NSEL Scam: Amit Rathi among three brokers arrested by EOW

Moneylife Digital Team 03 March 2015

According to reports, those arrested by the EOW, include, Amit Rathi, Chintan Modi of IIFL and CP Krishnan from Geojit Comtrade

The Economic Offences Wing (EOW) of Mumbai police, which is probing the Rs5,600 crore National Spot Exchange Ltd (NSEL) scam, has reportedly arrested some brokers. According to reports, those arrested by the EOW, include, Amit Rathi, managing director of Anand Rathi Financial Services Ltd, Chintan Modi, vice president of India Infoline (IIFL) and CP Krishnan from Geofin Comtrade (formerly known as Geojit Comtrade).

Police sources said some other executives of Anand Rathi, Motilal Oswal, Geojit Comtrade and IIFL were already questioned by the EOW.

According to NSEL data, brokers were manipulating client codes to the tune of 3,00,000 times, after the trade was carried out on the exchange and then they transferred the same to other names.

It may be noted that in equities and commodities, changes in client codes are allowed only in a genuine case. But in this case, changes in client code were effected to transfer profit and loss to launder money.

According to market sources, as many as 200 brokers are alleged to have sold NSEL products as investment vehicles by promising an assured return.

After the exchange was shut down and the agencies began to probe the roles of the management and the brokers, the then newly formed NSEL Investors Forum had been demanding an investigation into the role of the brokers.

According to police, broking houses charged 0.2% as warehousing charges, but never gave investors any warehousing receipts (WRs). "Nobody verified the warehouse receipt or whether goods were actually at the warehouse. Some warehouse receipts are said to be authentic as some genuine producers wanted to finance their working capital till their goods were sold. But as nobody verified the warehouse receipts. More commodity traders started producing warehouse receipts against which they received easy funding. Some may have used this money for financing their business, but the rest is anybody's guess," another report from the newspaper had said.

Around 200 brokers are said to be involved in the scam. Major brokerages, which are under the scanner are Anand Rathi, Motilal Oswal, India Infoline and Geofin Comtrade, the reports said.

Last month, according to reports, the Maharashtra government was planning to liquidate properties worth Rs6,500 crore belonging to defaulters in the NSEL case to settle claims of the investors.

Ranjeet Patil, minister of home (urban), told DNA, "Until now, all such defaulters used to regain the hold of the assets. But we will ensure that property worth Rs6,500 crore, which was already attached from the defaulters, is liquidated. The auction on the property would be initiated soon to settle the claims of the investors."

The EOW had attached assets of the defaulting members, including MCX promoter Jignesh Shah and other NSEL officials under the Maharashtra Protection of Interests of Depositors (MPID) Act.

Last year in August, the EOW had filed a charge sheet against Jignesh Shah, promoter of Financial Technologies India Ltd, in connection with the NSEL scam.

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