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 5th 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.
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