ED Initiates PMLA Probe In Axis Mutual Fund 'Front-Running' Case, Conducts Multi-City Searches
The ED searches under the Prevention of Money Laundering Act were conducted in Delhi, Ahmedabad, Bhavnagar, Bhuj, Gurugram, Kolkata and Ludhiana, the sources said.
The Enforcement Directorate on Friday said it conducted searches in multiple cities after registering a money laundering case to probe an instance of front-running in scrips traded by Axis Mutual Fund during 2018-2021, official sources said.
Front-running refers to an unethical and illegal practice in the securities market where brokers or traders execute orders for their own benefit using advance knowledge of pending client orders. This malpractice compromises market integrity and disadvantages other investors.
The probe involves the role of Viresh Joshi, a former chief trader and fund manager of Axis Mutual Fund. The ED has been investigating this instance under the civil provisions of the Foreign Exchange Management Act since the Income Tax department conducted searches in this case in 2022.
The ED searches under the Prevention of Money Laundering Act were conducted in Delhi, Ahmedabad, Bhavnagar, Bhuj, Gurugram, Kolkata and Ludhiana, the sources said.
The money laundering case stems from a December 2024 FIR of Mumbai police which alleged that Joshi 'exploited' confidential information on the trades to be executed on behalf of Axis Mutual Fund, to pre-emptively trade stocks, generating substantial illicit gains.
"The accused has thereby cheated the investors of Axis Mutual Fund which hold assets under management of more than Rs 2 lakh crore," according to the ED.
The agency also suspects that Joshi had utilised a terminal in Dubai to punch the front-running trade orders through mule trading accounts obtained from various brokers.
Joshi has informed the probe agencies that many other traders/brokers also misused the advance inputs on Axis Mutual Fund Trades and indulged in front-running to generate illicit trade profits, which is nothing but proceeds of crime, according to the sources.
The proceeds of the fraud were funnelled through multiple shell entities and bank accounts beneficially owned by the accused persons/entities and their family members, which is under investigation by the ED, the sources said.
