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.
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