The arrest comes as the police are to submit an action-taken report against National Spot Exchange, its associates and its directors before the Bombay High Court tomorrow. "Sinha was arrested in the Rs 5,600 crore NSEL fraud today.
He had full knowledge of the wrongdoings that were happening for the past few months or years. All managerial decisions were taken with his permission and he even received kickbacks from the defaulting companies," Deputy Police Commissioner at the Economic Offences Wing of Mumbai Police, Balsingh Rajput, said this evening. The police also invoked the provisions of Maharashtra Protection of Interest of Depositors Act of 1999 against all the accused. "The MPID Act gives power to the investigators to attach the accused' properties," Rajput said. "Sinha's interrogation began in the morning and his role was very clearly established in the scam following which we placed him under arrest," said an officer.
Yesterday, Sinha was grilled by Enforcement Directorate which has registered preliminary inquiry under the Prevention of Money Laundering Act, suspecting large-scale money laundering in NSEL. Sinha had a mercurial rise and was no stranger to controversies. According to sources, Sinha had a chequered past with his name being dragged into several cases earlier, especially in the Ahmedabad and Magadh stock exchanges controversies in 2003 and 1997 respectively, when on both the occasions he was sacked by the market watchdog Sebi. Sinha, who joined MCX on June 2003, had a rapid rise in the Financial Technologies Group, promoted by Jignesh Shah. He was a key player in setting up of MCX. He was designated as CEO of MCX initially for a brief period and subsequently made the director of business development at the exchange in 2005. He played a key role in conceptualising the business model of National Spot Exchange too. He was made MD and CEO of NSEL in 2011.
The crisis at NSEL began on July 31 when government ordered shutdown of some of its products. Sinha's role was under the scanner since then, investigators said. Indian Bullion Market Association, which is 60 per cent owned by NSEL, had earlier entered into agreement with SNP Designs, Sinha's own firm. In spite of losses, trading on behalf of SNP was allowed to continue and no margin money was ever taken from SNP, according to investigation sources.