Mangaluru: 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 ₹2,459.5-crore Ponzi scam that reportedly affected more than 35,000 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 press release, the investigation uncovered an alleged network that collected large sums from the public by promising unusually high returns. The agency alleges that investor funds were circulated to repay earlier participants, diverted into other ventures and used for personal enrichment.
The ED stated that an outstanding principal amount of ₹2,125.6 crore remained unpaid to investors as of the date of the prosecution complaint.
Investigation initiated following Belagavi police FIR
The ED initiated its investigation based on a first information report registered by Malamaruthi police station in Belagavi city. The FIR was filed under 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 subsequent investigation under the Prevention of Money Laundering Act (PMLA) allegedly revealed that Neelannavar operated a fraudulent Ponzi network through Shivam Associates and other entities.
Neelannavar was arrested on August 13 and is currently in judicial custody, according to the agency.
The prosecution complaint seeks to establish the alleged involvement of the five accused persons and entities in the money laundering network. The allegations will be subject to judicial proceedings.
₹2,459.5 crore allegedly collected from 35,000 investors
According to the ED, Neelannavar and his associates allegedly collected ₹2,459.5 crore from more than 35,000 investors by promising assured returns of 3% per month.
The scheme also allegedly offered a referral commission of 0.5% to participants who introduced new investors. The agency said referral agents were promoted as “leaders” within the network to attract additional participants and expand its reach.
Investigators allege that a substantial portion of the money collected was used to repay earlier investors. Such payments allegedly helped maintain confidence in the scheme and encouraged the continued participation of members.
The agency further alleged that funds were siphoned off for personal enrichment and diverted through multiple channels.
The scale of the alleged collection and the amount that remained unpaid indicate the potential financial impact on investors. The ED put the outstanding principal liability at ₹2,125.6 crore as of the date of its complaint.
Searches in Belagavi, Chikodi and Nipani
In August, the ED conducted searches at eight premises linked to the accused and their associates in Belagavi, Chikodi and Nipani.
According to the agency, the searches resulted in the seizure of documents, handwritten audit notes and digital evidence, including mobile devices and software transaction records.
The ED said the material provided evidence relating to the alleged generation, movement and concealment of proceeds of crime.
The searches also allegedly exposed financial connections involving key members of the network, their family members and several entities suspected of being used to route funds.
As part of the investigation, the agency froze bank accounts and fixed deposits belonging to key associates. The accounts and deposits contained ₹2 crore that the ED alleged was directly derived from siphoned investor funds.
The seized material and financial records are expected to form part of the evidence examined during the legal proceedings.
₹186 crore allegedly lost in stock trading
The investigation also traced the alleged movement of investor funds through several channels intended to conceal their origin and use.
According to the ED, a substantial amount of the alleged proceeds of crime was invested in high-risk stock trading, resulting in net losses of ₹186 crore.
The agency also traced approximately ₹25 crore that was allegedly routed through a network involving cooperative credit societies to create fixed deposits.
Those deposits were subsequently used as security for loans obtained in the names of associates. The borrowed funds were allegedly used to purchase parcels of land.
Investigators are examining these transactions as part of the alleged layering and diversion of investor money. The use of multiple accounts, deposits and loans is being scrutinised to establish the movement of funds and the roles of the individuals and entities involved.
Funds allegedly routed to family members and business ventures
The ED said its investigation traced certain funds to bank accounts belonging to Neelannavar’s close family members, including his wife, Sangeeta, and his minor son, Siddhant.
The agency is also examining money allegedly channelled into connected business ventures, including Shivam Sevaa (OPC) Pvt Ltd, which reportedly received ₹19 crore.
Other entities named in the investigation include Shivam Lifeline Pvt Ltd and Shivam Foods.
The transactions are part of the wider probe into how funds collected from investors were allegedly transferred, invested or diverted through associated businesses and accounts.
The ED’s findings are allegations made during the investigation. The precise role of each accused person and entity will be determined through the legal process.
₹5 crore allegedly diverted to Kannada film ‘Champion’
In another finding, the ED alleged that ₹5 crore from the pooled public deposits was diverted to finance the commercial production of the Kannada feature film Champion.
The alleged diversion is among the transactions being examined by the agency to establish how money collected through the investment scheme was used outside its stated purpose.
The film-related transaction adds another dimension to the investigation into the alleged movement of funds through business and commercial activities.
The ED is continuing its investigation into the alleged money laundering network, the movement of investor funds and the roles of the accused persons and entities.
Prosecution complaint seeks conviction of five accused
The prosecution complaint before the III Additional District and Sessions Judge in Mangaluru marks a significant step in the legal proceedings arising from the alleged Ponzi scheme.
The ED is seeking the conviction of five accused persons and entities in connection with the alleged money laundering and diversion of public deposits.
The case centres on allegations that more than 35,000 investors were drawn into a scheme promising high monthly returns, while a large portion of the principal remained unpaid.
Further proceedings will examine the evidence gathered by the agency, the financial transactions identified during the investigation and the alleged roles of those named in the complaint.