Understanding the operating mechanism of the Modaraba Scam: Victims' perspective on a Ponzi scheme

Irfan Ullah, Waqar Ahmad and Arshad Ali

First published: 1 March 2019


This study aims to explore the operating mechanism of the Modaraba Scam that emerged as a viable investment opportunity in Pakistan and ultimately unraveled as a mega Ponzi scheme. Thematic analysis of the findings reveal that the scam emerged with the conception of a sharia-compliant business and gained validity by the intermediation of religious clerics. Initially the scam operators paid out substantial profits to attract maximum investment. However, soon after, the profit was discontinued and the agents escaped. This research adds to the literature on fraudulent investment traps and can help in the identification of similar Ponzi schemes in the future.

Keywords: Modaraba · Modaraba scam · Ponzi scheme.

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