The Enforcement Directorate (ED) has taken Shivanand Neelannavar, the prime accused in the alleged Ponzi scheme case linked to Belagavi-based Shivam Associates, into custody. The accused was produced before a Belagavi court on Friday, which remanded him to 12 days of ED custody for questioning. Neelannavar is accused of allegedly collecting more than ₹2,100 crore from thousands of investors by promising unusually high interest and returns. The agency is now investigating the source of the funds collected from investors, their subsequent use and the financial trail leading to various businesses and assets.
Shivam Associates is alleged to have collected substantial amounts from investors by assuring them attractive interest rates and better returns. However, the entity allegedly did not have permission or regulatory clearance from competent authorities, including the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), to operate such an investment scheme.
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₹2,100 Crore Collection Under Investigation
During the court proceedings, ED lawyers argued that custodial interrogation of Neelannavar was necessary to establish the complete financial trail and identify other people allegedly involved in the scheme. The agency wants to determine where the money collected from investors was deposited, how it was transferred between accounts and entities, and where the funds ultimately ended up.
The case also involves allegations that money collected from thousands of investors was diverted into several sectors, including film production, real estate, fisheries and other business activities. ED officials are examining whether investor funds were transferred into these ventures and whether such transactions were used to conceal or divert the proceeds.
New Investors’ Money Allegedly Used to Pay Old Investors
The initial investigation by Belagavi Police reportedly indicated a pattern consistent with a Ponzi scheme. According to the police, people from Maharashtra, Chhattisgarh, Goa and other areas had invested money with Shivam Associates after being promised returns linked to investments in the stock market.
Investigators allegedly found that the firm suffered substantial losses in the stock market but did not disclose those losses to investors. Instead, the accused allegedly began using money received from new investors to make dividend or return payments to earlier investors. Such a mechanism can create the appearance of a functioning investment business while relying on fresh inflows to meet obligations to existing investors.
Police have also alleged that Neelannavar used funds collected from investors for personal expenses and other business ventures. The allegations include purchasing expensive houses and cars, travelling on holidays and financing film production. Investigators are examining the extent to which investor funds may have been diverted into these activities.
Case Moved From Police Investigation to CID and ED
Neelannavar was initially arrested by Belagavi Police, which began investigating the allegations with officials from the Revenue, Cooperation and Sub-Registrar departments. The investigation was subsequently transferred to the Crime Investigation Department (CID).
Following suspicions of illegal transfers and possible money laundering involving investors’ funds, the ED initiated a separate investigation under the Prevention of Money Laundering Act (PMLA). The agency has already carried out search and seizure operations at premises linked to Neelannavar.
ED officials from Mangaluru recently searched his residences and offices as part of the investigation. Financial documents, transaction records and other material connected with the alleged scheme are being examined to identify the movement of funds and assets allegedly acquired through the collected money.
ED to Trace Complete Money Trail
The immediate focus of the ED investigation is to reconstruct the complete financial trail of the more than ₹2,100 crore allegedly collected from investors. Investigators are examining how much money was raised from investors, how much was allegedly returned to earlier depositors, and how much may have been diverted to businesses, properties or other accounts.
The agency is also expected to examine the role of individuals and entities allegedly associated with Shivam Associates. Bank accounts, property transactions, business investments and transfers between related entities could provide crucial evidence in determining the final beneficiaries of the funds.
The investigation will also seek to establish whether the alleged diversion of investor money was part of a planned financial structure and whether other people assisted Neelannavar in collecting, transferring or deploying the funds.
With the accused now in 12-day ED custody, investigators are expected to question him about the alleged investment scheme, the flow of funds, properties and businesses linked to the money, and the identities of other people allegedly involved. Further investigation could lead to the identification of additional individuals, companies, assets and transactions connected with the alleged Ponzi network.
