NSE-like lapse? MCX may have also failed to preserve data of former MD’s computer

Similar to NSE disposing of its former CEO Chitra Ramkrishna’s devices as e-waste, Multi Commodity Exchange of India Limited (MCX) is also likely to be questioned why it did not store laptops and data from personal computers of its former MD and CEO Mrugank Paranjape and the head of research V Shanmugam in the case related to alleged data leak in 2016.

According to sources, Paranjpe’s laptop has not been stored by the commodity exchange despite a forensic audit pointed out a massive breach of MCX servers and sharing of a ‘data pipeline’ by the exchange with the then professor at Indira Gandhi Institute of Development Research, Susan Thomas, on the instructions of the two top officials at the exchange.

BusinessLine had sent two email queries to key board members and senior officials of MCX on February 17 and February 26 but received no response. 

In its recent order against NSE and its former MD and CEO, market regulator SEBI expressed concern over the exchange having disposed of her laptop as e-waste. Preserving data from laptops and personal computers used by senior exchange executives, whose tenure came under a cloud, gives vital clues or evidence of their mismanagement and illegalities, legal experts say. Both Paranjape and Shanmugam quit MCX under controversial circumstances after the forensic audit. When Paranjape left, he cleared data from his desktop computer and may have taken his laptop with him, sources said. In contrast, when PK Singhal, former joint MD of MCX, quit the exchange, the hard-disk drive from his personal computers and laptop was preserved despite no allegations against him of any mismanagement, sources say. MCX had undergone a forensic audit in the wake of 2013 NSEL scam, a then sister concern company. But Paranjape and Shanmugam were at the helm when the alleged sharing of crucial trading data was done with unauthorised persons. 

Forensic audit

Just a month after Paranjape came to helm MCX, the exchange started a data pipeline to Thomas whose husband Ajay Shah, was already indicted by SEBI for a similar data breach at NSE. Forensic audit found sensitive emails sent by Thomas to Paranjape. “Why a background check was not done before sharing the data. And how was the data important for research,” the auditors had asked Paranjape. When MCX started its data pipeline to Thomas, it was well known that SEBI was investigating the professors for the NSE breach. In his response to investigators, Paranjpe had said, “NSE scandal was out of my knowledge. The operational aspect (of data sharing) was completely monitored by the research department and they should be in a position to answer.”

Shanmugam, however, told investigators in 2019 that “no such check was done.”

Algo trading

A forensic audit revealed that the hidden aim was the extraction of trade data for algo trading. A former SEBI official told BusinessLine that TR Chadha & Co’s report on MCX showed how the data-theft was carried out. The audit report said that Thomas directed MCX to share data with one Chirag Anand, a creator of algo trading software without involving people from operations and compliance departments. Like NSE, MCX has maintained ‘no trail’ of the data it had shared with Thomas. The files uploaded on the FTP server by MCX IT department were all deleted, said a source. FTP stands for File Transfer Protocol, where one computer as the data storage bank and another receiver and a real time connection can be established.

While in the case of NSE, SEBI has come out with a detailed order that revealed the lapses at the stock exchange, in the case of MCX SEBI has been for long contemplating action against MCX based on the forensic report. But so far there has been no action on the findings of the forensic audit report. SEBI did not respond to a query sent by BusinessLine.