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How ‘Sharia-compliant Halal Options' Drew Hundreds of Unsuspecting Investors to IMA Scam

‘Halal’ options are considered ethical wherein the amount can be invested in trade of commodities accepted under the Islamic law and a profit is shared with the investors.

Revathi Rajeevan | CNN-News18

Updated:June 11, 2019, 10:49 PM IST
How ‘Sharia-compliant Halal Options' Drew Hundreds of Unsuspecting Investors to IMA Scam
Representative image.

Bengaluru: As of 6pm on Tuesday, there were 9,520 complaints before the Commercial Street police in Bengaluru against I Monetary Advisory (IMA) and its managing director Mohammed Mansoor Khan, and a case registered under sections 406 and 420 of the IPC for criminal breach of trust and cheating, respectively.

Hundreds of panic-stricken investors had assembled outside the IMA jewellery store in Shivajinagar on Monday following the circulation of an audio clip purportedly of IMA MD Mansoor Khan announcing that he was going to commit suicide as he ran into financial setback.

The visibly angry investors have invested anywhere between Rs 1 lakh to more than Rs 10 lakh each.

What drew thousands to invest in the company?

IMA offered them ‘halal’ investment options. According to the Sharia law, it is not acceptable or is ‘haram’ (prohibited) to draw interests (riba) and hence, those who follow and believe in the Sharia law do not deposit money in banks.

‘Halal’ options are considered ethical wherein the amount can be invested in trade of commodities accepted under the Islamic law and a profit is shared with the investors.

Thus, the complainants here became shareholders of the private company who would share its profits.

Shares and mutual funds are considered ethical too as long as the fund is invested in Sharia-compliant trades. However, the industry one invests in may be Sharia-compliant, but other underlying factors may make it Sharia non-compliant.

Certain companies specifically issue Sharia-compliant options. For example, Tata has an option called the Tata Ethical Fund, which according to them is an “open ended equity fund which invests in a diversified equity portfolio based on principles of Shariah”.

Among other offers, it promises to purify any prohibited income as advised by ‘Shariah advisors’.

IMA, according to the complainants, offered around 3% profit per month on their deposited amount and the percentage varied “depending on the company’s performance”.

Initially, the complainants received varying amounts each month which drew more people to invest in the scheme, but things went wrong when IMA failed to give any money over the last few months.

The money was invested under the IMA Credit Co-operative Society Limited which came into existence in April 2017, 11 years after IMA was founded.

The victims, mostly from the lower middle class, along with their complaints submitted receipts of their investments in the company under a “monthly income plan”.

One of the investors present at the location said their ‘maulvis’ (religious heads) had advised them to invest in the company and many of them invested as part of “a chain-like system”.

On Tuesday, images and videos of Mansoor Khan with political bigwigs, including one with Chief Minister HD Kumaraswamy and former CM Siddaramaiah.

While Siddaramaiah was part of an inauguration event of IMA in 2017, a picture tweeted by Karnataka BJP had Kumaraswamy dining with Khan, date unknown.

Khan’s audio clip also claimed that Shivajinagar MLA Roshan Baig had borrowed Rs 400 crore from him, but the he failed to return the same leading to the IMA’s financial losses. Baig has rubbished the allegation.

On November 16, 2018, the assistant commissioner of police, Bengaluru, had issued a public notice stating that the IMA was involved in illegally collecting money from public and diverting it for the director's self-interest, thereby commuting default in repayment of depositors’ money.

The notice also said that the government had appointed a competent authority to forfeit movable and immovable properties of IMA. Several complaints had been lodged when the notice was issued.

The Karnataka government on Tuesday formed a special investigation team to take over the case.

| Edited by: Sohini Goswami
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