If you are stuck in such a situation, here is what to do.

Mr. Sameer, a resident of Nagpur, invested a significant sum of money with a financial advisor, Mr. Alok Verma, who operated a firm called “Verma Wealth Management.” Mr. Verma promised extraordinary returns of 30-40% per month, claiming to have a foolproof strategy for stock market trading. To build trust, he provided notarized agreements to all his investors. Initially, Mr. Sameer and other early investors received the promised high returns, which encouraged them to reinvest and also attracted hundreds of new investors who poured their life savings into the scheme.

However, about a year into the operation, the payments started becoming irregular and eventually stopped altogether. It became clear that this was a fraudulent scheme, and Mr. Verma was arrested following numerous complaints from people who had lost their money. Mr. Sameer, being an early investor, had made a net profit before the scheme collapsed. Now, he is concerned whether the investigating authorities can legally compel him to return the profits he earned, given that many others have suffered substantial financial losses.

Advice in such cases

• Gather all documentation related to your investment. This includes any agreements, receipts, bank statements showing transfers to and from the operator, and any written or digital communication.
• Do not attempt to hide the profits you have made. Transparency with the authorities, when approached, is crucial.
• Understand that such schemes are often classified as Ponzi or pyramid schemes, which are illegal. The money you received as “profit” was likely the capital invested by newer investors.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think

Applicable Sections of Law

Such financial frauds typically involve multiple laws. The police will investigate the matter under various sections of the Bharatiya Nyaya Sanhita (BNS), 2023, and other special statutes.

• Section 318 of the Bharatiya Nyaya Sanhita (BNS), 2023: This section deals with cheating. Inducing someone to part with their money by making false promises of high returns is a classic case of cheating.
• Section 316 of the Bharatiya Nyaya Sanhita (BNS), 2023: This pertains to criminal breach of trust, where a person entrusted with property (in this case, investors’ money) dishonestly misappropriates it for their own use.
• The Banning of Unregulated Deposit Schemes Act, 2019 (BUDS Act): This is a special law enacted to tackle illicit deposit-taking activities. Promoting or operating such a scheme is a specific offence under this Act.
• Prevention of Money Laundering Act, 2002 (PMLA): When large sums of money are involved, the Enforcement Directorate (ED) often initiates an investigation under PMLA. The profits you earned could be considered “proceeds of crime.”

If you are the complainant

• Immediately file a First Information Report (FIR) with the local police, or the Economic Offences Wing (EOW) of the police, which specializes in financial crimes.
• Provide the police with all the evidence you have, including bank statements, agreements, and communication records.
• Form a group with other victims to file a collective complaint, which can strengthen the case.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think

If you are the victim

• Your primary identity in this scenario is that of a victim of fraud, even if you made a profit. You were induced to invest based on false promises.
• Cooperate fully with the investigation. The police will need to trace the entire money trail, which includes the funds that came to you.
• Be prepared for the possibility that authorities like the Enforcement Directorate (ED) may seek to attach the profits you made.
• Consult with Lawyer: The very basic and important step to start is talk to Lawyer / advocate. You should not hesitate in paying his consultation fee i.e. might be in range of Rs. 10,000 to 50,000 depends case to case. He is helping you in this situation of come out. He is expert in the domain and can help you explain the procedure which you might have never explored. A good lawyer can get the issues resolved much faster than you think

How the police behave in such cases

The police, particularly the Economic Offences Wing (EOW), take such cases very seriously. Their primary goal is to investigate the fraud, arrest the main accused, and trace the misappropriated funds. They will identify all individuals who transferred money to the accused. They may treat early investors who made a profit as witnesses to the crime. However, if an investigation under the PMLA is initiated by the ED, the focus will shift to recovering the “proceeds of crime.” The ED has the authority to provisionally attach properties and bank accounts, including the profits you received, pending a court order.

FAQs people normally have

Can the police ask us to give back the profit we have gained?
Yes, it is highly likely. While the police themselves might not directly force you to return the money, the legal process facilitates this. Under the PMLA, any financial gain from a scheduled offence (like cheating) is considered “proceeds of crime.” The Enforcement Directorate (ED) can attach these funds. The court overseeing the case, under the BUDS Act or PMLA, can order the liquidation of attached assets and the redistribution of funds to the victims who lost their principal amount. Your claim of being unaware of the fraud is not a foolproof defense against having to return the illicit gains.

What evidence is required?

• The investment agreement (even if notarized, it doesn’t legitimize an illegal scheme).
• Bank account statements showing the money you paid to the operator and the “profits” you received.
• Any emails, text messages, or WhatsApp chats with the promoter of the scheme.
• Contact details of other investors you may know.

How long will the investigation take?

Investigations into large-scale financial frauds are complex and time-consuming. It involves tracing money through numerous bank accounts, recording statements from hundreds of victims, and gathering forensic evidence. The process, from filing an FIR to the conclusion of the trial, can take several years.

Advocate Sudhir Rao, Supreme Court of India