case is an example of these sorts of internet trading scams, and the
purpose of this page is to examine the fraud and clarify the legal options available to victims of
similar crimes.


An analysis of the scam


Mittals four firms, Ablaze Info Solutions Pvt Ltd, Social Trade Pvt Ltd, 3W Digital Pvt Ltd, and
Intmaart Pvt Ltd, were involved in the scheme. These businesses operated through a website
called socialtrade.biz, which ultimately became frenzzup.com. Through these portals, they
flushed nearly Rs 3700 crore into their bank accounts within a year. This was Indias first internet
Ponzi scheme; for those unfamiliar with the term, a Ponzi scheme is called after "Charles Ponzi," who employed it for the first time in the United States in the 1920s. 'A Ponzi scheme is a type of investment fraud in which investors are promised large returns in exchange for their money.
Ponzi scheme participants put all of their efforts towards acquiring new consumers. The money
was obtained from new investors and used to pay out "returns" to the original investors.


Anubhav Mittal, a B.Tech graduate, and his two assistants, Shridhar Prasad, an MBA, and
Mahesh Dayal, the scams technical leader, planned the scheme. They provided several
investment options through these websites, ranging from Rs. 5,750 to Rs. 57,500. After making
the investment, the investors were persuaded that all they had to do was click on links and like
particular postings on social media. According to investors, the corporation bought the company
from a third party in order to boost the third partys web traffic on a digital platform. Depending
on their subscription settings, the investors received 25, 50, 75, or 125 URLs on their phones
each day.


The firm stated that for every like provided through the links, they were collecting Rs 6 and that
they were being paid by the respective companies as well as Facebook, and referred to it as
"digital marketing." The firm also stated that it would track the links to ensure that investors
followed through and did not engage in any deceptive practises in order to achieve their goal on
a daily basis.


Customers began approaching the police with various complaints about not getting money over a
period of time, and FIRs were filed against the business and its owner. The Special Task Force
was quickly assigned to the case, and it was immediately determined that the linkages or URLs
offered to the investors were false, and the business had no economic contacts with any third
parties. All of the URLs ended up on the same bogus server in Ghaziabad.

The idea was doomed to fail because subscription revenue was the primary source of income for
the firm. The STF discovered that over a lakh police complaints had been lodged against the firm
for non-payment of dues, and that within a year, they had defrauded over 6 lakh individuals out
of Rs 3,700 crore. The trio was quickly apprehended by the Directorate of Enforcement (ED)
under the Prevention of Money Laundering Act, 2002 (PMLA), and police discovered Rs 520
crore in a dozen of the firm's accounts throughout the nation.


Legal provisions


In the Noida fraud case, the ED, as well as the UP Police, registered the case under various
provisions of Indian Law which are mentioned as under:


Indian Penal Code, 1860


The following sections of the Indian Penal Code were applicable in this case, which are as
follows:
Section 34 – This section states that if a group of persons does illegal activity with the same
purpose, each of them shall be held liable for the crime as if it were committed by a single
person. Section 120-B of the IPC specifies the penalty for this offence.
Section 406– It stipulates that a criminal breach of trust is punishable by imprisonment of any
kind for up to three years, a fine, or both.


Section 420– If a person deceives someone and induces him to deliver any property to a person,
or to form, alter, or destroy the entire or any part of a valuable security, or something signed or
sealed that can be converted into a valuable security, the person is subject to the provisions of
this section. Shall be sentenced to either type of imprisonment for a period of up to seven years, as well as a fine.


Section 467– Whoever forges a document claiming to be a valuable security, a will, or a
document claiming to give authority to any person to make or transfer valuable security, or to
receive the principal, interest, or dividends thereon, or to receive or deliver any money, movable
property, or valuable security, or any document claiming to be an acquaintance or receipt
acknowledging the payment of money, or an acquaintance, or any document claiming to be an
acquaintance or receipt acknowledging the payment of money Anyone who does so will be
sentenced to life in jail or a term of up to 10 years in prison, as well as a fine.


Section 468– Anyone who commits forgery with the goal of deceiving others by utilising the
falsified document or electronic record is penalised by up to seven years in prison and a fine.
Section 471– Anyone who uses as genuine a document that he knows or has reason to think is
forged will be punished as if he manufactured it.

Prize Chits and Money Circulation Schemes (Banning) Act, 1978


In the Noida scam case, the following laws of the Prize Chits and Money Circulation Schemes
(Banning) Act, 1978 were applicable:
Section 3 deals with the prohibition of prize chits and money circulation programmes, as well as
membership and participation in such schemes. Section 4 of the same Act specifies the penalty
for this offence.


Section 5 deals with the penalty for various offences involving prize chits or money circulation
systems.


Section 6– This section states that everyone who is a part of a firm is jointly and severally
accountable.


Aside from the aforementioned requirements, the Indian legal framework contains a wealth of
legal rules that can be used to combat financial fraud, whether online or off. These clauses are
included.


The Companies Act, 2013


The Companies Act of 2013 is a piece of legislation that addresses corporate fraud. "Corporate
fraud" is defined as "any omission, concealment of a fact, or abuse of position offered by any
individual with the intent to deceive, benefit from, or harm the company's, investors', or
shareholders' interests, regardless of whether any unjust gain or loss is involved" under Section  447 of the same Act. A person who misrepresents himself or herself is also subject to
imprisonment for a period of 6 months to 10 years, as well as a fine, according to this law. The
minimum term for fraud against the public interest is three years in prison.


The Chit Funds Act, 1982


The state governments regulate and register the schemes that are permitted to operate under the
Chit Funds Act of 1982, and the Registrar is the authority in charge of regulation and security
deposits. If a corporation violates the Act, the Registrar is liable for attaching the security deposit
and property. According to the Act, all chit firms are forbidden from appropriating chit
collections or accepting any deposits. Due to rising operational expenses, fund managers shifted
to higher-value funds.


Why are people falling for online trading Scams


Scams using online trading platforms have received a lot of attention on the internet and in social
media. To encourage people to participate in their frauds, they frequently offer enormous,
guaranteed earnings and utilise phoney testimonials. Consumers are then led to professional-
looking websites where they are convinced to invest, either through a managed account in which
the business handles all of their transactions for them or by trading directly on the firms platform. The majority of clients allege that they first received some returns from the firm in order to create the appearance that their trade was profitable. They;ll be persuaded to raise their investment or suggest a friend or family member. Returns, on the other hand, ultimately cease, the clients account is stopped, and the consumer is no longer able to contact the company.


How to defend oneself Make an effort to conduct your own study. Giving over your passwords
or allowing others to access or manage your phone is not a good idea. Check to see whether they
are genuine agents rather than impersonators. Pressured to invest more and faster in order to reap
inconceivable benefits. Be wary of internet and social media adverts that promise high profits
from online investment.



Modus Operandi for genuine earning

The scammers promised the consumers that if they clicked on the phoney links given by them,
they would earn money. Typical titles for such enticing advertising include "make quick money
sitting at home," "how can students earn up to Rs. 15,000 per month" and "easy money just click this link," among others. Genuine advertisements, on the other hand, do not fall into this category. They operate in a very different way. In reality, it's the polar opposite. The user creates a website and signs up to have adverts shown on it. The user earns a predetermined amount of
money per click when visitors to the user's website click on the advertising.


Conclusion


The Noida case is an excellent illustration of how contemporary technologists defraud people of
their hard-earned money. This is just one of the several frauds that occur on a regular basis these
days. It is critical for people to be wary of tempting scams and to recognise that large sums of
money are never simple to come by. If a person is familiar with the regulations and processes
governing investments, he will recognise a scam when he encounters one. Because the world is
continually growing technologically, this has become a highly vital prerequisite for residents all
over the world.


References


https://blog.ipleaders.in/noida-fraud-case-fraudster-made-3700-crores-via-online-trading-scam/
https://timesofindia.indiatimes.com/city/noida/like-scam-noida-man-dupes-6-lakh-people-of-rs-
3700-crore/articleshow/56943794.cms
https://www.mondaq.com/india/white-collar-crime-anti-corruption-fraud/1119950/ponzi-
schemes-in-india-a-brief-overview-of-the-regulatory-landscape
https://www.hindustantimes.com/business-news/noida-online-scam-first-social-network-ponzi-
scheme-worth-rs-3700-crore-busted/story-YYlpTSxakh4lUhFRHynW6H.html
https://www.fca.org.uk/scamsmart/online-trading-scams

https://cyberblogindia.in/noida-fraudster-3700-crore-online-trading-scam/
https://legaldesire.com/laws-related-to-financial-crimes-in-india/
https://www.edunia.com/news/charges-on-anubhav-mittal/