The NSEL National spot Exchange Ltd scam or NSEL fraud is a systematic and premeditated fraud perpetrated in the commodity market on Jignesh Shah owned National Spot Exchange NSEL which is based in Mumbai , India.

The NSEL scam was a Ponzi scheme and is estimated to be a Rs. The Forward Markets Commission in July asked NSEL to stop all trades extending 11 days settlement which were illegal.

This led to less interest form investors and renewing their contract and the wheel of roll-over trades came to a halt as NSEL could not raise fresh investor funds to pay old investors whose funds were maturing. It was discovered after the exchange defaulted on 31 July that most of the underlying commodities did not exist and the buying and the selling of commodities like steel, paddy, sugar, ferrochrome etc.

Around 24 borrowers were given the funds by the NSEL, without any underlying commodity deposited by those borrowers. One of those borrowers who borrowed around Rs. An estimated number of investors, along with public sector units like MMTC and PEC, were victims of this NSEL scam.

The ROC report on NSEL fraud has come down heavily on the promoters and the FTIL, as it was found that a majority of minutes of meetings of the NSEL board were fabricated, as cell phone location data of the said board members did not match to the meetings' locations. Anjani Sinha, the sacked CEO and the MD of the company, attempted to take the blame for the fraud in order to exonerate other promoters, and filed an affidavit.

Anjani Sinha's wife, Shalini Sinha, though being a related party, traded on MCX for about Rs. However Anjani Sinha after arrest retracted his earlier affidavit and filed a fresh affidavit pinning the blame on the board of NSEL stating that they fully knew what was going on at NSEL.

He also claimed there was no financial dealing between IBMA and SNP designs whatsoever. Surprisingly Anjani Sinha whom the promoters blamed as the main culprit was kept with NSEL by Jignesh Shah for almost 12—13 weeks after the scam as a 'special office recovery' showing the collusion between the two. NSEL was promoted as a spot commodity exchange by FTIL and only token shares were given to NAFED so that the brand of NAFED can be used and the exchange could be touted as a 'farmer's market'.

Even before NSEL commenced business it was given a specific exemption from Forward Contracts Regulation Act FCRA by ministry of Consumer affairs in headed by Shri Sharad Pawar. This exemption was only for all one day forward contracts up to 11 days. Paul Joseph who signed this exemption later was known to have joined the FTIL group.

NSEL in applied to FMC for registration of these NTSD Non Transferable Specific Delivery paired contracts exceeding 11 days under section 14A of FCRA. The FMC did not approve or reject this application till the scam broke out in Without waiting for the FMC regulation approval or registration, NSEL went ahead and sold these contracts rampantly through brokers.

The FMC-Ministry of consumer affairs fully knowing these contracts were illegal they were collecting NSEL data from early did not stop them and let the scam balloon into an astronomical amount. In early the FMC was appointed as 'designated agency' to collect data from NSEL and protect investors' interest.

In April the Ministry of Consumer affairs issued a show cause notice to NSEL that it was violating the conditions of exemption like 'no short sale', 'no stock verification mechanism' and ' conducting trades beyond 11 days'.

So from early July the FMC knew about fraudulent NTSD contracts rampantly being conducted without registration under section 14AB of FCRA but for reasons unknown did not act. NSEL kept operating outside the realms of law and in March , it notched up a mind-numbing Rs.

The EOW Economic Offences Wing of Mumbai police is presently investigating this fraud and the Mumbai police has conducted various raids. Financial Technologies India Ltd, along with various other brokers allegedly involved in the fraud. On 9 October , Amit Mukherjee, the Assistant Vice-President Business Development of NSEL, was arrested by the EOW of the Mumbai police marking the first arrest in the scam.

Former CEO and MD, Mr. Anjani Sinha, was the third arrest in the case; he was arrested a week later on 17 October The EOW has since invoked the MPID Maharashtra Protection of Investors Deposit Act, under which it can attach properties and assets of the accused, for the interest of the investors. Nilesh Patel of NK Proteins Ltd.

Surinder Gupta of PD Agroprocessors who owns Dunar brand rice has been arrested by EOW on 5 March Gupta tried various delaying tactics with EOW, NSEL and investors. The EOW also arrested Rajesh Mehta of Swastik Overseas Ahmedabad who was one of the borrowers on 1 April On 6 January , the EOW of Mumbai's crime branch submitted its first chargesheet in connection with NSEL payment crisis. The chargesheet mentions the names of the following five accused:.

In October , EOW registered a case under the MPID Act in the NSEL scam. In the process, EOW attached defaulters' properties worth close to Rs. It has been going on since October last year. There have been numerous complaints from investors that the accused are moving around scot-free. We have increased the number of investigators, compartmentalized responsibilities, and given them a target of four months," Maria said.

The EOW arrested defaulter borrowers Nilesh Patel NK Proteins , Arun Sharma Lotus Refineries , Surinder Gupta PD Agro and Indrajit Namdhari Namdhari Foods. On 11 August , the EOW recently arrested the following officials from six defaulting companies on NSEL.

Rajvardhan Sinha, ACP, EOW of Mumbai Police said in an interview that the defaulters were not forthcoming with information pertaining to certain money flows, etc. The investigating official felt that custodial interrogation would help in tracing the fund flow. But most of the amount has been turned into assets," Rajvardhan added.

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The Economic Offences wing of Mumbai police finally arrested Jignesh Shah along with his trusted lieutenant Shreekant Javalgekar who were all along believed to be the masterminds of the scam on 7 May They diverted questions and always laid the responsibility on the former NSEL CEO although it was found that Jignesh Shah approved all the fraudulent contracts. The immediate cause of arrest of Jignesh Shah was his knowledge of various dealings of Indian Bullion Markets Association IBMA a subsidiary of NSEL which was predominantly used in money laundering and bogus trades.

The investors' counsel on 16 June produced before MPID court hard evidence of involvement of Jignesh Shah in the scam. Various emails sent among Anjani Sinha, Shreekant Javalgekar and Jignesh Shah were produced before the court where there was a talk about dehiring NSEL warehouses to remove cost burden, profit adjustment and bogus profits received from NK protein -one of the key borrowers at NSEL. It was also found that a group of companies called 'Rawal group' led by 'Dynamatic Developers Limited' traded on NSEL for crores and withdrew all investments before June just before the scam.

Another company Tezas Trading Limited also gave a 5 crore loan to NBHC National Bulk Handling Corporation Ltd. In a fresh FIR filed in Delhi it is proven that Jignesh Shah and his brother Manjay Shah were a part of the NSEL conspiracy where along with dodgy borrowers Mr. Jagmohan Garg of Mohan India here they deceived investors into putting money in NSEL sugar showing bogus warehouses and warehouse receipts.

While the NSEL management all along kept distancing itself from various defaulting borrowers, it was learnt that NSEL management was hand-in-glove with them. NSEL management made a last-ditch attempt to secure funds for the very defaulters who precipitated the Rs 5,crore fraud. Amit Mukherjee, AVP Business Development at NSEL negotiated a loan proposal on behalf of National Spot Exchange NSEL with Online Finance And Investment Pvt Ltd — a Chandigarh-based company.

Strangely, but NSEL tried to help the defaulting borrowers raise money almost to the tune of Rs crores by acting as a guarantor in the last week of the scam. The NSEL investors association has alleged slow investigation by Mumbai police, purposely going slow on FTIL group,Auditors of NSEL,defaulting borrowers and brokers who sold the ponzi scheme.

It is being alleged that the data of crashed email server of FTIL-NSEL was not purposely being recovered by Mumbai police. It is alleged that EOW wing of Mumbai police is not acting on inputs and no action has been taken on key FTIL directors like Devang Neralla, Paras Ajmera, manjay Shah etc. There are serious allegations on Mumbai Police EOW of tampering with NSEL-FTIL email servers maintained by Pratap Polkam of FTIL. Ketan Shah the man leading NSEL investors' association NIAG has leveled charges on the investigating agencies of misleading the court.

India's premier investigation agency The Central Bureau of Investigation raided various NSEL and borrowers' offices as well as the residence of Jignesh Shah and booked an FIR under prevention of corruption act for the funds that MMTC and PEC -two public sector units were made to invest in NSEL. The fraud by a group of people resulted in an alleged loss of Rs.

The CBI agency conducted simultaneous searches at 11 locations, including offices of brokers, PEC officials and traders in New Delhi and Karnal. The CBI also registered a case against certain officials of PEC on allegations that the accused were party to a criminal conspiracy to cheat PEC. Kirit Somaiya — former BJP MP and President of Investors' Grievances Forum — had filed a Public Interest Litigation PIL in the Bombay High Court on 30 August seeking a CBI probe into the alleged refusal by NSEL to pay dues to 17, small investors.

A bench headed by Justice PV Hardas then allowed the Petitioner Ketan Tirodkar to withdraw the PIL as his request for a CBI probe had been considered.

In a show cause notice, on 27 April , based on the data provided by the Forward Markets Commission India , the Ministry of Consumer Affairs asked the NSEL to answer why legal proceedings should not be carried out against the company given it was conducting illegal trades, and that there the company did not provide any apparent mechanism to verify commodity stocks.

The lack of early government intervention allowed the scam amount to balloon to Rs. The FMC also has played a dubious role in the scam as the ex chairman of FMC Mr.

Khatua whose son is employed with FTIL group knew about NSEL's application for registration of NTSD paired contracts but neither accepted nor rejected them. The dubious exemption to NSEL from FCRA was given in within weeks of Mr. Khatua assuming office when the Ministry of Consumer Affairs was headed by Sharad Pawar. Venkat Chary also works for FT group raising doubts about the working of FMC and their possible complicity collusion in NSEL scam.

It has been claimed that heavy political maneuvering was done by Jignesh Shah with various government entities to keep this SCN in abeyance and that cost the investors their hard-earned money.

Interestingly, a committee headed by Shri Arvind Mayaram suggested that the entire system was an 'unregulated exchange' and the HNIs High Net-worth Individuals invested with open eyes, pointing out the scam was the fault of the investors. However, the committee ruled so ignoring the role of FMC - the designated agency to supervise NSEL from early It does not even mention that the NSEL has in already applied for registration of NTSD contracts.

Apparently, FMC was aware of 'NBFC like activities' going on at NSEL and it is also claimed that FMC declined to file FIR against NSEL in spite of being aware of SGS finding that there were not enough commodities in the NSEL warehouses. A formal complaint against the role of officials of FMC and Ministry of Consumer affairs has been filed with CBI by NSEL Investors' Action Group NIAG.

A panel of high-level officials, and headed by the Economic Affairs Secretary Arvind Mayaram, submitted to the Finance Minister P.

Chidambaram its report on the alleged irregularities at the NSEL. However, the report did not reveal key shortcomings and acts of omission and commission by the bureaucrats of DCA and FMC was claimed to be more of a cover up. At the behest of the Forward Markets Commission FMC , the NSEL asked Grant Thornton to conduct a forensic audit of the books of NSEL.

The report, though not complete and with insufficient cooperation from NSEL, brought out various glaring irregularities. On the basis of the Grant Thornton report, the FMC served a show cause notice to the promoters of NSEL about their 'fit and proper' status to run exchanges. There are still wide differences between the books of the NSEL, and those of the most borrowers. The Grant Thornton report also pointed out how Mr.

Anjani Sinha wrote an internal email to stop using IBMA for rigging MCX prices, and to use SNP Designs P Ltd his wife Shalini Sinha's company to conduct proprietary speculative trades on the exchange. Subsequent to a court petition by some investors of NSEL, FMC has been directed by the Mumbai High Court to conduct a forensic audit of Eseries bullion contracts of NSEL.

After petitions from certain NSEL pair trade investors, the Bombay high court directed the FMC to appoint a forensic audit of Eseries products of NSEL. An audit firm by the name of Choksi and Choksi was given this assignment and their audit report has damning revelations against the promoters and FT group. Surprisingly these irregularities were never plugged and this report never finalized. The FMC also asked PWC to conduct an audit of MCX where after the audit a lot of related party trades and other deviations were found which raised serious questions about the integrity and functioning of the FTIL group.

It was learnt that MCX paid Rs 2. NSEL also appointed SGS to carry out quantity and quality inspection of the commodities lying in various warehouses. The audit indicated that significant stock shortage was found in 9 warehouses relating to 7 defaulters.

In respect of 29 warehouses relating to 11 defaulters, the SGS audit team was not allowed inside the premises. The EOW Wing of Mumbai police filed an FIR against all the directors of the NSEL and Financial Technologies India Ltd including Jignesh Shah, Joseph Massey and Shreekant Javalgekar.

Jignesh Shah who were present in all the crucial meetings, including the ones where fraudulent pair trade contracts were introduced, and money was allowed to be sanctioned to NK Protein Ltd. It is worthy to note that the owner of NK protein Ltd is also the son-in-law of the then Chairman Shankarlal Guru.

The FMC in their show cause notice, and the Registrar of Companies ROC in their interim report, have held the promoters including Mr. Jignesh Shah, squarely responsible for the fraud. Jignesh Shah also came on TV on 5 August , and promised a financial settlement. Interestingly, he said, "What will investors do with commodities, that's why we have decided to go for financial settlement" — which made people believe that he knew there were no underlying commodities in the NSEL warehouses, contrary to what was shown on the NSEL website.

Jignesh Shah also promised a committee of three to look into the scam. The committee was to include the retired police commissioner Sivanandan, but it was merely a whitewash and was never formed. It seems most exchanges being run and promoted by FT group have been mired in mismanagement, fraud and deceit. Soon after the news of the scam broke, FTIL claimed that the server that housed sensitive data related to the company has crashed.

This seems more like a planned move on the part of the promoters. The FMC also held FTIL, Jignesh Shah, Shreekant Javalgekar and Joseph Massey to be complicit in NSEL fraud and not 'fit and proper' to run any exchange in India. The latest revelations from EOW investigation and the police charge-sheet on Jignesh Shah confirm that a company associated with Jignesh Shah pulled out its money just before the exchange went bust. Jignesh has been charged with insider trading on NSEL and also MCX exchanges.

It was explicitly clear that these contracts were mere bogus contracts and the monies generated from investors will have to be given back to NSEL. This clearly underlines FTIL's complicity in the fraud. The economic offences wing EOW of Mumbai Police has found evidence of some irregularities on the part of the brokers in the National Spot Exchange Ltd NSEL scam.

An interim report on the police's forensic audit had thrown up evidence of hawala transactions, benami trades and client code changes at some of the brokers. The interim report also states some of the brokers were aware of the impending danger at NSEL; the EOW found volumes of the spot exchange saw a sudden fall in April and May The report mentions evidence of illegal and unauthorised changes at the back-end of NSEL severs, where brokers may not have any control.

The names of clients on NSEL servers were found to be different from those in brokers' ones. The NSEL brokers have been charged by investors with giving away their clients' monies without even securing the title of the goods i. The NSEL Investors' Action Group NIAG — a forum of NSEL investors has alleged that top brokers involved in NSEL scam have been privy to the scam from earlier. NIAG, in a letter to Mumbai police, has requested them to take strict action against brokers involved in the scam.

It is alleged that in criminal breach of trust the brokers parted with investors' monies without securing these warehouse receipts as promised," said the NSEL investors in a letter to the Commissioner of Mumbai Police. It is also alleged that the brokers charged warehouse receipt transfer and delivery charges when actually there was no underlying delivery of goods and warehouse receipts.

The investors' association also charged the brokers for falsely assuring them of NSEL being a regulated exchange and that their investment was secure. Besides, the Hon'ble Bombay High Court observed that "…brokers do have their own legal team and a full knowledge of how the market operates. The legalities of the transactions were quite expected to be known to the brokers … the brokers being quite experienced, and the investors being informed persons, it is apparent that the issue of illegality of the transactions raised by them is not out of their concern to adhere to legalities, but in order to project the applicant as the main offender, rather than the defaulting parties.

The EOW wing of Mumbai police on 3 March arrested 3 top brokers in NSEL scam. Those arrested were Amit Rathi, managing director of Anand Rathi Financial Services Ltd; C P Krishnan of Geojit Comtrade Ltd; and Chintan Modi of India Infoline Ltd IIFL. The three have been charged with mis-selling NSEL products, cheating, forgery and criminal conspiracy, among other charges.

The Securities and Exchange Board of India has formed a probe team to investigate the role of brokers in NSEL scam. Mukesh P Shah who is a maternal uncle of Jignesh Shah has been internal as well as external auditor of NSEL from time to time.

Mumbai police while opposing his anticipatory bail confirmed that he was doing insider-trading in FTIL shares and by virtue of possession of FTIL shares alone he should have been disqualified as an auditor. Besides,Mumbai police has confirmed that most companies of 'Rawal Group' where La Fin Financial Services P. In a custodial statement to the EOW authorities, Anjani Sinha the former CEO and MD of NSEL put the blame squarely on Jignesh Shah and charged him as the mastermind of the whole conspiracy.

Jignesh also fraudulently misused the name of NAFED a semi government organization by just giving them shares without representation and claimed them as a co-promoter to induce investors. Anjani in his statement also claimed that his boss Jignesh Shah forcibly took away the passports belonging to him and his wife and made them sign forcibly confessional statements which were actually drafted by FTIL legal team.

In his statement Anjani confirmed that Jignesh Shah, Manjay Shah Jignesh Shah's brother , Shreekant Javalgekar, Mukesh P. Shah Jignesh's uncle and auditor of NSEL were fully aware of the NSEL scam and he was merely made a scapegoat. The investors of NSEL formed an organization by the name of NIF in the month of August However investors who were dissatisfied with brokers' role in NIF formed a pure investors' organization by the name of NIAG NSEL Investors' Action Group.

NIAG has submitted a strong letter to the EOW Mumbai to investigate the role of Jignesh Shah and FTIL. On 21 October the Ministry of Corporate affairs announced a draft order for merger of NSEL which is the subsidiary company with its holding company, viz.

The govt by announcing this merger has exercised its power under sec. All stakeholders have been given 60 days to report to MCA and the order may get finalized after this. As of now FTIL has challenged this merger in Mumbai HC and the last date of merger allowed by Mumbai HC is 31 October In October, the court had set December 31 as the deadline.

The Bombay High Court has extended the deadline till February 15 for the Union Ministry of Corporate Affairs MCA to pass the final order for the merger of the National Spot Exchange Ltd NSEL with the Financial Technologies India Ltd FTIL. Hearing an application filed by the government, the Bench comprising Justices SC Dharmadhikari and BP Colabawala said time until 15 February is being granted, but with the condition that there will be no further extension.

The order was sigend by Shri Pritam Singh Additional Secratry to Ministry of Corporate Affairs. This order has been challenged by FTIL in Mumbai High Court and it is stayed till the arguments will be heard on merit. On 28 February ,The ministry of corporate affairs convinced about FTIL's fraudulent activities, moved a CLB application to take over the board of FTIL and replace it with govt.

This move is being contested by Jignesh Shah appointed FTIL board.

On 30 June the Company Law Board CLB barred FTIL from selling its assets. FTIL got a stay from Chennai High Court on this CLB order. On 19th April Supreme Court of India reversed this stay and froze all assets of FTIL barring day to day expenses [40]. FIU under Finance Ministry held that NSEL came under the purview of Forward Contracts Regulation Act FCRA and therefore guilty of failing in several of these obligations under the law. The black money watchdog has slapped a penalty of Rs 1.

The watch dog further held that failures is deliberate and willful and hence, invite penalties. NSEL is fined Rs.

The ED has attached properties worth around crores in NSEL scam. On 13 July the ED arrested Jignesh Shah under PMLA Prevention of Money Laundering act. The Serious Fraud Investigation Office has been asked by the MCA to investigate NSEl scam and investigation is in progress. It was discovered that even 15 months before the NSEL scam went public, India's leading financial journalist Sucheta Dalal knew all major aspects of the fraud.

An email dated 8 May from Sucheta to Jignesh Shah, Anjani Shah etc came in public domain which revealed that Sucheta knew about illegality and lack of safety of NSEL product. A complaint has been filed with Mumbai police by NSEL Investors' Action Group to investigate Sucheta Dalal's role.

Sucheta knew about illegality of contracts, role of IBMA and the fact that the warehouses were in so called borrowers' own premises. The CBI has filed a chargehseet against FTIL , Jignesh Shah, NSEL and various shell companies in NSEL scam matter. The chargesheet of EOW also says Jignesh Shah connived with perpetrators of NSEL crime looking at NSEL profitability.

Jignesh Shah was fully knew about lack of stocks at NSEL and also insider trading took place on NSEL. From Wikipedia, the free encyclopedia. Retrieved 8 October Rajvardhan, Additional Commissioner of Police, EOW, Mumbai".

Summary of all scams in India since - sotoyege.web.fc2.com

CBI searches 15 locations to probe fraud on PEC". Cover-up of a cover-up! Around Rs crore spent in transactions with hundreds of related parties, finds PwC audit , MCX row: Retrieved 25 September Retrieved from " https: Commodity exchanges in India Finance fraud Pyramid and Ponzi schemes.

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