Jignesh Shah Arrested in NSEL Scam

Financial Technologies India Ltd (FTIL) chairman and former National Spot Exchange Limited (NSEL) director Jignesh Shah has been arrested by the Mumbai police in connection with a multi-crore payment scam at the FTIL-owned commodities exchange.

The Mumbai Police's Economic Offences Wing (EOW), a specialised unit that deals with financial crimes, also arrested FTIL's chief financial officer, Srikant Javlekar, in connection with the case.

Both Mr Shah and Mr Javlekar have been booked for cheating and forgery under sections of the Maharashtra Protection of Interest of Depositors (MPID) Act. While the case was registered in September last year, the police took over nine months to arrest Mr Shah, who is now being seen as the chief conspirator.

While Mr Shah has been interrogated earlier, he was arrested due to his evasive and uncooperative stance. The police say that is why they need to interrogate him in custody.

Speaking to reporters, EOW Additional Commissioner of Police Rajvardhan Sinha said, "We have been investigating this case for the past few days, and have found that they are involved in criminal conspiracy."

"Instead of running the organisation as an exchange process, it has been run on non-banking regulations and has caused the investors to foot a loss to the tune of Rs 5,600 crore."

According to the police, Mr Shah masterminded the entire scam and engaged in a criminal conspiracy with the co-accused to make NSEL function as a non-banking institution. So far, 11 people have been arrested by the police in the case.

But investors may not get any relief soon.

Mr Sinha explained, "Jignesh Shah has converted most of the stolen money into shares and therefore it will be premature to gauge the amount of money that can be recovered as the market value of shares keeps fluctuating."

"Just after the commencement of this investigation, we froze Mr. Shah's demat, real estate and bank accounts."

The police, however, say that Rs 5,100 crore has been securitised as seizures in the case have been made under the Maharashtra Protection of Interest of Depositors (MPID) Act. This money will be disbursed to the investors on pro rata basis.

Investigations revealed that the exchange operated an elaborate money lending machine under the garb of a commodity bourse. The probe into the scam showed that investors were taken for a ride as commodity stocks were missing in most cases.

On September 30, 2013, one of the investors had filed an FIR against the directors and key management persons of NSEL for cheating, forgery, criminal breach of trust and conspiracy.

The FIR stated that the accused hatched a criminal conspiracy to defraud the investors and misrepresented that they were investors and induced them to trade on the platform of NSEL by creating forged documents like bogus warehouse receipts thereby defrauding the clients.

Mr Shah, who was also the director of NSEL and a member of the audit committee of the exchange, approved all the borrowers at NSEL. The accused conspired in a criminal conspiracy to make NSEL a non-banking institution, the police said.

In January, the Mumbai police had filed a charge sheet under various sections of the IPC and also under certain provisions of the Maharashtra Protection of Interest of Depositors (MPID) Act.

Financial Technologies India Ltd (FTIL) chairman and former National Spot Exchange Limited (NSEL) director Jignesh Shah has been arrested by the Mumbai police in connection with a multi-crore payment scam at the FTIL-owned commodities exchange.

The Mumbai Police's Economic Offences Wing (EOW), a specialised unit that deals with financial crimes, also arrested FTIL's chief financial officer, Srikant Javlekar, in connection with the case.

Both Mr Shah and Mr Javlekar have been booked for cheating and forgery under sections of the Maharashtra Protection of Interest of Depositors (MPID) Act. While the case was registered in September last year, the police took over nine months to arrest Mr Shah, who is now being seen as the chief conspirator.

While Mr Shah has been interrogated earlier, he was arrested due to his evasive and uncooperative stance. The police say that is why they need to interrogate him in custody.

Speaking to reporters, EOW Additional Commissioner of Police Rajvardhan Sinha said, "We have been investigating this case for the past few days, and have found that they are involved in criminal conspiracy."

"Instead of running the organisation as an exchange process, it has been run on non-banking regulations and has caused the investors to foot a loss to the tune of Rs 5,600 crore."

According to the police, Mr Shah masterminded the entire scam and engaged in a criminal conspiracy with the co-accused to make NSEL function as a non-banking institution. So far, 11 people have been arrested by the police in the case.

But investors may not get any relief soon.

Mr Sinha explained, "Jignesh Shah has converted most of the stolen money into shares and therefore it will be premature to gauge the amount of money that can be recovered as the market value of shares keeps fluctuating."

"Just after the commencement of this investigation, we froze Mr. Shah's demat, real estate and bank accounts."

The police, however, say that Rs 5,100 crore has been securitised as seizures in the case have been made under the Maharashtra Protection of Interest of Depositors (MPID) Act. This money will be disbursed to the investors on pro rata basis.

Investigations revealed that the exchange operated an elaborate money lending machine under the garb of a commodity bourse. The probe into the scam showed that investors were taken for a ride as commodity stocks were missing in most cases.

On September 30, 2013, one of the investors had filed an FIR against the directors and key management persons of NSEL for cheating, forgery, criminal breach of trust and conspiracy.

The FIR stated that the accused hatched a criminal conspiracy to defraud the investors and misrepresented that they were investors and induced them to trade on the platform of NSEL by creating forged documents like bogus warehouse receipts thereby defrauding the clients.

Mr Shah, who was also the director of NSEL and a member of the audit committee of the exchange, approved all the borrowers at NSEL. The accused conspired in a criminal conspiracy to make NSEL a non-banking institution, the police said.

In January, the Mumbai police had filed a charge sheet under various sections of the IPC and also under certain provisions of the Maharashtra Protection of Interest of Depositors (MPID) Act.

Amongst those charge sheeted were CFO Anjani Sinha, two vice presidents - Amit Mukherjee and Jay Bahukhundi - and two borrowers of the beleaguered exchange - NK Proteins managing director Nilesh Patel and Arun Sharma, a film financer and chairman of Lotus Refineries. The other six arrests have been made this year.

Police say borrowers and brokerage houses are on their radar and might be arrested in the course of the investigation.

"Many brokerage houses issued fake warehouse receipts. They had also accessed the accounts of their clients without their consent to perform transactions. These houses are under scrutiny," Mr Sinha added.