Exposing the Torres Scam
INTRODUCTION
The largest Ponzi scheme in recent history emerged from Mumbai disguised under the name Platinum Hern Private Limited[1], popularly called by it’s brand name, Torres Jewellery. Came to light in February 2024, when there was a rapid opening of six showrooms across Mumbai and its suburb regions. It promoted stone jewellery and came out with alluring investment plans carrying high interest returns of between 6% to 20% per week that later went as high as 11%. The promise of luxurious cars, flats, iPhones, and precious gems served to attract the investors. The group members were also incentivized to bring in new investors, thereby establishing a multi-level marketing structure interwoven with Ponzi-like operations. While the schemes seemed very lucrative, there was a scam underneath. The operations started to fall apart by December 2024, interest payments stopped, and investors found that the gemstones promised as awards were fakes.
This was a very wide-ranging scam involving several domestic and Ukrainian individuals.Key accused include the director of Platinum Hern, Sarvesh Surve, along with his accomplices Taufiq Riyaz (alias John Carter) and Laxmi Yadav. Along with these, 11 foreign nationals who were mainly Ukrainians played key roles, and among them masterminds include Artem and Olena Stoin.[2]
CONTEXT
FIR had been lodged on January 6, 2025, by one vegetable vendor alleging the fraud of ₹13.48 crore over him. The case had been handled initially by the Shivaji Park police station. Subsequently, the Economic Offences Wing (EOW) of Mumbai Police was brought into the picture. Besides this, Enforcement Directorate (ED) has conducted a parallel probe focusing on allegations of money laundering. Cash and bullion of ₹9 crores, as well as bank accounts of more than half-a-dozen people linked to the company, have been frozen during the search operations. The total amount of scam is estimated to exceed ₹1,000 crore, and approximately 1.25 lakh victims, with most of them being from lower-middle and lower-income groups.
The Indian legal jurisdiction has many tools to decode and address such scams. In the case of the Maharashtra state, the MPID Act is very crucial for the protection of interests of depositors. Under this act, the fraudster can be accused, and their properties can be attached to pay off the victimized people. It also covers all the sections under the Indian Penal Code for cheating, criminal breach of trust, and conspiracy during the investigation process. The ED probe under the Prevention of Money Laundering Act will trace the laundered amount and retrieve it. This was one of the very wide-scale scams at the hands of several Indian and Ukrainian citizens. Some of the important accused are the Platinum Hern’s director, Sarvesh Surve, along with his confederates Taufiq Riyaz alias John Carter and Laxmi Yadav.[3]
The investigation in the scam covered selling the bogus stones and that laundered amount which was siphoned in benami properties. The firm was not even holding a valid licence in RBI, which makes doubt about its operation. Even magnitude of fraud remained dwarfed and police action has been initiated only after June 2024.
Considering the culprits are foreigners, the case would require collaboration among international agencies like law enforcement departments and immigration to bring in and extradite the accused. The trial would thus be more concerned with the punishment of the wrongdoers with maximum returns to the victim’s account. More importantly, loopholes in regulation, such as no guidelines for any control on schemes like Torres’, must be looked into so that frauds of this nature do not take place in the future.
PROCEDURE FOR THE SCAM
Further procedures in dealing with the Torres Scam would be to have a multi-faceted approach toward giving justice, compensating victims, and preventing frauds like it from happening in the future.Tracing and recovery of assets involved in the scam will be of top priority to investigative agencies. It would require financial record analysis, identification of benami properties, and seizure of funds. Once identified, the assets can be liquidated and the proceeds shall be used in compensation of the victims. In such a way, there will be alleviation of suffering from the numerous victims who lost parts of their savings.
To further strengthen the case, evidence will be more robust. These include documentary evidence such as bank transactions, investment contracts, and certificates that will prove the gemstones are counterfeit and were given to the company. The investigators will also take the statements of various witnesses, most especially the investors and former employees of Platinum Hern, to piece together the timeline of events and criminal intent behind the actions of the company. This will lay the foundation for a strong prosecution.
Prosecution will entail the lodging of detailed charge sheets against the accused and trying them through special courts under the MPID Act and other applicable laws. The Courts will give suitable penalties like fine and/or imprisonment to the convicts. In this manner, the legal process is targeted towards ensuring strict accountability and adding a deterrent effect to such fraudulent schemes.
Compensation to the victims continues to be one of the major objectives. Money that has been recovered in the form of asset liquidation and seizure would be used for compensating the investors equitably among themselves. Authorities will ensure transparency of the process for restoring confidence of the victims in the process. At the same time, the policymakers will tackle systemic vulnerabilities revealed by the scam. This would see a tight regulation of the multi-level marketing schemes and investment operations as the oversight will be stepped up both at the Reserve Bank of India and Securities and Exchange Board of India levels.
International cooperation is also required, as the scam involves foreign nationals. The investigative agencies will cooperate with foreign governments and international law enforcement agencies to bring back absconding accused, especially the Ukrainian masterminds. It involves red notices and coordination through diplomatic channels. This also involves looking into cross-border money laundering operations in connection with the scam in tracing and recovery of funds laundered out of India[4].
OTHER SCAMS:
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Nature of the Scam
The Torres Scam was based on an MLM business model in the promises for high returns on investments in gemstones. The Saradha Chit Fund Scam, on the other hand, was on chit fund investing; investors were promised outstanding returns as a form of incentive. The Pearl Group Scam involved a fraud real estate scheme where land promised did not exist in many instances. The Madoff Ponzi Scheme was an old-fashioned case of a Ponzi operation that made returns to the older investors through funds of the newer investors. Though different in mechanisms, all these scams relied on the principle of trust and promised out-of-the-way financial gains.
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Victim profiles:
The victims of the Torres Scam were mainly middle-class investors comprising professionals and small business owners; the same has been observed with the Saradha Chit Fund Scam that targeted low-income and rural investors. In the Pearl Group Scam, from the rural farmers to the professional classes in cities, the nature of the fraud reflected a wider net of victims. The Madoff Ponzi Scheme’s victims were also the rich persons, institutions, and charities as it shows the very wide range of different socioeconomic classes of victims affected by such scams.[5]
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Investigative and Litigation Initiatives
As was the case with the Saradha Scam, during the Torres Scam, there was an intense activity on tracing of assets, confiscation of funds, and bringing the foreign masterminds before Indian courts for prosecution. Pearl Group Scam included the process of seizure of assets and their liquidation; however, because of a massive number of gullible people involved in this scam, litigation was inevitable, which became very protracted in nature. U.S. laws expedite the Madoff case, culminating in quick trial and handing down a sentencing of 150 years to Bernie Madoff for his scams. Indian scams delay due to some procedural bottlenecks; while U.S. cases enjoy expedited legal procedure.[6]
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Recovery of Assets and Victim Compensation
Asset recovery in the Torres Scam is through liquidation of confiscated properties and money to refund the investors, like in the cases of Saradha and Pearl Group. However, the scale differs; in the case of the Saradha Scam, only a few percentages of the promised returns could be recovered as the money had been siphoned off. The Madoff Scheme stands apart, since the majority of the defrauded $65 billion was recovered, thanks to vigorous asset tracing and clawback lawsuits against the beneficiaries of the scheme.[7]
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Policy and Regulatory Reforms
Regulatory failures to monitor MLM schemes are once again evident in the Torres Scam, which have also been reported with the Saradha and Pearl Group scams.Both cases led to regulatory reforms over the financial regulatory domain, chit fund law strengthening, and increased governance at the hands of SEBI[8]. Similarly, the Madoff Scheme resulted in global investment fund auditing and governance practices being overhauled by regulatory bodies, such as the SEC, across the United States. International Dimension of the Torres Scam demands cross-border cooperation at the level of regulation; something also called for in the Pearl Group Scam, in which overseas operations were being carried out.[9]
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Socioeconomic Impact
The Torres Scam has shaken the confidence of investors in MLM models and gemstone investments, just as the Saradha Scam has shaken the confidence of people in chit funds.[10] The Pearl Group Scam has undermined faith in rural investment schemes, while the Madoff Scheme shook the confidence of people in high-profile hedge funds and wealth management services. In most cases, the scale of damage depends on the financial stability of the victims, and the middle- and lower-income investors suffer the most.[11]
Author: Nicole Earl, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or IP & Legal Filing
[1] FileSure, Platinum Hern Private Limited, https://www.filesure.in/company/platinum-hern-private-limited/U32119MH2023PTC400312?tab=about (last visited Jan. 21, 2025).
[2] NDTV, Torres Jewellery: Who Are the Masterminds Behind Torres Jewellery Ponzi Scam?, https://www.ndtv.com/video/torres-jewellery-who-are-the-masterminds-behind-torres-jewellery-ponzi-scam-887567 (last visited Jan. 21, 2025).
[3] Hindustan Times, Multicrore Torres Investment Scam: 1,535 Complaints Received by Mumbai Police So Far, https://www.hindustantimes.com/cities/mumbai-news/multicrore-torres-investment-scam-1-535-complaints-received-by-mumbai-police-so-far-101736623732202.html (last visited Jan. 21, 2025).
[4] The Indian Express, Torres Scam: Bombay HC Slams Police ‘Lethargy,’ Orders Protection for Whistleblower, https://indianexpress.com/article/cities/mumbai/torres-scam-bombay-hc-police-lethargy-orders-protection-for-whistleblower-9780380/ (last visited Jan. 21, 2025).
[5] Business Standard, What Is Saradha Scam?, https://www.business-standard.com/about/what-is-saradha-scam (last visited Jan. 21, 2025).
[6] Business Today, Pearl Group Ponzi Scam: SEBI to Refund ₹20 Crore to 12.85 Lakh Investors, https://www.businesstoday.in/latest/story/pearl-group-ponzi-scam-sebi-to-refund-rs-20-crore-to-1285-lakh-investors-316320-2021-12-02 (last visited Jan. 21, 2025).
[7] Madoff Scheme
The New York Times, Madoff Trustee Recovers $14.4 Billion for Victims, https://www.nytimes.com/2021/12/23/business/madoff-victims-compensation.html (last visited Jan. 21, 2025).
[8] CNBC, SEC Overhauls Regulations After Madoff Ponzi Scheme, https://www.cnbc.com/2014/07/22/sec-implements-strict-regulations-following-madoff-scheme.html (last visited Jan. 21, 2025).
[9] Pearl Group Scam International Operations
Hindustan Times, Pearl Group Scam: ED Investigates Overseas Operations, https://www.hindustantimes.com/india-news/pearl-group-scam-ed-investigates-overseas-operations/story-X4sFYhbNeRLqEfGkbDbvMO.html (last visited Jan. 21, 2025).
[10] Torres Scam
Hindustan Times, Multicrore Torres Investment Scam: 1,535 Complaints Received by Mumbai Police So Far, https://www.hindustantimes.com/cities/mumbai-news/multicrore-torres-investment-scam-1-535-complaints-received-by-mumbai-police-so-far-101736623732202.html (last visited Jan. 21, 2025).
[11] NDTV, Saradha Scam: A Blow to Bengal’s Rural Economy, https://www.ndtv.com/india-news/saradha-scam-a-blow-to-bengals-rural-economy-386912 (last visited Jan. 21, 2025).
