Man behind India's $4 smartphone arrested for fraud

Micromax works to improve India's connectivity
Micromax works to improve India's connectivity

The man who made headlines a year ago with his promise of a $4 smartphone has been arrested on suspicion of fraud.

Mohit Goel, the founding director of Indian phone manufacturer Ringing Bells, was arrested on Thursday in the northern city of Ghaziabad, Indian police said.

One of the company's distributors, Ayam Enterprises, has accused Goel and four associates of cheating them out of 1.6 million rupees ($24,000).

Akshay Malhotra, proprietor of Ayam Enterprises, told CNNMoney that he paid Ringing Bells 3 million rupees ($45,000) in February 2016 for phones and accessories. He says his company received products worth only 400,000 rupees ($6,000), many of them of inferior quality.

Malhotra said when he demanded a refund, he received just one million rupees ($15,000).

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Malhotra said Goel resorted to intimidation when asked for the rest of the money.

"When we called them to ask for our money back and to end our association with them, he said he didn't have the money," he said. "He threatened that something will go wrong if we don't wait quietly."

Goel is scheduled to appear in court on Friday, according to Ghaziabad's deputy superintendent of police, Manish Mishra. The search for the other four suspects is still underway.

Ringing Bells launched its Freedom 251 smartphone last year to great fanfare. The phone was priced at just 251 rupees ($3.76), a deal many industry experts said at the time was too good to be true. One analyst said the company would lose $26 for every device it sold.

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Ringing Bells could not be reached for comment, and the company's website was down on Friday.

Goel, who reportedly stepped down as managing director in December, did not respond to multiple requests for comment but told the Hindustan Times newspaper that he had promised to pay several distributors back by Mar. 31 this year. He said he found the accusations against him "surprising."

But the executive's troubles may only just be beginning. Another distributor has filed a similar complaint with police, while several more are starting to jump on the bandwagon.

"Calls are coming in and victims are coming forward," Mishra said. "We currently have complaints that they defrauded various distributors of a total of 4 million rupees ($60,000) but I suspect the actual amount is double."

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