Deceived Clients Alleged Top Brokers in NSEL Crisis

The Enforcement Directorate (ED) had issued summoned to Nirmal Jain, the chairman and managing director of India Infoline Finance (IIFL) group, for questioning in connection with the National Spot Exchange Ltd (NSEL) money-laundering case.

Brokers involvement in misguiding clients was raised by few clients such as Moti Dadlani ,Rita Vadodaria, and Achal Agarwal. On 18^th March 2015, Rita Vadodaria, client of Anand Rathi Commodities registered a fresh complaint against Anand Rathi Commodities.

Mr. Dadlani lodged a complaint against his broker and has alleged that his broker has defrauded money under his name. The broker deceptively; used Mr. Dadlani account and PAN details to invest huge amounts on NSEL.

As per media reports, ED said that they  are examining the broker’s role in the entire scam and asked them to furnish the details of funding of clients through non-banking financial companies and their unexplained write-offs.

The Investigating agencies are enquiring about the illegal changes made on the NSEL platform.  NSEL alleged in their charge sheet that the brokers were involved in miss selling products of NSEL by deceiving their clients on the NSEL platform were found to be different from those on brokers’ records

Two years ago, three executives of leading brokerage firms Anand Rathi Financial Services, Geofin Comtrade and India Infoline were arrested by the economic offences wing of Mumbai police, and were later released on bail.

Top Brokers alleged For Cheating Their Clients

Trading Clients of top Indian brokerages who traded on NSEL’s platform are staring at large outstanding in NSEL. Clients of Anand Rathi Commodities stand exposed to over Rs600 crores while those of Indian Infoline stand to lose over Rs300 crore

NSEL was merely a platform for borrowing and lending finance. The brokers were collecting a juicy 5%-6% as brokerage, fees and commission. Brokers misguided  their clients by laying assured return scheme  on them , clients didn’t  do enough of due diligence and therefore, to their carelessness, found  to be trapped in brokers nest  who aggressively sold NSEL products to them.

Apart from misguiding their clients, brokers were also involved in ‘benami transactions’. The NSEL defaulters now owe as much as Rs5,380.53 crores in unsettled dues. But which defaulting brokers were on the other side of the racket, that is, which of the brokers were most aggressive in channeling the money? The main was Anand Rathi Commodities Pvt Ltd. promoted by Amit Rathi.

 India Infoline Commodities, Motilal Oswal Financial Service and Geojit Comtrade are few among those defaulting brokerage firms alleged in ‘Benami Transactions’. While the names of defaulting brokers  who have defaulted are known, the list of defaulting brokers who involved in ‘Benami Transactions’ are

Investigating Agencies Revealed Deceptive Brokers in Duping NSEL

The Economic Offences Wing (EOW) of Mumbai crime branch has mapped out the nature of the crimes committed by the three brokers arrested in the Rs5,600 crore National Spot Exchange Limited (NSEL) crisis. EOW investigations reveal that the three brokers, who were arrested on March 3, had allegedly given false information to investors and auditors of NSEL, and also allegedly traded in their clients' names without taking permission. In this way, these brokers had manipulated the trading volumes of the NSEL.

Image source http://www.dnaindia.com/mumbai/report-cops-unravel-brokers-role-in-nsel-scam-2067457

The EOW arrested Amit Rathi, Director of Anand Rathi Commodities Limited (ARCL); Cherassary Krishnan, Director of Geofin Comtrade; and Chintan Modi, Director of India Infoline Commodities Limited- three major brokers in the city.

How Anand Rathi Commodities Ltd. distorted facts?

As per media reports, ARCL started trading on the NSEL platform in 2009, and presently has 12,900 clients. In the past four years, ARCL traded worth Rs19,130.2 crore, which is around 16% of the overall turnout on the NSEL platform. It was also revealed during the investigation that ARCL had falsely assured investors that they (ARCL) had done the due diligence, and there were enough settlement guarantee funds, thus enticing them to invest in the NSEL products. "ARCL also acted as clearing and forwarding agents, and gave NSEL auditors deceitful information that there were adequate goods in the warehouses. They should have carried out all the checks that were needed about availability of the stocks to protect the interest of their investors, but instead they gave them wrong information," said an EOW officer privy to the investigation. He added, "We also have reason to believe that there was a connection between the defaulted members in the case and ARCL, based on some transactions that point towards such connections." The EOW investigators also believe that ARCL masqueraded as its client to do large deals (this is known as UCC manipulation). "We have come to know that UCC manipulation (masquerading) was done rampantly from two conduit accounts without the consent of the account holder and commodities were bought without the consent of the clients, leading to unfair trade practices," said an officer. He added, "We have reason to suspect that ARCL carried out suspicious transactions of funding through multiple accounts, and to increase the volumes on NSEL platform, indulged in circular trading by transferring funds into various accounts of their own employees and relatives.

"A special court on Saturday extended the police custody of Amit Rathi, director of Anand Rathi Commodities Ltd (ARCL), until March 13, holding that he was an active director in the company, based on documents provided by Mumbai police.

Rathi's counsel, senior advocate Amit Desai, argued against his extended remand on the ground that he was a non-executive director and therefore not actively involved in the company's affairs. Rathi's bail application will be heard on March 13. The court noted that Rathi was an authorised signatory to the bank accounts of ARCL and participated in board meetings, based on documents provided by the Mumbai police's Economic Offences Wing. The police searched the registered offices of ARCL, its holding company Anand Rathi Financial Services and Rathi's residence on Thursday  5^th March.On March 13th, the special High Court will hear Amit Rathi bail plea and give his jurisdiction.

As per media reports & Investigating Agencies exploring case it is clear that Amit Rathi was fully aware of the notorious act which was played under his nose and it sounds very unpleasant that Amit Rathi couldn’t whiff this. Granting bail to Amit Rathi will not only adversely affect investors, but it will promote this unethical trade practices in the future.

Brokerage Firms Charged For Alleged False Declarations

The Securities and Exchange Board of India (Sebi) has recommended a forensic audit of brokerage houses whose clients lost significant amounts of money in the Rs 5,574-crore National Spot Exchange Ltd (NSEL) scam.




The regulator has indicated this to third-party auditors looking at the books of these brokers. Sebi had on April 4 given the brokerages 60 days' time to have their books vetted by third-party auditors. The brokerages include Anand Rathi Commodities, India Infoline Commodities, Geofin Comtrade, Phillip Commodities and Motilal Oswal Commodities.

"There were several irregularities found, which included instances of contract notes issued by brokers not matching trade records of the exchange. Instances of discrepancies and manipulation of books of accounts need to be verified further. This can be done by a forensic audit of banking transactions made between brokers and clients.

The NSEL crisis came to light in July 2013, when the National Spot Exchange(NSEL) was unable to repay so called 13,000 trading clients, who were trading on the platform. The National Spot Exchange (NSEL) did not have adequate goods in its warehouses as promised by brokerage firms to their clients. Nor did the settlement guarantee fund have enough money for repayment.

When contacted, Phillip Commodities and Anand Rathi did not respond and IIFL refused to comment. Ajay Menon, director, Motilal Oswal Commodities, said, "Sebi has initiated inspection of books of accounts vide its letter dated April 4 and we are submitting the information sought. As of now, we are not aware of initiation of a forensic audit."

Mr. Dadlani A Trading Client Lodged A Complaint Against His Broker

Brokers involvement in misguiding clients was raised by few clients such as Moti Dadlani ,Rita Vadodaria, and Achal Agarwal. On 18^th March 2015, Rita Vadodaria, client of Anand Rathi Commodities registered a fresh complaint against Anand Rathi Commodities.

Mr. Dadlani lodged a complaint against his broker and has alleged that his broker has defrauded money under his name. The broker deceptively; used Mr. Dadlani account and PAN details to invest huge amounts on NSEL.

As per media reports, ED said that they are examining the broker’s role in the entire case and asked them to furnish the details of funding of clients through non-banking financial companies and their unexplained write-offs.

The Investigating agencies are enquiring about the illegal changes made on the NSEL platform.  NSEL alleged in their charge sheet that the brokers were involved in miss selling products of NSEL by deceiving their clients on the NSEL platform were found to be different from those on brokers’ records

Two years ago, three executives of leading brokerage firms Anand Rathi Financial Services, Geofin Comtrade and India Infoline were arrested by the economic offences wing of Mumbai police, and were later released on bail.

The ED registered a criminal case under the PMLA Act in 2013, to probe the case. So far, it has made an attachment of Rs 800 crore in the case. A supplementary charge sheet could be expected

SEBI To Take Action Against Brokers Involved in NSEL case

Sebi has been asked to take necessary action against the defaulting brokers in the nearly Rs 5,600-crore NSEL crisis while the Corporate Affairs Ministry and other agencies including the Enforcement Directorate are also investigating the case. The nearly Rs 5,600-crore payment and settlement crisis at the National Spot Exchange Ltd (NSEL) came to light in late 2013 and since then the matter has come under the scanner of multiple 

agencies. 

The Economic Offences Wing (EOW) of Mumbai police and the Directorate of Enforcement (ED) are also investigating the matter. Properties valued at Rs 5,757 crore (approximately) of the accused have been attached by EOW while 32 common properties valued at Rs 740 crore (by ED) and Rs 1,222.89 crore (by EOW) have been attached. Further, directions have also been given to the Securities and Exchange Board of India to examine and take necessary action against the defaulting brokers.

Warning call for Motilal Oswal

The Enforcement Directorate (ED) has issued another summon to Motilal Oswal, chairman and managing director of Motilal Oswal Financial Services, rejecting his request to be represented by one of the directors of the company.

The action taken after enforcement directorate asked him to appear before it on August 8. According to media reports Investigating agencies are inspecting broker’s role in the entire NSEL crisis and cross-verifying the evidences.

The ED has summoned nine brokers for questioning in connection with the National Spot Exchange Ltd (NSEL) money-laundering case. This is the first time that heads of brokerages such as Motilal Oswal Financial Services, India Infoline Commodities, Geofin Comtrade and Phillip Commodities are being called for questioning. It is alleged that broking firms where involved in misleading their clients. Recently, senior executives from broking firms were arrested by Economic offences wings (EOW) Mumbai police, in client code modifications. The names of clients on the NSEL servers were found to be different from those on brokers’ records.

A year back 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.

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 crores 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 involvement in duping their clients

The Economic Offences Wing (EOW) of Mumbai crime branch has mapped out the nature of the crimes committed by the 3 brokers arrested in the Rs 5,600 crore, National Spot Exchange Limited (NSEL) crisis. EOW investigations reveal that the 3 brokers, who were arrested on March 3, had allegedly given false information to investors and auditors of NSEL, and also allegedly traded on their clients' names without taking permission. In this way, these brokers had manipulated the trading volumes of the NSEL.

The EOW arrested Amit Rathi, Director of Anand Rathi Commodities Limited (ARCL); Cherassary Krishnan, Director of Geofin Comtrade; and Chintan Modi, Director of India Infoline Commodities Limited- 3 major brokers in the city.

How Anand Rathi Commodities Ltd. distorted facts?

As per media reports, Anand Rathi Commodities (ARCL) started trading on the NSEL platform in 2009, and presently has 12,900 clients. In the past four years, (ARCL) traded worth Rs 19,130.2 crore, which is around 16% of the overall turnout on the NSEL platform. It was also revealed during the investigation that ARCL had falsely assured investors that they (ARCL) had done the due diligence, and there were enough settlement guarantee funds, thus enticing them to invest in the NSEL products. (ARCL) also acted as clearing and forwarding agents, and gave NSEL auditors deceitful information that there were adequate goods in the warehouses. They should have carried out all the checks that were needed about availability of the stocks to protect the interest of their investors, but instead they gave them wrong information. Investigating officers believe that there was a connection between the defaulted members in the case and ARCL, based on some transactions that point towards such connections. EOW investigators also believe that ARCL masqueraded as its client to do large deals (this is known as UCC manipulation).  UCC manipulation (masquerading) was done rampantly from two conduit accounts without the consent of the account holder and commodities were bought without the consent of the clients, leading to unfair trade practices. Investigating officers suspect that ARCL carried out suspicious transactions of funding through multiple accounts, and to increase the volumes on NSEL platform, indulged in circular trading by transferring funds into various accounts of their own employees and relatives.

The court noted that Rathi was an authorized signatory to the bank accounts of ARCL and participated in board meetings, as per Economic Offences Wing (EOW) report. As per media reports, it is clear that Amit Rathi was fully aware of the notorious act and it sounds very suspicious that, Mr. Amit Rathi couldn’t whiff this. If Mr. Amit Rathi went scot-free then this will not only cause adversely effect on investors, but it will promote this unethical trade practices in the future.

How Brokers Misguided their Clients

The Enforcement Directorate (ED) had issued summoned to Nirmal Jain, the chairman and managing director of India Infoline Finance (IIFL) group, for questioning in connection with the National Spot Exchange Ltd (NSEL) money-laundering case.

Nirmal Jain

Brokers involvement in misguiding clients was raised by few clients such as Moti Dadlani ,Rita Vadodaria, and Achal Agarwal. On 18^th March 2015, Rita Vadodaria, client of Anand Rathi Commodities registered a fresh complaint against Anand Rathi Commodities.

Mr. Dadlani lodged a complaint against his broker and has alleged that his broker has defrauded money under his name. The broker deceptively; used Mr. Dadlani account and PAN details to invest huge amounts on NSEL.

As per media reports, ED said that they  are examining the broker’s role in the entire scam and asked them to furnish the details of funding of clients through non-banking financial companies and their unexplained write-offs.

The Investigating agencies are enquiring about the illegal changes made on the NSEL platform.  NSEL alleged in their charge sheet that the brokers were involved in miss selling products of NSEL by deceiving their clients on the NSEL platform were found to be different from those on brokers’ records

Two years ago, three executives of leading brokerage firms Anand Rathi Financial Services, Geofin Comtrade and India Infoline were arrested by the economic offences wing of Mumbai police, and were later released on bail.

The ED registered a criminal case under the PMLA Act in 2013, to probe the case. So far, it has made an attachment of Rs 800 crore in the case. A supplementary charge sheet could be expected

The NSEL crisis had led to a payment default of Rs 5,600 crore in July 2013, involving 23 Defaulters.

Mohan India Diverted Funds in Several Ventures

Jagmohan Garg

J S Srivastava

Delhi based Mohan India and its sister concern Tavishi Enterprises- led by Jagmohan Garg & J.S Srivastava as company’s director’s, are promoted by an influential business family from north-west Delhi. The group is one of the Defaulters in the NSEL case.

As per media reports , the company had bought  2,16,324 tonnes of sugar for Rs 605.2 crore during the year 2011-12.The total earned profit was approximately Rs.2,044 crore. During the recent NSEL crisis, Mohan India Group was one of the major defaulters of NSEL crisis. Close to Rs. 600 crore, out of Rs. 852 crore that they got, were paid to several unrelated bodies and  about Rs. 200 crore to related entities.

More appallingly, Jagmohan Garg,  had diverted investors monies to several ventures. Such as the five 5-star hotel – Radisson and,- real estate properties viz. Mera Baba Reality projects in Pitampura and Rohini and a lot more. Jagmohan Garg swindled these funds from these known related entities to unrelated entities.

As per Media reports, it is also said that the money was siphoned off after having been laundered. What emanated out of it was that all the money was directed to the political leaders, those who backed them. In October, 2013, Mohan India agreed to pay Rs.771 crore as final settlement, out of its combined obligation and the deal safeguarded by asset mortgages and penal clauses for the delayed payment obligations.

At present Mohan India is one of the largest defaulters of NSEL and Mr. Jagmohan Garg and Jai Shankar Srivastava have yet to honor their obligation. These habitual defaulters are using their clout to safeguard their ill-gotten assets from money laundered through the Exchange. But the law is catching up fast with such financial criminals and justice should be delivered soon.