ISLAMABAD: Ghulam Rasool Ayubi was not the kind of man you would peg as a master criminal. An unassuming small-time trader from the Badami Bagh area of Lahore, Ayubi would sell vegetables on a handcart to make enough money to feed his family.

For nearly half-a-decade, he earned money the hard way, eking out a living buying produce at local vegetable markets and selling it door-to-door in some of the city’s more upscale neighbourhoods.

Convinced by a friend that there was more money to be made buying and reselling clothes in Azad Kashmir, Ayubi headed to Muzaffarabad. On his way there, the cash-strapped man spent a night at Rawalpindi’s Zikria Mosque, where he met some people who would change his life forever.

Mufti Osama Zia was one of those who convinced Ayubi to start up his own Modarba business. He told him it was perfectly legitimate under Islamic injunctions, as it did not involve interest, which is prohibited in Islam. He explained to Ayubi that he needed to collect money from as many people as possible. These contributions would be an investment in a company which would give them a steady profit anywhere from Rs4,000 to Rs7,000 per month on a deposit of Rs100,000.

Enamoured by this new idea, Ayubi soon established the Mezban Trading Company (Pvt) Limited, under the aegis of which, he opened Mezban stores in Rawalpindi, Taxila and Wah Cantt.

In addition to his stores, Ayubi was running a Modarba scheme and in just four months, managed to raise nearly Rs3 billion from 2,800 people. With this money, he bought plots, vehicles and agricultural land in the names of his family and close relatives in different parts of the country and also made several trips abroad before finally disappearing in 2013.

The racket Ayubi was running was essentially a Ponzi scheme. This form of white-collar crime first made headlines with the arrest of Punjab-based financier, Double Shah. However, Ayubi’s twist on the classic confidence trick was a religious one: rather than promising people outlandish returns on their profits – a characteristic of the classic Ponzi scheme that draws in more investors but also leads to its swift breakdown – Ayubi’s modarba scam promised people a steady income for a fixed period of time.

He used common methods to build up trust: making sure that some of his original investors kept receiving their payments regularly so that more and more people would be inspired by their success to invest. But then one day, the money dried up and Ayubi vanished.

Officials from the National Accountability Bureau (NAB) picked up his scent following complaints from several of his victims. He was then arrested and Rs50 million has been recovered from him so far.

Another such scam artist is Qari Ahmed Nawaz from the Shakardra village in Attock. A prayer leader at the Huzaifa Mosque in Darussalam Colony in Attock city, Nawaz was turned onto this trick by fellow cleric Mufti Bashir, who was a director at the Elixir Group of Companies at the time.

Bashir would collect money from locals, on the pretext that they were investing in the business – which was registered with the Securities and Exchange Commission of Pakistan and seemed legitimate enough – and promised a monthly return of Rs 4,000 profit in return for a Rs100,000 contribution to the Modarba. The company had over 100 agents active in the Attock district alone.

By June 2013, Nawaz – who began acting as an agent for Elixir, had collected nearly Rs110 million from 359 people. These people would be paid Rs 4,000 per month, while Nawaz, for his troubles, would receive a monthly payment of Rs1,500 per investor. He was soon making nearly Rs1 million a month and began making extravagant purchases.

Attock-resident Rafia Bibi was one of those unfortunate souls who invested with Nawaz. She gave him Rs300,000, hoping to make Rs12,000 every month so she could take care of her sick husband and marry off her three daughters.

First, Nawaz told her that she could not get the full Rs12,000 because the company wasn’t doing very well. Then, one day, he disappeared without a trace.

A NAB team followed the trail to Malaysia and Thailand and has managed to track down at least 15 other people accused of committing white-collar crimes, who are currently living in the Far East, China, Sri Lanka, UAE, Abu Dhabi and Ethiopia.

NAB data reveals that nearly 40,139 victims of Modaraba and Musharika scams have lost a combined Rs22.250 billion rupees to confidence tricksters in Punjab and Islamabad.

The bureau has registered 93 cases to date and 17 accused are already in custody. At least Rs2 billion has already been recovered from those in custody and more recoveries are likely, NAB Rawalpindi-Islamabad Director General Retired Colonel Shahzad Anwar Bhatti told Dawn.

Saying that it was mostly those with limited resources who were swayed by promises of ‘easy money’, there was a lack of effective regulation, particularly at the SECP’s end, to check the misuse of company licences. Most of these Modarba scams were being run by individuals or companies who had licences from the SECP for something else altogether.

Sajid Gondal, an SECP spokesperson, told Dawn that while theirs was a regulatory function, monitoring illegal activities and enforcement of the law was the domain of agencies such as police, FIA and NAB.

“The Elixir Group was registered with the SECP and authorised to operate a dairy, housing and beverage trade,” he said.

Published in Dawn, October 21st , 2014