Analysing motivations of Ponzi victims in West Bengal, India

The state of West Bengal, in Eastern India, has been affected by recurring Ponzi scams from the 1970s. In the last cluster of these scams, between 2000–2013, over three million depositors lost ~2.5 billion USD (2015 equivalent). This research deploys semi-structured interviews and behavioral finance tools to find out why victims invested in these schemes, which looked too good to be true, to provide evidence-based suggestions to the legislators to amend the existing anti-fraud legislation and modulate its implementations. We conducted an in-depth psychometric test on over 350 victims, agents, and control group respondents and found that the investors in Ponzi scams are more trusting, have less financial self-regulation and lower delayed gratification than the control group. The research also finds that the functional driver of the scam is the local agent of these schemes, who collects money from the depositors and works on hefty commissions. Agents work in a pyramidal structure, with the top-level agents being the core conspirators with the directors of these sham companies. We find that the victims are decisionally vulnerable to predatory tactics by the agents of these scams and are often directly related to or have known the agents for several years. The victims tend to invest in the agent rather than through the agent. Thus, the primary remedial measure will need to be early identification of Ponzi scam agents and allowing for civil liability of ground-level financial agents.