A five rupee note played a crucial role in a Rs 1.3 crore-worth front-running racket run by dealers and authorised persons of broking houses.
The bank note was used to split the profits by the two masterminding the racket.
In an order dated April 26, the Securities and Exchange Board of India (Sebi) impounded unlawful gains of more than Rs 1.3 crore earned by front running trades of a big client of a brokerage, by the brokerage's dealer Ashok Maheshwari and his associates.
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His associates included Darshan Bakul Shah and CHL Stock Concepts, who are authorised persons of two other brokerages. Names of the brokerages were not revealed.
What was the role of the five-rupee note?
It acted as a sort of an ID proof.
According to Sebi's investigations, Maheshwari would pass on information about the big client's coming trades to Shah, who would then front run these trades through his family's and associates' accounts.
When it was time to split the profits, Shah would send Maheshwari's share through a cash courier. The five rupee note was shown by Maheshwari to identify himself to the cash courier.
As Shah told the regulator's officials, the "five rupees note was sent by Ashok Maheshwari from his mobile (no: 99XXX097XX) on Telegram for identification of himself as a receiver of cash via Ganesh, my employee."
He added, "I hand over cash to Ganesh and the above 5 Rupee Note image for identification of Ashok Maheshwari. Ganesh, handed over the cash to Ashok Maheshwari upon verifying the images with the serial number mentioned in the above images.…”
This method of using bank notes as an ID proof has been perfected by hawala operators. Currency notes are preferred for such transactions because they have a unique ID that is independent of the recipient and sender.
Unfortunately for Shah, he hadn't deleted the image of the currency note from his phone and the image was found by the Sebi's officials who later questioned him about it.
Another crucial piece of evidence that helped Sebi was the IP address through which Shah placed the orders. It shed light on the multiple accounts he was using to front run the trades, according to the regulator's findings.
The IP address was linked to his residential address. But orders were being placed from this address for Shah, for his family's HUF and for an otherwise unrelated company Benzer Department Stores.
The Sebi order stated, "In the present case, based on the digital footprint in form of IP address, it has been revealed that the Noticee no. 2 was executing trades in the accounts of Noticee no. 5. Thus, the technology has helped the investigative process, without which it would have been a little difficult to expose the well -knit scheme of executing trades in multiple accounts."
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