Kerala couple flees after multi-crore chit fund scam in Bengaluru: What is chit fund?

A couple, originally from Kerala has fled the country after duping hundreds of investors in a multi-crore chit fund scheme. The couple – Tomy A Varghese, 57, and Shiny Tomy, 52 – were operating a firm based in Bengaluru’s Ramamurthy Nagar that had promised high monthly returns. The firm, A&A Chits and Finance, is believed to have cheated 368 investors of nearly Rs 40 crore.

The couple is now believed to have fled to Kenya. Tony and Shiny were unreachable after investors allegedly stopped receiving payments in recent months. They are believed to have fled the country two days before they were booked on a police complaint, filed by a senior citizen who lost Rs 70 lakh. 

According to complaints, the couple had been running the firm for around 25 years, and lured investors by offering returns of around 15 per cent. Many victims are believed to have invested all their life savings, and some are understood to have even sold off their properties in the hopes of gaining financial gains. 

The firm did deliver on its promise for several years, thereby building credibility within the investor community. Things went downhill in the past few months, concerning and spreading anxiety among depositors.

The couple is likely to have liquidated their assets before fleeing. Their Krishnarajapuram apartment in East Bengaluru was sold off. A First Information Report (FIR) has been registered in connection with the case. Police have started a search operation to trace the couple and recover the money owed to the defrauded investors.

Authorities are examining financial records and other evidence linked to the firm’s operations as part of the investigation. Over 350 individuals have visited the police station to record their statements regarding the scam. Officials believe many more victims – police say there were 750 investors – may not have come forward or are unaware they have been defrauded. 

What Is A Chit Fund?

A chit fund is a traditional Indian financial scheme that blends saving and borrowing within a single system. It involves a group of individuals (subscribers) who contribute a fixed sum regularly to a common pool. This pool is distributed to one member per cycle—typically monthly—via an auction or lottery.

Why Do People Use Chit Funds?

Chit funds offer two key benefits:

Regular Savings: Members develop disciplined financial habits by contributing monthly.

Access to Credit: Members can receive a lump sum early, functioning like an interest-free loan.

How Does A Chit Fund Operate?

A fixed number of participants join for a set duration (e.g. 50 months).

Each contributes the same amount monthly.

The total collection -- called the chit value -- is offered to one member each cycle.

The recipient is chosen via:

Auction: Members bid by offering a discount. The lowest bid wins.

Lottery: A random draw (less common in regulated setups).

The foreman (organiser) manages the fund, charges a commission, and oversees payouts.

Auction Example

If the chit value is Rs 50,000 and the winning bid is Rs 40,000:

Rs 10,000 is the discount.

The organiser takes a commission (e.g. Rs 2,500).

The rest is shared among members as dividends, reducing their monthly dues.

How Do Members Benefit?

Dividends: Members who don't win early receive a share of the discount.

Interest-Free Loans: Winners can use funds for urgent needs or investments.

Smart Bidding: Savvy members time their bids for maximum gain.

Short-Term Liquidity: Easy access to capital without collateral or bank delays.

Staying Safe in Chit Funds

Join only registered chit funds under the Chit Funds Act, 1982.

Always verify registration with local authorities.

Check the operator’s track record and reviews.

Demand a written agreement with clear terms.

Avoid schemes with high commissions or aggressive marketing.

Diversify -- don’t put all your money into one fund.

Use digital platforms for better transparency.

Consult a financial advisor before investing.

Report suspicious activity to authorities promptly.