Daijiworld Media Network – Mangaluru
Mangaluru, Oct 11: The Directorate of Enforcement (ED), Mangaluru sub-zonal office, has filed a prosecution complaint before the III Additional District and Sessions Judge in Mangaluru, seeking the conviction of five accused persons and entities in an alleged Rs 2,459 crore Ponzi scam involving more than 35,000 public investors.
The complaint, filed on Friday, names alleged kingpin Shivanand Siddappa Neelannavar and his firm, Shivam Associates, among the accused in the money laundering case.
According to an ED release, the investigation was initiated based on an FIR registered by the Malamaruthi police station in Belagavi city under the provisions of the Bharatiya Nyaya Sanhita (BNS), the Banning of Unregulated Deposit Schemes Act, and the Karnataka Protection of Interest of Depositors in Financial Establishments (KPID) Act.
The investigation under the Prevention of Money Laundering Act (PMLA) revealed that Neelannavar allegedly operated a fraudulent Ponzi network through Shivam Associates and other entities. He was arrested on August 13 and is currently in judicial custody.
Rs 2,459.5 crore collected from over 35,000 investors
According to the ED, Neelannavar and his associates allegedly collected Rs 2,459.5 crore from more than 35,000 investors by promising unusually high assured returns of 3% per month, along with a 0.5% referral commission for introducing new investors.
Neelannavar allegedly promoted referral agents in the network as “leaders” to attract more people to the scheme.
The investigation found that a substantial portion of the money collected was circulated to repay earlier investors, helping sustain public confidence and keep the scheme running. The funds were also allegedly siphoned off for personal enrichment.
As of the date of the complaint, an outstanding principal amount of Rs 2,125.6 crore remained unpaid to investors, the ED stated.
Searches uncover incriminating documents, digital evidence
In August, the ED conducted extensive searches at eight premises linked to the accused and their associates in Belagavi, Chikodi, and Nipani.
The searches led to the recovery and seizure of incriminating documents, handwritten audit notes, and digital evidence, including mobile devices and software transaction records. According to the agency, the material confirmed the illicit generation, movement, and concealment of the proceeds of crime.
The searches also exposed what the ED described as a deep-rooted financial nexus involving key members of the alleged syndicate, their family members, and multiple front entities.
The agency subsequently froze bank accounts and fixed deposits belonging to key associates, containing Rs 2 crore allegedly derived directly from siphoned investor funds.
Rs 186 crore lost in stock trading
The ED investigation found that the alleged proceeds of crime were layered and diverted through multiple channels to conceal their origin and use.
A substantial amount of investor money was allegedly deployed in high-risk stock trading, resulting in net losses of Rs 186 crore.
Approximately Rs 25 crore was reportedly routed through a complex network involving cooperative credit societies to create fixed deposits. These deposits were then used as security for loans obtained in the names of associates to purchase land parcels.
The investigation also traced funds to bank accounts belonging to Neelannavar's close family members, including his wife, Sangeeta, and his minor son, Siddhant.
In addition, money was allegedly channelled into connected business ventures, including Shivam Sevaa (OPC) Pvt Ltd, which reportedly received Rs 19 crore, as well as Shivam Lifeline Pvt Ltd and Shivam Foods.
Rs 5 crore allegedly diverted to finance Kannada film
In another finding, the ED alleged that Rs 5 crore from the pooled public deposits was diverted to finance the commercial production of the Kannada feature film 'Champion'.
The agency is continuing its investigation into the alleged money laundering network, the movement of investor funds, and the roles of the accused persons and entities.
The prosecution complaint seeks the conviction of the five accused persons and entities in connection with the alleged scam.