Wednesday, November 12, 2008

Chiahpuam or Ponzi Scheme in Mizoram

Chiahpuam or Ponzi Scheme in Mizoram
• How it Works
• How they Claim it Works.
• How Investments should Actually Work
• Effect of Chiahpuam in Mizoram
• Can Chiahpuam be avoided, is there away to avoid such schemes?
• Chiahpaum Moral View



How it Works
Chiahpuam or Ponzi scheme to very simply define, is a downline marketing scheme which does not rely on any investment plan but on fraud. In this model each person must recruit two others, but the ease of achieving this is offset because the depth required to recoup any money also increases. The scheme requires a person to recruit two others, who must each recruit two others, who must each recruit two others.

The "8-ball" model contains a total of 15 members. Note that unlike in the picture, the triangular setup in the cue game of eight-ball corresponds to an arithmetic progression 1 + 2 + 3 + 4 + 5 = 15. The pyramid scheme  is a geometric progression 1 + 2 + 4 + 8 = 15. Prior instances of this scam have been called the "Plane Game" and the four tiers labelled as "captain", "co-pilot", "crew", and "passenger" to denote a person's level. Another instance was called the "Original Dinner Party" which labelled the tiers as "dessert", "main course", "side salad", and "appetizer". A person on the "dessert" course is the one at the top of the tree. Another variant "Treasure Traders" variously used gemology terms such as "polishers", "stone cutters" etc. or gems "rubies", "sapphires", "diamonds" etc.
Such schemes may try to downplay their pyramid nature by referring to themselves as "gifting circles" with money being "gifted". Popular scams such as the "Women Empowering Women" do exactly this. Joiners may even be told that "gifting" is a way to skirt around tax laws.
Whichever euphemism is used, there are 15 total people in four tiers (1 + 2 + 4 + 8) in the scheme - the person at the top of this tree is the "captain", the two below are "co-pilots", the four below are "crew" and the bottom eight joiners are the "passengers".
The eight passengers must each pay (or "gift") a sum (e.g.Rs1000) to join the scheme. This sum (e.g.
Rs 8000) goes to the captain who leaves, with everyone remaining moving up one tier. There are now two new captains so the group splits in two with each group requiring eight new passengers. A person who joins the scheme as a passenger will not see a return until they exit the scheme as a captain. This requires that 14 others have been persuaded to join underneath them.
Therefore, the bottom 3 tiers of the pyramid always lose their money when the scheme finally collapses. Consider a pyramid consisting of tiers with 1, 2, 4, 8, 16, 32 and 64 members. 

No matter how large the model becomes before collapse, approximately 88% of all people will lose.If the scheme collapses at this point, only those in the 1, 2, 4 and 8 got out with a return. The remainder in the 16, 32, and 64 tier lose everything. 112 out of the total 127 members or 88% lost all of their money.

How they Claim it Works.
From what I here, there are two ways people are made to believe they are investing in some business:
1. They claim to invest in currency exchange with conversion of Indian rupees into Burmese Kyat, but this is unlikely given the volume of huge sum of money involved, believed to be in crores when currency convertibility is not even allowed by the Myanmar or Burmese Government.
2. Fake Currency: There are also claims that fake Indian currency coming in from Bangladesh and other countries are deposited into the bank and withdrawn again from the bank creating a huge surplus. This is also unlikely as tellers within Indian Banks are trained to verify authenticity of Indian currency.

How Investments should Actually Work
When making an investment weather in a Mutual Fund or a Fixed Deposit in the Bank, your hard earned money should be invested in Asset Generation which would yield profit in the long term. The Money you have invested could have been taken as a loan to build a Highway to upgrade the infrastructure of your state and money recovered from toll booths, or else it could have been taken as a loan by a car manufacturer who would use your money to build Industries which would manufacture Cars, Trucks etc and then share the profit from sales of those vehicles back into your investment, hence the chance for a 50% or even a 10% return on investment within a week is unlikely in a legitimate business.
Mizoram is not a sole exception in this scheme and has happened internationally, the most famous of which could be the Ponzi scheme which has a long history within itself as he made a lot of money, A scheme in Albania where more than 1.2 billion was lost could be another case, and recently the SH Shah case in Pakistan.

Effect of Chiahpuam in Mizoram
The effect of chhiahpuam in Mizoram could be adverse as the people who have invested would lose their money and their uplines who have pocketed the money would be reluctant to utilize the money they have received, creating a condition of economic glut within the state with economic growth grinding to a halt. The Main source of this investment could be of three types –
The first one being of the naïve poor people who have heard of the get rich quick scheme and have invested their life savings in it leaving them more vulnerable as their security is gone, they could have invested only a few thousands which could still be a huge amount for them.
The second could be those who have invested money not their own, some of them could have taken bank loans who would know have no way of paying back even the principle amount, others could be people who have invested Government Department money under their care or even Church money which is money contributed by the general public for use of the community.
The Third could be people who have got money through illegitimate means – corruption which they have no way of investing as white money hence the investment within this schemes.

Can Chiahpuam be avoided, is there a way to avoid such schemes?
My answer to that would be Yes, it’s possible to avoid such schemes if measures can be taken, when such measures have not been taken, it could also reflect on the strength or weakness of the government.
One big loophole that I notice according to me is the lack of Income tax for Individuals within the state. There’s not check and balance system to check that the money withdrawn or deposited is for legitimate reasons. For Example, if a person had got a money illegally, he can still deposit lakhs or millions of rupees without any question from where he has got it as there’s no PAN card system or taxation system to check an individual’s source of Income in Mizoram. It’s a blessing for the State as a whole that there's no Income Tax but the fact that some people are exploiting it for cheating others make it a burden for society. The present Mizoram state Government has recently come up with a state health Insurance policy for the Non Government public wherein the premium is just around Rs 100- Rs 200. What I would like to suggest here is that Why don’t the Mizoram state Government create a Tax exemption limit for people earning above Rs 50,000 but earning below 100,000 that they get their tax exemption limit only on the condition that they pay premium for their own health Insurance, Life Insurance and Investment worth Rs 50,000. Those earning below Rs 50,000 could possibly get complete tax exemption and those earning above a certain amount, say Rs 500,000 or more could pay higher tax to subsidize those who cannot afford to pay for Insurance or have enough for Investments or else allocate it build up the very much needed infrastructure needed within the state like Hydel Projects, Better Roads, Educational and Medical Facilities.
The reason that I’m very particular with the Life Insurance and Health Insurance is two sided, on one side to reduce the State Govt Deficit which is an all time high of almost Rs 3,000 crores, and on the other hand the fact that Mizoram is the Cancer Capital of India with six districts of Mizoram among the top ten districts in India with cancer cases. I’m not here to debate about the good or bad affect of smoking but being practical with bearing the consequences of Cancer. With Mizoram having a high incidence of Cancer, it’s natural that a lot of the Mizo people are going to have Medical Problems related to Cancer, which could prove costly for the families within Mizoram, reducing them to further poverty due to Medical care required, added to that the inevitable death of the Cancer patient leaving behind a wife and children’s with almost no means to support themselves, the least that the state Government can do to Mitigate the adverse affect on the family is to make it compulsory for citizens with the means to purchase Health Insurance and Life Insurance so that they can better face the cloudy days ahead. The wealth and health of the citizens in Mizoram also has an adverse affect on the State Government of Mizoram itself.

Chiahpaum Moral View
Mizoram being a Christian state, one can’t but help the Church meetings almost throughout the week, the Gospel Camps, people dancing in the Church with Joy but these are the same people, sometimes in trouble because of investment in Fraudulent schemes. Is it possible that these people are looking for a shortcut to spiritual growth by foregoing reading the good book by indulging in emotional hysteria, in the same length, are they trying to forego hard work by searching a short cut to success? Has money become god for a society which had lived without it 100 years ago? These are hard questions to answer but I would like to say the answer lies within the same book which states “Dishonest money dwindles away, but he who gathers money little by little makes it grow”, that I think sums up the way things should be.


11 comments:

  1. HYIP schemes, or High Yield Investment Programs are Ponzi scams, please beware.

    Mark
    editor@dgcmagazine.com

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  2. Very informative. And I like your take on the whole situation as well. Good job.

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  3. @ Chhamanator- thanks, hope the new Govt will take same action so that this kind of HYIP is not repeated.

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  4. Veryyyyy interesting and informative, Boss. Hey, you could have entered this business too! :)

    Reading about Arithmetic and Geometric Progression brings back bad memories of Engineering College. Lolz. Hey, what about Harmonic Progression!!?? Thats not used in this scheme too? :) Ah, those good ol days of calculating AP, GP and HP. If only I knew it could be used to hoodwink the people, I might have cleared the paper in my first attempt. lolz.

    Our state is in a very bad state. Thats all I can say. I still can't believe so many people would fall for this... I mean, we're such an educated bunch with the highest in literacy rate (ok, I know the rate has got nothing to do with this but still, thats the impression any layman will get), so I am surprised at the short-cut method so many people are attempting. I hope this will serve as a good example to my brothers and sisters in Mizoram.

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  5. Piangthar tha chu ka ni hauh lova, mahsela Kristian ka nihna angin dik ka ti lo thin a chiahpuam tih vel hi kan bible ah hian a lang chiang khawp.

    “engmah lo mai mai a sum dehchhuah chu tihriral a ni ang a, thawhrimna a khawl erawh chu a puang ang.” thufingte 13:11

    “Mi fir chuan sum a um a, a chungah tlakchhamna a lo thleng dawn tih a hre hek lo” thuf 28.22

    “sum hi a tirah dehchhuah thuai theih mahsela, a tawpah malsawmna a ni kher lo” thuf 20:21

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  6. This comment has been removed by the author.

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  7. nice..kei pawhin a tir atangin pyramid scheme ni berin ka hria...he chiahpuam an tih hi khilama hotuten min rawn phone a, bumna bak a nih loh tur thu ka lo hrilh a, thuchhuah siam a, rbi lam hriattir turin ka chah...bum kan awl lutuk hi a thinrimthlak a ni..hui ha

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  8. Very well written! Easy/fast money hi thil him a ni lo fo tih kan zir chhuah phah chuan a lawmawm a ni ber tawh mai. A pawi ngawt a ni!

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  9. @ Illusionaire - All those Mathematic and Geometric stuff actually is practical sometimes even though it was boring :-)
    @rka - dik khawp mai, Chiahpuam hi bible nen pawh a in mil lo.
    Maruata & Mafaka- Thanks for the comments.

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  10. Ti tha hle mai.... tunah chuan an man khawm awk awk mai a lawm...

    In hre ve em ka hre lo a.. Vizag a ka awm lai leh Cochin a ka awm lai te, Tun a Mumbai ah te pawh hian ani... hetiang hi a tam khawp mai a! Website changtlung tak nen an bei a... tun hnai mai a tlan bota te ka la hriat te chu.. SMS Media, Sagacious, Shree Shoppings etc etc.. Kan thawhpui te ho pawh an mahni leh mahni an in bum kual a.

    A theory pui berah chuan thla ruk a tling tawh em? tih ani a. Thla ruk em a la tlin loh chuan an la hlawk hman tihna.. ha ha..
    Provident Fund a tanga la chhuak a dah a. chan ta vek pawh ka hre nual mai

    Any way tangkai bawn tawps.. ka vawikhat rawn luhna.. ka rawn leng lut zel ang

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  11. very informative...easy and fast money syndrome hi nuai bo a ngai ani...educated and responsible citizens lehzel te an involved duh hi chu a vanduaithlak hle ani....kan hnam kan la tlem a kan ram a rethei bawk si a atleast the educated lot should work towards the prevention and not get themselves involved in such scams.

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