CHAPTER 1: INTRODUCTION
The concept of Ponzi scheme was entitled after Charles Ponzi deceived thousands of citizen in New England in 1919. Charles Ponzi involved in an illegal cash making plan, he promised to investors that they would acquire a rate of 50 percent returns in 45 days or 100 percent returns within 90 days, this plan had been attempted earlier but none than Charles Ponzi had figured out to deceive millions of dollars, an estimated sum of $10 million among several naïve individuals. In 1920, Charles Ponzi was arrested for such financial deceit Benson (2009) Moreover, the famous mastermind Bernard Madoff makes a new headlines in the fraud investment. The New York Times (2009) announced that the Ponzi scheme planned by Bernard Madoff was the biggest deception in American history, including a sum of $65 billion and had destroyed the finances stability of thousands of people. Bernard Madoff was responsible for 11 frauds including securities fraud as well. He was a non-executive chairperson of National Association of Securities Dealers Automated Quotations exchange (NASDAQ), having a standout amongst the biggest stock exchange in North America. Bernard Madoff had shaken the faith of many investors. In 2008 Madoff was arrested for a period of 150 years Matthew (2012) where he was found guilty of monetary fraud.
1.1 Background of the study
Up- to- date, it has been observed that the concept of Ponzi schemes have spoiled the life of many people be it in developed or developing countries and Mauritius is one among these countries which had not been spared. During the recent years, Ponzi schemes have lead numerous individuals penniless have made these victims to regret on their decisions that they have invested their hard-earned funds into such organizations that were unregistered and did not own a license. However, even though there are still many people who have an imprecise idea about this schemes, which might be demonstrated the reasons why a huge number of the population continues to fall in their awful attraction (Basu 2014).
The Association of certified fraud examiners (ACFE) (2011) highlight the fact that in today’s era mostly every individual has a desire to acquire revenue in an easy and quick way. However, fraudsters are alert about these individuals’ ambitions and hence these fraudsters take the advantage of their eagerness by suggesting attractive business opportunities. But sadly, there are loads of individuals that seize the opportunity and find themselves a victim in the unregulated investment scheme.
For the past few years, Mauritius has encountered several cases in relation to the financial scandals. The newspaper Le Mauricien (2014) stated that there were approximately 3630 victims related to Ponzi schemes for a sum of Rs 937 million that were reported up to April 2014. This indicates a significant figure especially for Mauritius which is a small island. Hence, it is essential to determine how a Ponzi scheme works and the reasons why millions of investors got tempted to invest. Despite there are two regulators frameworks in Mauritius it is important to note whether these regulators are enough to protect and help investors while making an investment decision. The two regulators framework regulate the financial and non-financial sectors. The Bank of Mauritius (BOM) regulates the financial sectors, while the Financial Services Commission (FSC) regulates the non-financial sectors in Mauritius.
1.2 Problem statement
This research work was conducted among the Mauritian residents by considering their gender, age, education level and profession. This study was planned with the aim to evaluate and analyze the percentage of awareness of Ponzi scheme that the Mauritian possess and to study whether the investors in Mauritius take into account if an organization is registered before making any investment decision. Hence, preventing people to stay away from falling under such schemes. The results of this study might help regulators and policymakers in understanding investors’ perspective of investment scams and even to take appropriate actions.
1.3 Objectives of the study
The objectives are illustrated below:
· To figure out the distinction between what is a Ponzi scheme and a pyramid plan.
· To assess the notion of Ponzi scheme and to classify the various category of agreement that may fall under the criteria of a Ponzi plan.
· To find out whether Ponzi schemes have an effect on the Mauritian fiscal framework.
· To identify if age, gender, profession and the level of education have a consequence on investment.
· And finally what are the actions that may be taken to avoid to become a Ponzi victim.
1.4 Layout of the paper
Chapter 1: Introduction
Chapter 1 discusses the background of the study, the problem statement and the main aim and objectives of the research.
Chapter 2: Literature Review
This chapter presents a review of the literature. The literature review is divided into two sections, one is known as the theoretical evidence which focuses mostly on the theories relating to the concept of Ponzi scheme. The second section refers to the empirical evidence, this part is usually based on past research that has been validated and observed by researchers.
Chapter 3: Overview
This chapter elaborates specifically on the Ponzi schemes cases that Mauritius has encountered.
Chapter 4: Research Methodology
Chapter 4 is about the research strategy that has been adopted including the collection of data, questionnaire design, research design, data analysis techniques, and the limitations of the research.
Chapter 5: Research Analysis
This chapter of the research mainly focuses on the findings obtained from the questionnaires and analyzes the results obtained.
Chapter 6: Conclusion and recommendations
The last chapter provides a conclusion according to the research of the study and suggests recommendations in order to avoid Ponzi schemes from spreading and how to improve the level of public awareness.