The Enforcement Directorate (ED) has uncovered the alleged use of two cooperative credit societies as part of the money-laundering network in a massive Rs 2,459.49-crore Ponzi scam that duped more than 35,000 investors in Karnataka.
The ED’s Mangaluru Sub-Zonal Office filed a Prosecution Complaint before the III Additional District and Sessions Judge, Mangaluru, on October 9, seeking prosecution of five accused persons and entities, including alleged kingpin Shivanand Siddappa Neelannavar and his firm, M/s Shivam Associates.
According to the ED investigation, approximately Rs 25 crore of the proceeds of crime were routed through two cooperative institutions, Shreemata Co-operative Credit Society Ltd. and Dhanashree Multipurpose Co-operative Society Ltd. The funds were allegedly used to create fixed deposits, which subsequently served as security for loans obtained in the names of associates to purchase land parcels.
The findings have brought the role of cooperative credit institutions into focus in the alleged financial layering and diversion of investors’ money.
The investigation revealed that Neelannavar and his associates allegedly collected Rs 2,459.49 crore from over 35,000 investors by promising assured monthly returns of 3%, along with a 0.5% referral commission for introducing new investors. The network allegedly operated through multiple entities and referral agents presented as leaders.
The ED stated that funds collected from new investors were largely rotated to pay earlier investors, while substantial amounts were diverted for personal enrichment. An outstanding principal amount of Rs 2,125.60 crore reportedly remains unpaid to investors.
The investigation also traced Rs 185.95 crore in net losses from high-risk stock trading, besides investments in real estate and family-linked business ventures. Another Rs 5 crore was allegedly diverted to finance a Kannada feature film titled ‘Champion’.
Searches conducted at eight premises in Belagavi, Chikkodi and Nipani in August 2026 led to the seizure of incriminating documents and digital evidence. The agency also froze bank accounts and fixed deposits worth Rs 2.02 crore linked to the alleged proceeds of crime.
Neelannavar was arrested on August 13, 2026, and is currently in judicial custody. Further investigation is underway.
The case highlights how cooperative credit institutions can allegedly be misused as channels for layering illicit funds, underlining the importance of robust financial controls and due diligence.
