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Home / Market / Stock-market-news /  We want to understand conspiracy angle in NSEL case: Rajvardhan Sinha

Mumbai: The 5,574.35 crore payment crisis at the National Spot Exchange Ltd (NSEL) has seen the arrest of several executives allegedly involved in it, the seizure of properties, including those of the exchange’s controversial promoter Jignesh Shah and even a class action suit.

All that in Act 1.

Now the economic offences wing (EOW) of Mumbai police will fix liabilities of those who have been named in the complaint, but against whom charges are yet to be pressed, EOW additional commissioner Rajvardhan Sinha said in an interview: Edited excerpts:

EOW has already filed charges in the NSEL case. What is the focus of its investigations now?

During the initial investigations, our primary objective was to recover as much money as possible. So far we have recovered 4,500 crore worth of properties.

Now, our focus is to probe the role of people linked to the scam who have been named in the FIR (first information report) and have not been arrested. We also want to understand the conspiracy angle, to find the money trail and recover the remaining amount that has been lost by investors. The probe will cover the promoters of NSEL, its management, its brokers and the defaulting members.

What is the role of brokerages in this payment crisis at NSEL?

We have just summoned some of the brokerages and started studying their books of accounts.

We have analysed the data we got from the NSEL servers and have found that some of them have carried out transactions from their personal accounts while others have indulged in circular transactions. In such transactions, the brokers have carried out the transactions in their personal accounts and then transferred it to the clients’ account.

Will you seek the help of Securities and Exchange Board of India to fix the liability on brokerages?

In case we find any discrepancy where a broking house has breached the so-called code of conduct which they are bound to follow, then we will surely report it to the markets regulator for further action.

How did you go about discovering the money trail in this case?

We have taken the help of our forensic accounting team to unravel the money trail. They have gone through the books of accounts of NSEL and its borrowers along with the transactions in their bank accounts.

When you call it a 5,600 crore case, we want to know where has the money gone? Who are the ultimate beneficiaries ?

It’s only because of the money trail we have been able to identify properties bought out of ill-gotten money and attached them. We are very much aware of where the money has gone and have been attaching properties to recover it. Beyond this I won’t be able to comment on this issue as the investigation is yet not complete.

What is the role of promoters and the board of NSEL in this crisis?

This is a part of our current investigations. So at this juncture, I won’t be able to comment on it.

Is this a case of wilful fraud or is it a case of things falling apart because of excessive greed of the several parties involved?

It is a combination of both. Because wilful fraud comes when you have greed to make more or fudge the figures to show that the exchange is growing hugely. It is also greed on the part of borrowers knowing well that it was a spot exchange—but still taking the money as it was coming easily to them and growing their business with the ill-gotten money. Some of the brokerages knew about the happenings at the exchange but they were still selling contracts to the investors to earn commissions.

Have you concluded that brokerages were aware of the unfolding crisis at NSEL?

When you promote it to a client as a safe investment with a fixed rate of return, then definitely such promotion leads to a notion that you are investing in a kind of instrument that is not a spot exchange. So if the brokerages promoted it like that then one definitely gets an impression that they were aware of the happenings at the exchange. Some of the brokerages have shown such things in their brochures and power point presentations.

What are the chances of recovering the money?

Roughly 262 crore has been put in the escrow account of NSEL. We have frozen the bank accounts and shares worth 300 crore. Apart from that we have attached roughly 4,040 crore worth of properties of which the real valuation has not yet been done. As per the Maharashtra Protection of Interests of Depositors Act, once the properties are auctioned and money is liquidated, investors can get their money back.

What allegations against the brokers can lead to attachment of their assets?

If we find that the ill-gotten money which rightfully belongs to the investors has gone into the accounts of the brokers and are able to trace it, then it will lead to attachment of assets.

In the future can we see EOW fixing the liabilities on the promoters and brokers of NSEL?

Definitely. Since we have taken the investigation forward, it means that the people who have been mentioned in the FIR and who have not yet been chargesheeted. Their liabilities will be fixed in the next chargesheet.

What was the most difficult aspect of this investigation?

The investigation is not yet over, but the most difficult part for us police officers was to understand how an exchange works, what a spot exchange is, and (how) the transactions happen. We took the help of certain chartered accountants to understand forward contracts, the role of a spot exchange and the manner in which profits are generated by an exchange. Once we understood what T+2 and T+30 are and how transactions happen, everything fell in place and we were able to proceed and apply sections of law to it.

Has there been any shift in the pattern of economic crimes in the last few years?

Economic crimes will only increase in the future. One thing is for sure that when there is a stagnation in the economy then a tendency to defraud increases. Similarly, in the age of e-commerce, transnational crimes and white collar crimes have increased.

Crimes related to multi-level marketing have increased and it is difficult to control them because the servers are located abroad and money is wired outside. In 2013 the total amount of money involved in the complaints made to EOW was 8,900 crore and over past three years the total money involved in various economic crimes which have been reported to EOW Mumbai is 14,500 crore.

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