ED: Jignesh Shah was the brain behind NSEL scam

Jignesh Shah founder of Financial Technologies India Ltd FTIL mdash promoter of National Spot Exchange Limited NSEL laundered the illgotten wealth he made by duping NSEL investors of Rs 5600 crore by buying private property the Enforcement Directorate ED told the PMLA court yesterday Seeking his custody the agency said the ldquoproceeds of the crimerdquo provisionally attached during investigations amounted to Rs 837 crore Shah was arrested on Tuesday after 10 hours of questioningJignesh ShahThe architectThe ED said the NSEL and the FTIL were effectively under Shahrsquos control at relevant times and he was one of the main architects of moneylaundering activitiesSister subsidiaries of Shahcontrolled companies were created to route the proceeds of the crime and keep his firms untainted it addedIt charged Shah with being the brain behind multilayered interconnected transactionsAccording to the agency NSEL its directors and office bearers hatched a criminal conspiracy to defraud investors convinced them to trade on NSELrsquos platform prepared bogus warehouses receipts and falsified accounts thereby breaching the trust of nearly 13000 investors and duping them of Rs 5600 croreED sought Shahrsquos custody to unearth and trace the trail of siphoned funds Defence counsel Aabad Ponda claimed that Shahrsquos arrest was illegal ldquoShah is already listed as an accused by the agency in their complaint filed before the court last year The court had issued summons and in the last hearing he was exempted from appearance and was directed to appear before the court on June 18 for his bail hearing However while the judicial process was on the agency arrested him for the same charges in the case This is illegalrdquo he saidSpecial public prosecutor Hiten Venegaokar however said this is a separate case ldquoThis case pertains to the money laundered by Shah which he earned through the NSEL platform and transferred to his various companies in a layered transactionrdquoThe court remanded Shah in EDrsquos custody till July 18How the money was madeED investigations have revealed that 15 defaulting members had obtained huge funds from NSEL by trading against fictitious stocks of commodities like sugar rice TMT bars chrome castor oil cotton and wool Fake receipts of the goodscommodities being deposited in NSEL godowns were generated Such nonexistent goods were then sold on the exchange and the funds derived from such fraudulent sales were siphoned offThe defaulting members admitted in their statements before the ED to having launched contracts on the NSEL portal without having stocks of their respective commodities and collected huge funds with the connivance of NSEL employees ED found that NSEL directors management personnel and other employees helped these members to launder the moneyThe nexusDuring their investigation ED officials noticed certain irregularities in transactions between Indian Bullions Marker Association IBMA a stepdown subsidiary of FTIL and certain defaulters of NSEL The agency believes that dubious entries were made to siphon off money from the NSEL platformThe ED also found many suspicious interconnected transactions between FTIL NBHC National Bulk Handling Corporation mdash a subsidiary of FTIL and NSELIn his statement the CFO of FTIL Devendra Agarwal told the ED the amounts transferred were loans from FTIL to NBHC and payments from NBHC to NSEL were the advance for procurement of commodities But the ED didnrsquot buy this claim of advance of loan and repayment made in just two daysEDrsquos financial investigation reveal that R8439 crore flowed from NSEL to FTIL during 20092010 and 20142015 for various purposes The transactions on the NSEL platform have been proved to be bogus and artificially exaggerated Investigation points to a nexus among the defaulters the NSEL IBMA and NBHCIBMA allegedly transacted crores of rupees with NSEL defaulters without any business or transfer of goods The ED also found transactions between NSEL and FTIL under a bogus separate lsquosoftware chargesrsquo category