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NSEL scam | Anjani Sinha's arrest: How things unfolded

The Central Bureau of Investigation, Serious Fraud Investigation Office and Enforcement Directorate have been investigating the NSEL scam.

January 18, 2021 / 10:47 PM IST
Representative image

Representative image

The economic offences wing (EOW) of the Delhi Police has arrested Anjani Sinha, the former managing director of National Spot Exchange Limited (NSEL), on January 17 evening for fictitious trading on the exchange, and creating false stocks. Seven years after the NSEL scam broke out, the Delhi Police expedited investigation into this case.

The NSEL scam shocked every segment of investors in the market when it was unearthed in 2013. Even today, the aftershocks can be felt.

Sinha, the former managing director of NSEL, was arrested by Delhi Police following a case registered by the EOW in 2015 on a broker’s complaint.

Anjani Sinha was reporting to Financial Technologies (now 63Moons) promoter Jignesh Shah before the scam broke out. Shah had valid reasons for liking him since he was giving a robust return on investment,  especially at that time when other exchanges like the Multi Commodity Exchange (MCX) were facing commodity transaction tax pressure.

According to Delhi Police, during the interrogation, Sinha disclosed that he used to report to Shah, who was the group MD and chairman. "Shah was very desperate to generate profit in the subsidiary companies. He devised the introduction of a new business concept in the NSEL, even violating conditions of the licence of NSEL given by the Ministry of Consumer Affairs," according to a statement issued by the Delhi Police.

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The Central Bureau of Investigation (CBI), the Serious Fraud Investigation Office (SFIO) and the Enforcement Directorate (ED) have also filed chargesheets this case. Now,  the ED and the Economic Offences Wing (EOW) of Mumbai Police are close to filing the final chargesheet in this case.

Anjani Sinha worked with Shah for more than seven years, prior to which he had worked with Ahmedabad Stock Exchange and Baroda Stock Exchange.

However, 63Moons has refuted allegations that Sinha was close to Shah. “At the time, 63 moons had 9 multi-asset class exchanges in India and overseas, and many subsidiaries, which were overseen by separate managing directors who were all stalwarts in their fields. Also, once the crisis was unearthed at the exchange, 63 Moons was the first to file a criminal complaint against Anjani Sinha,” the company said in a response to Moneycontrol.

The company added that NSEL contributed only a small share of 63Moons’ (then known as FTIL) revenues. “NSEL’s contribution in the standalone total revenue of 63Moons was only 7.3 percent during FY12-13, while NSEL’s contribution in the standalone total income was just 5.25 percent during the same period,” it said.

NSEL was the platform where investors got assured returns of 15 to 18 percent. NSEL was executing a forward contract which was more than T+25. As per regulations, only T+10 was allowed. However, commodity market regulator Forward Markets Commission banned this product after it was appointed as the designated regulator. So, NSEL was not able to give the money back.

According to 63Moons, the NSEL has never offered assured returns on its products. “The exchange, on the contrary, had sent out circulars directing brokers not to give any advertisements or make such claims of assured returns. The blame rests sorely on the brokers who had miss-sold the product despite the circular to the contrary,” the company said in its response.

“There was no specification in the exemption that contracts beyond T+10 were not allowed, because NSEL was allowed to launch Forward Contracts by virtue of Exemption Notification June 5, 2007, which by definition are settlements beyond 11 days. That is, in trade parlance, T+11 and above. The show-cause notice on the duration of the contract is not adjudicated yet,” the statement read.

“The fact is that NSEL, with the help of 63Moons has been continuously striving to recover the default amount from the 22 defaulting entities, which has resulted in obtaining the decree of Rs 3,365 crore and crystallization of liability by High Court Committee to the tune of over Rs 900 crore, which is pending confirmation by the Honourable Bombay High Court, and an injunction of Rs 4,515 crore. This entire process has been due to single-handed effort of NSEL and 63 Moons,” the company statement further added.

After defaulting on payment by NSEL, brokers and investors rushed to investigation agencies. Subsequently, the Mumbai Police EOW registered a case against 63Moons, Shah and brokers and arrested Shah, Amit Rathi from Anand Rathi group, Chintan Modi (IIFL) and CP Krishnan from Geojit.

The FMC issued a ‘not fit and proper’ order for 63Moons for running exchanges and merger of NSEL with FTIL. However, after a long fight FTIL has got a favourable order from the Supreme Court.

According to sources, around Rs 5,600 crore of investor money is stuck in this scam.

(This story has been updated with 63Moons' response)

 
Tarun Sharma
first published: Jan 18, 2021 09:04 am

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