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PACL Head Nirmal Singh Bhangoo Arrested Over Alleged $6.8 Billion Investment Scam

The arrest Bhangoo and other executives comes 17 months after markets regulator the Securities and Exchange Board of India ordered PACL to return money to millions of investors, saying the company was running an illegal investment scheme

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The Central Bureau of Investigation (CBI) on Friday arrested the founder of PACL Ltd over allegations the property company cheated investors of $6.8 billion, in what local media is calling the country's biggest financial scandal.

The arrest of Nirmal Singh Bhangoo comes 17 months after markets regulator the Securities and Exchange Board of India (SEBI) ordered PACL to return money to millions of investors, saying the company was running an illegal investment scheme.

The scheme promised depositors returns on investments in agricultural land, the regulator said.

PACL has argued it was selling land to customers and not investment schemes, and so was not subject to SEBI's regulations.

Reuters did not get any response to phone calls to PACL's head office in New Delhi on Friday.

PACL founder Bhangoo and three other company officials were arrested on Friday as part of the ongoing investigation into allegations of criminal conspiracy and cheating, said R.K. Gaur, a spokesman for India's Central Bureau of Investigation.

CBI sources said Bhangoo, CMD of Pearls Golden Forest Ltd (PGF) and ex-Chairman of Pearls Australasia Pty Limited, along with Sukhdev Singh, MD and Promoter-Director of Pearls Agrotech Corporation Ltd (PACL), Gurmeet Singh, Executive Director (Finance) and Subrata Bhattacharya, ED in the PGF/PACL were confronted with documents purportedly contrary to their claims of clean business.

The case involves alleged collection of about 450 billion rupees ($6.8 billion) from roughly 55 million investors across the country, Gaur said, terming it a "Ponzi scheme case".

Indian regulators have stepped up scrutiny of unregistered investment products over the past two years, plugging regulatory loopholes that had long allowed unregulated entities to raise billions of dollars from small investors. Many people ended up losing their life savings in these schemes.

The founder of conglomerate Sahara India has spent the last 21 months in jail for not complying with a court order to return $5.4 billion to investors who put money in a 2008-11 time deposit plan that was later ruled illegal.

Sahara's business empire includes overseas hotels such as the New York Plaza and a Formula 1 racing team.