The scam involved selling fake shares in companies that didn't exist, and then using the money to buy real shares at inflated prices. This allowed the investors to profit while the country suffered through a recession.
They created fake companies with names like “Saradha Group” and “Tata Steel.”
The scam was so successful that it became known as the "Saradha Scam." It's estimated that $1 billion was stolen from the people of India during the scam.
They then bought shares in these companies at inflated prices.
The scam began when the promoters of Saradha Group approached several banks with a plan to raise money through the sale of stocks. The promoters claimed that the company had made huge profits and would soon pay back its investors. To convince the banks to lend them money, the promoters offered to buy large amounts of shares in various companies.
They sold their shares back to investors at much lower prices.
The promoters then used the proceeds from these sales to purchase more shares in other companies. This process continued until the promoters owned enough shares to control those companies. Once they controlled the companies, the promoters stopped paying dividends and started selling off assets.
Investors lost billions of dollars as a result
The scam cost investors $3 billion, and the government had to bail out several banks. It also led to the resignation of Prime Minister Narasimha Rao.
The scam was uncovered when one of the founders of Saradha Group was arrested.
The founder of Saradha Group, Sudipta Sen, was arrested in 2006 after being accused of masterminding the scam. He was later acquitted of all charges.
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