Wednesday, March 4, 2015

3 commodity brokers held in NSEL scam

Mumbai: The city's Economic Offences Wing on Tuesday arrested three brokers in the Rs 5,600-crore National Spot Exchange (NSEL) alleged cheating case. The brokers were arrested on charges of cheating, forgery and conspiracy , among others. Rajvardhan Sinha, additional commissioner of police (EOW), identified the three brokers as Amit Rathi of Anand Rathi Commodities, C P Krishnan of Geofin Comtrade and Chintan Modi of India Infoline Commodities.

NSEL FRAUD - `Brokers misled investors, showed fake transactions'

Mumbai: Amit Rathi of Anand Rathi Commodities, C P Krishnan of Geofin Comtrade and Chintan Modi of India Infoline Commodities were summoned for inquiry and placed under arrest by the EOW on Tuesday . All three will be kept at the Mumbai crime branch's lock-up in the police commissionerate compound near Crawford Market, and will be produced before a special court on Wednesday. “During our probe, we found that around 139 broking firms and brokers had traded on the NSEL. There were several allegations against some brokers. We summoned them for questioning. However, the investigating officer was not satisfied. The trio gave evasive replies to certain queries and were not cooperating in the investigation. Hence, their custodial interrogation was necessary ,“ said additional commissioner of police (EOW) Rajvardhan Sinha. Till date, 24 people, including Jignesh Shah, chairman of Financial Technologies (FTIL) group, and MCX CEO Sreekanth Javalgekar, have been arrested for alleged role in the biggest payment default in the Indian commodity market. Rathi's total client base is around 12,900 with trading exposure of Rs 19,130 crore, which is almost 16% of the total turnover of NSEL when it stopped trading in August 2013. The total trading exposure of India Infoline was Rs 9,183 crore while Geofin's cli ent base was around 1,000 with trading exposure of Rs 5,526 crore, said Sinha.
“Our basic findings during the questioning of the three are more or less common. They had given false assurance to investors leading to enticement for investing in NSEL. They also assured investors of fixed and high returns saying it was safe to invest but that was not the case,“ he added. The trio had also given confirmation of stocks to the auditors of the NSEL.
“We have found certain fictitious transactions between the borrowers and investors.We also found large-scale market-capturing practices by using Unique Client Code, done at the brokers' end,“ said Sinha.
The police found that bank accounts of certain investors were used without their knowledge in financial transactions.
“Transaction of Rs 1,061 crore was done without the knowledge of investors. The EOW has issued a letter to the FTIL asking for details of the Rs 84 crore paid to NSEL by FTIL as service charge.“
In the NSEL scam, regulatory grey areas in the commodities trading space were used by brokers and investors to make a 14-16% guaranteed profit.Brokers and investors also manipulated the amount of goods kept in warehouses. A PR firm, on behalf of Anand Rathi Commodities, issued a statement: “Anand Rathi Commodities Ltd and its directors and officials have fully cooperated with the agencies.“


The Times of India, March 4, 2015

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