NSE Colo Scam: CBI Arrests OPG Securities' Owner Sanjay Gupta

Moneylife Digital Team 22 June 2022

Investor Interest

The central bureau of investigation (CBI), on Wednesday, arrested Sanjay Gupta, owner and promoter of Delhi-based OPG Securities Pvt Ltd, in connection with the National Stock Exchange (NSE) co-location (Colo) scam in which brokers allegedly abused the facility to make gains by getting early access to the stock market.

OPG Securities is at the centre of the colo scam at the NSE, in which some brokers got preferential access to the Exchange's servers at the colo facility and trading system. These brokers connected to the Exchange's backup server and could access the price feed faster, giving them an advantage over other brokers.

Quoting sources, a report from Economic Times says, the CBI has managed to unearth a cartel that allegedly 'helped Gupta in approaching Sebi officials' while the capital markets regulator was conducting its probe into the NSE algorithm scam between 2015 and 2018.

"The searches and the probe have indicated that there is a Mumbai-based syndicate that could have assisted Gupta in reaching out to Sebi officials who were conducting the investigations," a source privy to the development told the newspaper.

Earlier in May 2018, CBI registered a case against Mr Gupta of OPG Securities, Aman Kakrady (brother-in-law of Sanjay), Ajay Shah (who is alleged to have facilitated Mr Gupta by developing and providing algo software Chankaya) and against some officials of Securities and Exchange Board of India (SEBI) and NSE.

Last year, SEBI imposed an overall penalty of over Rs5 crore on OPG Securities, its promoter and MD Mr Gupta, and two other directors, Sangeeta Gupta and Om Prakash Gupta. SEBI imposed a penalty of Rs5 crore jointly on the company and the directors, along with Rs10 lakh fine each on OPG Securities and Mr Gupta.

As per a complaint received by the market regulator from a whistle-blower, OPG Securities used the systems at NSE to its advantage by hiring Nagbhusan Bhat, who was working with Omnesys Technologies, to figure out which server was working better.

The brokerage also allegedly made certain arrangements with a staffer from NSE data centre, Jagdish Joshi, who would inform it of the time when the servers would start so that they could be the first to connect.

NSE was the second-largest shareholder of Omnesys Technologies which had the knowledge that connecting faster would put the server ahead in the queue. (Read: NSE Algo Scam: SEBI Imposes over Rs5 Crore Penalty on OPG Securities, Sanjay Gupta and 2 Directors)

The Colo or algo scam came to light in mid-2015, when Moneylife wrote about it for the first time, following multiple letters from a whistle-blower. For this, NSE had filed a defamation case against us. A single-judge had penalised NSE for Rs50 lakh for filing a case against us. After filing an appeal against the order, NSE paid up the penalty. Meanwhile, in the wake of the scam, the top brass of NSE had to resign and a new management team took charge.

The entire colo scam has been documented by Moneylife editors Sucheta Dalal and Debashis Basu in their book Absolute Power: Inside Story of the National Stock Exchange's Amazing Success, Leading to Hubris, Regulatory Capture and Algo Scam, released in June 2021.

Read our coverage on NSE Algo Scam here

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