Alabama authorities arrest Indian man over Ponzi scheme fraud worth $400,000

Authorities in Alabama have arrested a young Indian man for committing a Ponzi scam worth $400,000.

Pathyam Patel of Gandhinagar, Gujarat, has been arrested for guaranteeing massive returns after starting to sell securities. However, he used the money only for personal expenses and never invested in securities.

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The Alabama Securities Commission (ASC) confirmed that they arrested Patel in Alabama on March 6. He violated at least nine counts of securities law violations, the Times of India newspaper reported.

ASC stated, "The indictment alleges that Patel sold more than $4,00,000 in investment contracts to at least six investors. Patel represented that he was associated with Infinity Wealth Management, an investment advisory firm, which he claimed was registered with the US Securities and Exchange Commission."

Patel promised investors to earn massive profits by investing their money, guaranteeing that there would be no loss of their principal amount.

Patel also asked for additional payments to maintain their investments.

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"Patel did not invest the funds as communicated to the investors. Instead, he used them for gambling on sporting events, personal expenses and paying other investors. Patel had no ability to guarantee that the investors would not lose their principal (amount)," ASC added.

The authorities also revealed that while running the scam, Patel was not even registered with the ASC to sell securities in Alabama.

Moreover, the investment contracts which Patel sold were not ASC-registered. He was neither a registered investment advisor nor a broker-dealer.

Investor.gov describes the Ponzi scheme as "an investment fraud that pays existing investors with funds collected from new investors."

In a Ponzi scheme, organisers often promise to invest your funds and generate high returns with little or no risk. However, they do not invest any money. They use it to pay those who invested earlier and keep some portion for their expense.

(With inputs from agencies)