Unveiling Deceptions: A walkthrough corporate Frauds in India and how to look out for them | Episode 45

Since yesterday, Blusmart has been in the news. For all the wrong reasons. Fraud, high value real estate purchases, luxury items and what not! This one feels like a movie and is certainly bigger than the Fintech’s own big ouch moment when Ashneer’s news came out.

The Jaggis, promoters of Gensol (listed entity) and Blusmart, the much-loved ride hailing company forged no dues letters from IREDA and PFC, bought flats in DLF Camellias and literally siphoned off ~INR 1,000 cr/USD 125mn. What’s surprising is that SEBI is the one who bought this out in clear terms while investors at Gensol/BluSmart are still not talking about it.

What’s worrying is that Blusmart had who’s who of investor world and all of them missed the obvious red flags here.

There are certain traits which are specific to fraud prone founders that I have observed over a decade of investments. They talk in extremes, and you always get a feeling that this is just too much while talking to them, there’s a feeling in the stomach that something is off. This is the feeling I had when I met the Jaggis sometime back in 2019- Everything looked very rosy, bit something was off. That was the reasoning which saved us from funding them.

There are other traits as well which we will dive into detail here – Extra protectiveness about numbers and control, delayed MIS more often than not, too much of superlative and futuristic talks while being removed from reality, not being tuned into exact numbers. There’s a list here. And most importantly, your gut feeling. Don’t ignore that

Having said the above, what is also acknowledged is that India’s entrepreneurial ecosystem is a powerhouse of innovation, with startups and listed companies driving economic growth. Yet, beneath the surface, some founders have orchestrated frauds, exploited trust and leaving investors reeling. The fintech sector, a cornerstone of India’s digital economy, is especially prone to deception due to its complexity and regulatory gaps.

This post traces major fraud cases, starting with the recent allegations against BluSmart’s founders and moving backward to the infamous Satyam scandal.

With a focus on fintech’s risks, I will also highlight red flags to help investors navigate this high-risk landscape. Not to say this is exhaustive, but it’s a start. I am listing down some of the big ones here, but there are multiple frauds which are not in public domain or are relatively smaller to mention, but have same or worse damage value.

The Fall of Titans: Fraud in India’s Startup and Listed Space

BluSmart’s Troubled Promise (2025) – Anmol Singh Jaggi and Puneet Singh Jaggi

In Delhi, BluSmart’s electric cabs were a symbol of sustainable transport, led by brothers Anmol and Puneet Singh Jaggi. Their listed company, Gensol Engineering, raised ₹975 crore in loans from IREDA and PFC to buy EVs for BluSmart’s fleet. But in 2025, SEBI’s investigation exposed alleged misconduct. The Jaggis reportedly diverted ₹262 crore to related entities, with Anmol channeling ₹200 crore through a car dealer and withdrawing ₹25.16 crore personally, including ₹6.2 crore to his mother. SEBI also flagged a luxury flat purchase with company funds. Gensol’s shares dropped 62% since June 2024, and an independent director resigned, citing weak governance. The case, still under scrutiny, highlights the risks of complex corporate structures and related-party deals.

Outcome Health’s Collapse (2023) – Rishi Shah and Shradha Agarwal

In Chicago, Indian-origin founders Rishi Shah and Shradha Agarwal built Outcome Health, a health tech firm that raised nearly $1 billion by placing ads in doctors’ offices. But a $1 billion fraud unraveled their success. They inflated revenues, faked campaign results, and misled clients, diverting funds for personal dividends. Convicted in 2023 for mail fraud, wire fraud, bank fraud, and money laundering, Shah and Agarwal faced prison. The scandal showed that even high-profile ventures by Indian founders can falter when financials are manipulated.

Stayzilla’s Downfall (2017) – Yogendra Vasupal

In Chennai, Stayzilla aimed to compete with OYO in hotel bookings, led by Yogendra Vasupal. But unpaid vendors, including an ad firm owed ₹1.7 crore, exposed financial troubles. Vasupal was arrested for fraud, accused of misleading creditors and investors about Stayzilla’s health. The startup shut down, its failure tied to overexpansion without steady revenue. Stayzilla’s collapse warned investors about startups that prioritize growth over stability.

Housing.com’s Implosion (2015) – Rahul Yadav

Mumbai’s Housing.com was a real estate disruptor, with Rahul Yadav as its bold leader. But allegations surfaced that Yadav inflated website traffic to boost valuations. His erratic behavior—firing staff and clashing with investors—created turmoil. Ousted in 2015, Yadav left Housing.com’s valuation in ruins, later sold to PropTiger. The case underscored the dangers of founder-driven chaos and unverified metrics.

Satyam’s Massive Fraud (2009) – Ramalinga Raju

In Hyderabad, Satyam Computer Services was a leading IT firm, with Ramalinga Raju as its respected founder. In 2009, Raju admitted to a $1 billion fraud, inflating financials with fake bank balances, revenues, and 13,000 nonexistent employees. The scheme, enabled by lax auditors, propped up Satyam’s stock while Raju siphoned funds. The company collapsed, Raju was jailed, and India’s corporate governance faced reforms. Satyam’s fall showed that even established firms can hide major fraud.

What these cases do is that they severely damage investor’s trust in the ecosystem and you tend to become more cautious about every investment. It’s a big loss for everyone here.

Fintech’s Risky Landscape: A Sector Prone to Fraud

India’s fintech boom—driven by UPI, digital lending, and crypto—has attracted billions but also a bit of frauds. Its digital platforms and regulatory gaps create opportunities for misconduct. Two fintech scandals highlight these risks and lessons.

BharatPe’s Governance Crisis (2022) – Ashneer Grover

In Gurugram, BharatPe became a fintech leader, enabling merchant payments, with Ashneer Grover as its outspoken co-founder. In 2022, allegations emerged that Grover and his wife, Madhuri Jain, funneled ₹66 crore through fake vendors to siphon funds. A leaked audio of Grover berating an employee intensified scrutiny. An Ernst & Young investigation confirmed governance issues, and Grover was removed. BharatPe recovered, but its valuation took a hit, showing the risks of unchecked founders in fintech.

Trellis Data India’s Crypto Scam (2022) – Vikram Deswal

Trellis Data India promised 3–4% monthly returns through crypto arbitrage, led by Vikram Deswal. The scheme raised crores but was a Ponzi scam, using new investors’ money to pay old ones. SEBI’s 2022 crackdown dismantled Trellis, leaving investors with losses. The case exposed the dangers of unregulated fintech products marketed with unrealistic promises.

Fintech’s Specific Risks

Fintech thrives on complexity. Digital platforms hide cash flows, and regulatory gaps in crypto and lending enable deception.

Founders exploit investor enthusiasm, promoting tech solutions without compliance. BharatPe’s vendor fraud and Trellis’s Ponzi scheme show how fintech’s innovation can conceal misconduct when oversight is weak.

Look for erratic lending behaviors, very off cohorts, lending to particular set of people again and again, lending to undocumented entities. Another key problem area here is lending to vendors who default frequently. Look out for out of pattern issues.

Red Flags and How do you Protect Investments from Fraud

The fraud cases—from the Jaggis’ alleged diversions to Raju’s fabricated financials—reveal patterns investors can use to spot risks. Listing down some of these here:

1. Opaque Financials and Related-Party Transactions

Unclear financial statements or frequent deals with founder-linked entities (e.g., BluSmart-Gensol’s leasing, Satyam’s fake accounts). Frequent high value payments to consultants (Ashneer’s case) might be a red flag.

Review audited financials, cap tables, and disclosures. Check for unusual fund flows to related parties. For investments, require independent audits and shareholder approval for related-party transactions. Hiring forensic accountants for high-risk investments is a good idea.

2. Inflated Metrics and Unrealistic Claims

Exaggerated revenues, user numbers, or growth projections (e.g., Housing.com’s traffic, Outcome Health’s revenues, Trellis’s crypto returns). If something is too good to be true, most likely it is.

Verify metrics with third-party data, customer feedback, or industry standards. Be skeptical of overly optimistic projections. Conduct site visits, interview customers, and audit tech systems to confirm claims.

Look for signs on social media manipulation. Gensol was being pushed by 100s of influencers and this was a red flag.

This twitter thread exposes some of these. Probably make a not of these handles and stay away.

3. Founder Dominance and Instability

Overpowering founders or erratic behavior (e.g., Rahul Yadav’s conflicts, Ashneer Grover’s outbursts, Byju’s) is a big, big red flag. Walk away from these kind of founders. You want a partner, not a ticking bomb.

Evaluate board independence, founder history, and governance structures. Look for signs of unilateral decisions. Push for independent directors, audit committees, and strong internal controls to limit founder overreach. Be super active here.

4. Fund Diversion and Personal Enrichment

Using company funds for personal expenses or unrelated ventures (e.g., BluSmart’s luxury flat, Outcome Health’s dividends). Don’t overlook this. If it has happened once, it will happen again.

Monitor cash flow statements and insider transactions. Flag payments to non-business entities. Mandate detailed fund utilization reports and include clawback provisions for misused funds.

5. Vendor Issues and Debt Problems

Unpaid vendors or loan defaults, indicating cash flow issues (e.g., Stayzilla’s dues, Gensol’s rating downgrades).

Check credit ratings, vendor complaints, and legal filings for unpaid debts. Assess working capital, cash reserves, and debt repayment capacity before investing.

6. Fintech-Specific Risks

Unregulated products, unclear digital transactions, or risky lending practices (e.g., BharatPe’s vendor fraud, Trellis’s Ponzi scheme). Look at who the money is being lent to and look at specific static pools/cohorts which seem to highly problematic and dig deeper.

Confirm compliance with RBI and SEBI regulations. Review tech platforms, loan portfolios, and KYC processes. Hire fintech experts to evaluate regulatory and operational risks, especially in crypto or lending.

Moving Forward: Investing with Caution

The question here is – How do investors protect themselves. Some of the important things to do here are - Prioritize transparency by scrutinizing financials and verifying metrics.

Strengthen governance with independent oversight. Question the founders on things that don’t add up. Don’t be afraid to take control. Most importantly, don’t hope things will get better.

Diversify investments to reduce exposure, consult SEBI-registered advisors, and monitor platforms like twitter for early warnings, but always cross-check information. The next big opportunity may excite, but thorough due diligence is the key to safeguarding capital.

In India’s fast-paced entrepreneurial world, fortunes can vanish quickly. The stories of the Jaggis, Shahs, and Rajus show that brilliance can hide fraud, but careful analysis reveals the truth.

It’s better to be cautious then sorry.

Note: The BluSmart-Gensol case is based on SEBI’s interim findings as of April 16, 2025, and may change. Fintech cases like Trellis rely on available records, and new details may emerge.

Disclaimer – The views presented here are my own and doesn’t reflect views of my employer in any way and it shouldn’t be construed as that in any way whatsoever.