Author: Aditi Gautam, Asian Law College
Linkedin Profile: https://www.linkedin.com/in/aditi-gautam-069178290
Introduction
The Rose Valley scam was one of the largest financial frauds in the country’s history, masterminded by Gautam Kundu, chairman of the Rose Valley Group. The company illegally mobilized thousands of crores from the public through unregulated and unauthorized investment schemes, luring investors with the promise of unrealistically high returns. At its core, it operated as a classic Ponzi scheme — using funds from new investors to repay older ones, rather than generating genuine business revenue.
Although the Rose Valley Group claimed to be a diversified conglomerate involved in real estate, hospitality, tourism, media, and entertainment, investigations revealed that most of its income came from illegally collected public deposits.
Many of these investment schemes were not registered with SEBI (Securities and Exchange Board of India), making them illegal under Indian financial law. The scam not only exposed regulatory loopholes but also devastated the lives of millions of small investors across eastern India.
What was the rose valley Ponzi scheme and how it worked:
The Rose Valley Group promised unusually high returns of 12% to 20%, primarily through real estate projects and holiday resort bookings. To attract public investment, it launched over 20 unregulated schemes, many of which were not approved by SEBI, India’s financial regulator. The company aggressively targeted rural and semi-urban populations, using a vast network of agents, promotional campaigns, and trust-building events. However, instead of investing the funds in legitimate business ventures, the money was misused to:
– Pay earlier investors, creating a false sense of profit and reliability.
– Expand the scam into new regions and bring in more depositors.
– Finance luxury assets, including lavish hotels, resorts, and even a media empire comprising newspapers and TV channels
This unsustainable cycle continued until regulatory authorities intervened and exposed the fraudulent nature of the operation.
Rose valley Ponzi scheme as a scam –
The Rose Valley operation was fraudulent for several critical reasons, exposing it as a classic Ponzi scheme masked under the guise of legitimate business.
1. Lack of Regulatory Approval
The vast majority of investment schemes launched by Rose Valley were not registered with SEBI (Securities and Exchange Board of India). This was a clear violation of the Collective Investment Schemes (CIS) regulations, rendering the company’s fundraising activities illegal under Indian securities law.
2. No Genuine Revenue Model
Though the group claimed it was investing in real estate, resorts, and tourism, investigations revealed that there was no sustainable or profitable business model capable of generating the high returns (12–20%) it promised. Revenue from actual operations was either minimal or fabricated, making the scheme financially hollow.
3. Classic Ponzi Structure
The company followed a pyramid-style structure typical of Ponzi schemes — money from new investors was used to pay earlier investors, creating a false appearance of profitability. The cycle was unsustainable, and the scheme eventually collapsed when the flow of new investments began to decline.
Together, these elements clearly defined Rose Valley as a Ponzi scheme, designed to deceive millions of investors while posing as a legitimate enterprise.
Scope of Rose valley scam-
The Rose Valley Ponzi Scheme stands as one of India’s largest financial frauds, second only to the Sahara and PACL scams in scale.
The total estimated value of the scam:
– The value ranges between ₹15,000 crore to ₹17,000 crore, as per Enforcement Directorate and CBI reports.
A large number of investors were affected:
-The scheme defrauded over 30 lakh investors, primarily from Odisha, West Bengal, Assam, Bihar, and Tripura, with most victims being low- and middle-income individuals from rural and semi-urban areas.
Agents and workforce:
To carry out the fraud, Rose Valley employed over 20 lakh agents, with around 2.7 lakh actively involved at the time of the crackdown.
States where the scam was operated:
The scam spread rapidly through an extensive network of branches and sub-agents, operating across several Indian states including Jharkhand and parts of Maharashtra.
In response, the Enforcement Directorate attached assets worth over ₹4,200 crore, which included 414 land parcels, 11 resorts, 9 luxury hotels, and ₹332.76 crore in fixed deposits—later valued at ₹450 crore with interest.
Victims of Rose valley Ponzi Scheme:
Poor and Middle-Income Individuals
The primary victims of the Rose Valley Ponzi scheme were poor and middle-income investors who were promised high returns on small investments. Many were looking for a secure way to grow their savings and were misled by the company’s false promises.
Residents of Eastern Indian States
The scam was most widespread in states like West Bengal, Odisha, Assam, Bihar, and Jharkhand, where financial awareness was relatively low. These regions were targeted due to limited access to formal banking and investment options.
Unorganized Sector Workers
Many victims were daily wage earners such as farmers, rickshaw-pullers, hawkers, and domestic workers. With limited savings and no access to financial advice, they invested in the scheme believing it to be trustworthy and lucrative.
Retirees and Senior Citizens
Retired individuals were especially vulnerable, often investing their retirement funds or pensions in the hope of receiving regular income. Many were convinced by local agents or friends to trust the company.
Women and Homemakers
A large number of women, particularly homemakers, fell victim to the scheme. Many invested small amounts from household savings or jewelry, often through informal community networks or self-help groups that were exploited by Rose Valley’s agents.
Arrest and Legal Proceedings
On March 25, 2015, Gautam Kundu, Chairman of Rose valley Group, was arrested by the PMLA Act. The ED filed chargesheet in April 2015, leading to the seizure of properties across multiple states.
The Assam branch alone defrauded investors of ₹592.48 crore, as noted in a 2020 charge sheet.
The Charges framed against him were-
IPC Sections 120B (criminal conspiracy), 420 (cheating), 409 (criminal breach of trust)
Violations under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978
Recovery and Refund Process (As of 2025)
Asset Seizure- ₹332.76 crore in fixed deposits seized from Odisha (now grown to ₹450 crore with interest)
Total assets attached by ED: Over ₹4,200 crore
Includes 414 land parcels, 11 resorts, and 9 luxury hotels
Refund Status
March 7, 2025: PMLA court (Bhubaneswar) ordered release of ₹450 crore
March 14, 2025: ₹22 crore disbursed to 32,319 investors
October 2024 (1st phase): ₹5.12 crore disbursed to 7,346 victims (₹10,200 each)
In February during 5th phase: ₹2.29 crore disbursed to 3,762 investors
To date, over 31 lakh investors have registered claims, and the refund process continues in phases under the supervision of ED and PMLA courts.
Conclusion
The Rose Valley scam stands as a stark reminder of how unregulated financial schemes can devastate the lives of millions, especially in economically vulnerable regions. Disguised as a legitimate business empire, the company operated a classic Ponzi scheme, exploiting regulatory gaps and public trust. With over ₹15,000 crore defrauded and more than 30 lakh victims—mostly from rural and low-income backgrounds—the scam exposed deep flaws in financial oversight. Important strides toward justice were made with Gautam Kundu’s arrest and seizure of assets by Enforcement Directorate. However, while phased refunds have begun, the long path to full recovery continues, underscoring the need for stronger investor protection and financial literacy in India.
FAQS
What was the Rose Valley scam?
The Rose Valley scam was a massive Ponzi scheme in India where the Rose Valley Group, led by Gautam Kundu, illegally collected thousands of crores from the public through unauthorized investment schemes, offering unrealistically high returns.
How did the Rose Valley scheme work?
Rose Valley promised 12%–20% returns on investments. It ran over 20 unregulated schemes. New investor’s funds were utilized to compensate existing investors . Those Funds were diverted into luxury hotels, media companies, and real estate instead of legitimate business.
Was the Rose Valley Group a real business?
Yes, it claimed to be in real estate, hospitality, tourism, and media, but investigations found that most revenue came from illegally mobilized deposits — not real business activities.
Why is it considered a Ponzi scheme?
It promised high returns without actual revenue generation. It repaid previous investors using funds from new ones. The scheme collapsed when fresh investments slowed down.
How much money was involved in the scam?
The total scam is estimated to be worth ₹15,000–₹17,000 crore, making it one of India’s biggest financial frauds after Sahara and PACL.
How many people were affected?
Over 30 lakh (3 million) small investors — mainly from West Bengal, Odisha, Assam, Bihar, Jharkhand, and Tripura — were defrauded.
