The Economic Offences Wing of Mumbai Police has arrested three top officials of leading brokerages in connection with the ₹5,600-crore National Spot Exchange scam. So far, 24 people have been arrested in relation to the scam, but this is the first time that brokers have been taken into custody.
On Tuesday, the police arrested CP Krishnan, Whole-time Director of Geofin Comtrade; Amit Rathi, Director at Anand Rathi Commodities; and Chintan Modi, Director at India Infoline Commodities, for custodial interrogation.
Rajvardhan Sinha, Joint Commissioner of Police, EOW Mumbai, said the investigating officers found the three officials evasive, non-cooperative and giving contradicting statements. So, their arrests were necessary under various Sections of the IPC relating to cheating, forgery, criminal conspiracy and criminal misappropriation.
“We will produce them in the Maharashtra Protection of Investors Deposit court on Wednesday and seek their custody for further probe,” he said. The investigation wing of Mumbai police is examining 139 broking houses which traded on the NSEL platform.
Enticed investors While Anand Rathi Commodities had 12,900 clients and trading exposure of ₹19,132 crore – accounting for 16 per cent of NSEL’s turnover — India Infoline Commodities contributed turnover of ₹9,183 crore before the exchange suspended operations. Geofin Comtrade had 1,000 clients and recorded ₹5,527-crore turnover.
Sinha alleged that the three broking houses provided false assurance to investors of NSEL and enticed them to invest in the exchange by giving misleading statements.
The EOW has also found fictitious transactions executed by the brokers. It has been alleged that the Unique Client Code was manipulated and in some instances modifications were done only at the brokers’ end.
Short selling For instance, Sinha explained, the name of investors holding certain goods in NSEL records and the broking house were different. In a few cases, client accounts were sometimes used without their consent or knowledge. In one incident, a client account was used to execute trade worth ₹1,061 crore without his consent.
The broking firms also allegedly indulged in short selling and circular trading to artificially push up volumes on the exchange. The investigating agency also suspects proprietary trading by brokers.
Anand Rathi Commodities Limited said it was disappointed at the turn of events and does not believe the arrest is appropriate in the circumstances. “We have submitted the requisite information as requested and clearly established that Anand Rathi Commodities did not make any illegal profits or enrichment.”
The EOW has also issued notice to Financial Technologies, asking the firm not to sell any assets without informing it. “We have found that FTIL has created a lien on NSEL’s assets for claiming its dues worth ₹84-85 crore for providing software services, so we have directed the company not to sell any asset without informing us,” Sinha said.