The agency is also investigating plans by the two to list companies.
The Enforcement Directorate (ED) has found evidence that Mehul Choksi and Nirav Modi diverted money to related companies.
The ED has also traced some of the money being routed back to the banks for re-issuing letter of undertaking, or LoUs.
Separately, the Directorate is also investigating the planned listing of Mehul Choksi's Nakshtra World, and Nirav Modi's Firestar International.
“Both Nirav Modi and Mehul Choksi have been using this facility from 2010 and diverted funds to different related companies. And some of the amount came back to bank also for further re-issuing LOU,” an official from the ED told Moneycontrol.
Initially, sources added, the LoUs were taken for 90 days. Later, these were extended for 365 days.
"These companies were issued LOUs even before clearing the earlier ones. They used the new ones to settle old LoUs. In this process, rest of the amount was diverted to their companies, and they benefited from interest arbitration," said sources quoted above.
ED officials hope to get further information on the transactions as these were done via banking channels and could be traced.
At the same time, as most of the money was diverted to companies based overseas, the ED is coordinating with other countries. "We are waiting for their reply," an official said.
While Choksi planned to list Nakshtra World in 2017, his nephew also had similar plans for his Firestar International.
The ED is now investigating if the funds from the IPO were to be used to repay banks. Also, merchant bankers handling the listings may come under the scanner for not detecting the outstanding LoUs.“The delay by the Securities and Exchanges Board of India in approving the listings, spoiled the game of these fraudsters,” said the official.