The Ponzi playbook in Telangana: built on trust, broken by fraud

For nearly two years, the money arrived on time, until one January morning it didn’t.

At the start of 2025, when most people were planning their finances for the year, Shobhan Kumar, a 37-year-old doctor from Hyderabad, saw a longstanding investment collapse. It started with a missed payment, followed by unanswered calls. Within days, the investment that had appeared reliable for nearly two years vanished — taking with it more than ₹1.5 crore, almost all his savings and the sense of financial stability he had painstakingly built over time.

Until then, Shobhan had been cautious with money. Like many salaried professionals, he stuck to fixed deposits, recurring deposits and equities. But rising expenses nudged him to explore alternatives.

While researching online, he came across invoice discounting platforms, marketed as low-risk investments backed by corporate invoices rather than market speculation.

His search led him to two prominent platforms, one of them Falcon. “The company appeared everywhere: in search results, social media feeds and online reviews. They had very good ratings and the website showed well-known corporate clients. There was no red flag,” he recalls.

He began small, investing about ₹1 lakh. For the first three months, returns of around ₹3,300 arrived right on time. The payments were seamless,without reminders or follow-ups.

Over the next two years, that initial confidence hardened into trust. Falcon had a dedicated support system, with a coordinator who stayed in regular touch. On a few occasions when transfers were delayed by a few hours, Shobhan was assured the money would be credited within 24 hours. It always did. The platform appeared organised and transparent.

The app he was asked to download was available on Google Play Store. Invoices were shared regularly. Purchase agreements were uploaded. Every transaction seemed documented. The company frequently cited associations with large corporate names and encouraged referrals, offering vouchers and incentives.

Then, in January 2025, the payments stopped.

At first, he assumed it to be routine delay. He was told there was a technical glitch. When the delay stretched to days, e-mails began arriving instead, citing defaults by certain companies and invoices not being honoured. The messages outlined a phased plan to stabilise the system, written in technical but reassuring language.

And then, without warning, everything went silent.

Calls stopped connecting, e-mails went unanswered, the website went offline. The app opened to a blank screen, its transaction history wiped clean. By the time news reports surfaced about the Falcon fraud, Shobhan had exhausted every possible way of reaching the company.

The financial fallout was immediate. With ongoing EMIs and monthly returns used to manage repayments, the sudden halt forced him to borrow from friends to avoid defaulting. “It was extremely stressful, both mentally and financially. I had lost all my savings. I was anxious and helpless. Those few months were very disturbing,” he shares.

For salaried professionals, he says, finances are planned down to the last detail. The sudden collapse upended everything. Though he has since repaid his friends, the strain lingers. “I am single, so I somehow managed. But it meant restructuring loans, cutting back on everything and starting again. Not everyone can survive a shock like this.”

Shobhan is among 7,000 investors defrauded in the Falcon scam. In 2025 alone, Telangana has detected at least seven major Ponzi schemes, with estimated losses exceeding ₹1,900 crore. These include the ₹850-crore IIT Capital Tech and AV Solutions ‘AI-powered investment’ fraud, the ₹850-crore Falcon invoice discounting scam, the ₹60-crore Sri Nandhan Infra Developers case, the ₹25-crore AV Infracon and AV Organo Farms fake investment and buyback schemes, the ₹6-crore Fibwave Analytics LLP fraud, the ₹41.91-crore Sri Sai Ram Enterprises scheme and a ₹68.47-crore deposit scam linked to mastermind Ramavat Balaji Naik.

Nationwide, losses running into more than ₹20 lakh crore have been reported over the years, with fresh cases continuing to surface.

Amid growing concern over the scale at which such frauds are draining household savings, Reserve Bank of India Governor Sanjay Malhotra recently flagged the issue in a meeting with Telangana Chief Minister A. Revanth Reddy, urging the State to notify the Banning of Unregulated Deposit Schemes (BUDS) Act, which provides a legal framework to curb and penalise unregulated deposit schemes.

While States such as Kerala and Punjab have notified the Act, others are yet to do so, creating uneven enforcement and regulatory gaps that fraudsters continue to exploit.

An industry built on deception

The magnitude of Ponzi schemes uncovered in 2025 is best illustrated by two major cases reported in Cyberabad — the ‘AI-powered investment’ fraud and the Falcon invoice discounting scam. Though packaged differently, investigators say both followed near-identical playbooks typical of large-scale financial fraud.

In the first case, investors were drawn in by claims of AI-driven stock market prediction tools promising returns of 7% a month, or 84% annually. The pitch leaned heavily on the buzz around artificial intelligence to project sophistication and credibility.

Falcon, in contrast, positioned itself as a polished invoice discounting and peer-to-peer investment platform, claiming to connect investors with reputed corporate borrowers and offering high returns on short-term deposits.

Investigations later revealed that neither scheme had a legitimate business model. AV Solutions built false credibility through fake SEBI, NSE and BSE registrations, fabricated trading dashboards and non-existent AI software, while Falcon used fake vendor profiles, forged invoices and sham transactions to mimic legitimate commercial activity. Together, the two schemes are estimated to have mobilised over ₹2,500 crore, impacting thousands of investors across Telangana and other States.

As in classic Ponzi structures, early investors were paid on time using funds from new participants, creating the illusion of profitability, and fuelling reinvestment and referrals.

Trust, timing and collapse

Ponzi schemes rely less on complex financial engineering and more on the careful manufacture of trust. They begin with promises of unusually high, steady returns, backed by visible markers of success. Early payouts fuel word-of-mouth credibility, pulling in new investors.

An official from the Economic Offences Wing of Cyberabad police said the rising appetite for passive income has become a critical vulnerability. “With salaries stretched by EMIs and household expenses, many people seek easy supplementary income, making them susceptible to schemes that appear both lucrative and safe. Even educated investors often fail to question how such returns are possible when banks and regulated institutions cannot offer comparable yields. Emotional decision-making takes over, driven by success stories, persuasive agents and the promise of a lifestyle that seems within reach,” the official said.

Once fresh inflows slow and withdrawal demands rise, the structure collapses rapidly. Offices shut, apps fail and organisers vanish, leaving families devastated. Investigators say such schemes rarely survive beyond 12 to 18 months, as mounting payout obligations inevitably expose the fraud.

Inside the machinery of fraud

Behind the scenes, these schemes survive by exploiting regulatory blind spots through layered corporate structures. Fraudsters typically incorporate multiple private limited companies or LLPs via the Ministry of Corporate Affairs portal, using genuine or dummy identity documents and addresses to create legally registered but non-operational shell entities. On paper, they appear compliant but in reality, they have no business activity, employees or assets.

These entities are then used to open multiple current accounts across banks and States. Investor funds are quickly split and routed through these accounts and personal wallets — a process known as layering — masking the original source of the money. A commission-driven network of agents and sub-agents mobilises deposits within communities, earning incentives for bringing in new investors.

Technology plays a central role in sustaining the illusion. Mobile apps, web dashboards and auto-generated statements display fabricated returns, account balances and maturity schedules, despite having no connection to actual bank funds.

Unlike purely online scams, Ponzi schemes depend on the organiser’s physical presence in the early stages. Fraudsters travel widely, meet investors and host flashy events to project legitimacy and access.

Once the scheme gains momentum, many move abroad, operating through encrypted platforms without active SIM cards. Funds are withdrawn in small amounts across locations, consolidated through agents and routed overseas via cryptocurrency and benami channels.

The regulatory blind spot

Ponzi schemes thrive in the space between weak oversight and fragmented enforcement. While only RBI-authorised non-banking financial companies are legally allowed to accept public deposits, unauthorised entities routinely raise large sums through shell companies.

“Company incorporation is largely procedural, with little scrutiny of business intent or operational capacity. Banks, under pressure to meet current account-opening targets, often rely on registration documents without deeper background checks,” says an official from the Telangana Cyber Security Bureau.

Companies run by fraudsters typically lack valid permissions under the Banking Regulation Act, Companies Act, Reserve Bank of India Act or Securities and Exchange Board of India regulations.

Current accounts, meant for business use, allow high-volume transactions and attract less immediate scrutiny than personal accounts, enabling fraudsters to move crores of rupees quickly. Many shell company accounts exist only for a few months, enabling fraud before being shut down, bypassing income tax or regulatory intervention.

Enforcement remains fragmented, with limited real-time coordination among the Registrar of Companies, banks, investigating agencies and the judiciary.

“Fraudsters exploit institutional gaps. When agencies work in silos, schemes grow and collapse before effective action begins,” says Hyderabad Police Commissioner V.C. Sajjanar, who has investigated Ponzi scams across India for over 25 years.

Despite the BUDS Act, 2019, illegal deposit-taking companies continue to surface. “A law alone is not enough. Stricter scrutiny at company registration stage, continuous monitoring of business activity and stronger due diligence by banks before opening current accounts are essential,” Sajjanar says, stressing that sustained public awareness is equally critical.

He also underscores the need for stronger judicial deterrence. “Unless offenders face swift trials, meaningful jail terms and heavy financial penalties, the same individuals will return under new names and new companies.”

Money trail and long road ahead

The money trail in most Ponzi schemes ends in familiar places: real estate, land parcels, luxury vehicles and high-end personal indulgences. Funds are often routed through relatives or benami entities and, in some cases, moved overseas via cryptocurrency. Asset recovery is slow and legally complex, leaving victims facing a long, uncertain struggle to reclaim even a fraction of their losses.

In the Falcon case, investigations by the Enforcement Directorate (ED) exposed the brazen use of illicit funds. Of the ₹792 crore quantified so far, at least ₹21 crore was allegedly lost in Goa casinos, while ₹13.94 crore was spent on acquiring an aircraft.

“Lifestyle changes almost overnight. In some cases, the money trail is straightforward; in others, it is deliberately obscured through shell companies and mule accounts spread across a wide network,” says an ED official associated with the probe.

Falcon’s prime accused, Amardeep Kumar, invested part of the proceeds in equity shares of several companies, including legitimate businesses, to create an appearance of credibility. On the other hand, Heera Group CEO Nowhera Shaik channelled funds into farmlands, commercial plots and residential properties across the country and started her business ventures, with recent findings pointing to assets in Dubai.

Investigators say such schemes rarely operate without professional enablers. Chartered accountants and financial advisers are often engaged to park illicit proceeds, reduce tax scrutiny and delay detection.

In the Falcon case, Sharad Chandra Toshniwal, the statutory auditor of Capital Protection Force since its incorporation, was arrested for allegedly facilitating the diversion of ₹14.81 crore into multiple corporate entities and acquiring shares in the names of relatives and benami holders.

For victims, the reckoning is stark: while the fraudsters’ assets are traced, frozen and litigated over years, financial ruin is immediate and recovery, at best, is partial.