The Belagavi police arrested Shivanand S. Neelannavar, the promoter of Shivam Associates, a financial firm that had been operating without regulatory approvals, on Friday (May 15).

Shivam Associates (ACCUMEN), the firm he founded, faces charges of collecting deposits from the general public by promising 36% returns, without approval from the Reserve Bank of India, Securities and Exchange Board of India, Department of Cooperation, or any other Central or State government agency. Preliminary investigations conducted by officers from the police, revenue and cooperation departments have revealed that over 35,000 persons had invested in the firm. A significant number of them are ex-servicemen. The firm was running a multi-level marketing scheme that had no approvals either. The quantum of funds involved is yet to be determined.

Belagavi Deputy Commissioner Mohammed Roshan told reporters in Belagavi on Saturday (May 16) that the alleged ponzi scheme scam is likely to be transferred to the CID as it has inter-State and inter-district ramifications, in addition to the fact that prima facie, the amount involved crossed ₹50 crore.

He said that investigators are scanning all the documents retrieved from the offices of the firm and the residences of Neelannavar to gather data related to its operations. In most cases, the deposits were received as hand loans. However, there is a High Court judgement which states that hand loans can be treated as deposits in such cases, the Deputy Commissioner said.

“Some time ago, a financial scam cell was set up in the Deputy Commissioner’s office to enforce The Banning of Unregulated Deposit Schemes Act, 2019 (BUDS Act) and the Karnataka Protection of Interest of Depositors in Financial Establishments Act, 2004 (KPID Act). The cell has been tracking the activities of Neelannavar for a few months now,” Mr. Roshan said, explaining that a formal investigation was launched by a team headed by Shravan Nayak, Assistant Commissioner and Sub-Divisional Magistrate. He submitted a 150-page report that clearly showed that the firm had no permission from any government agency to collect deposits, give or receive loans or indulge in any financial transactions with any member of the public.

“A detailed investigation led by Police Commissioner Borase Bhushan Gulabrao also showed that there were several cognisable wrongs done by the firm. Following this, officials of various departments conducted raids on the premises of the firm and the founder. They recovered digital and documentary data. These are being studied for further evidence of wrongdoing. Copies of all relevant documents have been shared with the State government,’’ Mr. Roshan said.

The Deputy Commissioner said a list of depositors has been obtained. It appears that several pensioners deposited their life’s savings into the firm while some land-losing farmers had invested the compensation they received after acquisition. In other cases, some persons were benefiting from inviting others to invest. He appealed to the victims of the scheme to file complaints and seek refunds from the district financial frauds cell. “The issue will now be taken up by a competent authority at the State level that will be appointed soon. It will ensure that all the depositors get refunds as per law,’’ Mr. Roshan said.

Mr. Gulabrao said that an FIR was registered against Neelannavar and his associates based on provisions of the BUDS Act and KPID Act. “Further investigation is on, but the accused is not cooperating with investigators. He is dodging all serious and specific questions by giving vague and unrelated responses. We will seek police custody of the accused as we need him for further investigations,’’ the Police Commissioner said.

“Neelannavar had been holding several public events, where he invited celebrities and artists to speak or perform. In one of the events held in Kadur village, he claimed to have collected over 15,000 guns and weapons. This was a red flag for us. This created suspicions on whether he was trying to build a gang for unlawful activities. Police officers began tracking all his activities from then on. Officers of the police, social media, and IT cell collected all his public statements,’’ he said.

Neelannavar hails from Unkal near Hubballi and later settled in Belagavi. A PU graduate, he has done petty jobs like driving and selling ice-cream. Around 2016, he took loans to invest in the stock market. “This seems to have given him an idea of investing other people’s money in the market. However, his approach did not have the sanction of the law,’’ the Police Commissioner said. He added that most of the transactions of Shivam Associates were done through banks using cheques and a website built for that purpose. Officials have initiated steps to freeze the bank accounts.

“Investigators have collected copies of ads issued by Shivam Associates through social media, pamphlets and other means where a payment of 36% was promised for a minimum investment of ₹1 lakh. We appeal to the public to conduct due diligence before investing their money. For example, when the State Bank of India pays around 6-7% interest for deposits, how can any agency afford to pay 36%? This means that the agency is using methods that do not have the sanction of the law. People should not respond to such impossible claims,’’ he said.

He said officers are tracking some other such companies running ponzi schemes, fake investment schemes, or deposit schemes, and will take action soon.