Economic offences wing sniffs financial fraud at NSEL

MUMBAI: The city police's economic offences wing (EOW) has found some truth in allegations by investors that money was siphoned off by top executives and others at National Spot Exchange (NSEL), the commodity bourse hit by a payment crisis.On Tuesday, a 32-page preliminary enquiry (PE) report was submitted to EOW additional commissioner of police Rajvardhan Sinha, and it found that there were evidence of financial fraud at the commodity bourse promoted by Jignesh Shah-controlled Financial Technologies group.In mid-Setpember, in a significant development as part of the ongoing Rs 5,500-crore NSEL saga, around 58 investors and 17 brokers and members of NSEL filed a complaint with the EOW against NSEL, Jignesh Shah, the promoter of Financial Technologies group that owns NSEL, and the board of directors of NSEL. The complaint has also been made against executives of NSEL, including Amit Mukherjee and Jai Bhaukhundi, its auditor Mukesh Shah & Co, and 24 defaulters and their clients."I have received the PE report and going through it. Once we scrutinize, we will take a call about the probe," said Sinha. No FIR has been registered yet. As a process, EOW first conducts a PE in all the cases before officially lodging an FIR.The complainant alleged that Jignesh Shah is the "brain, trust and alter ego" of NSEL and primarily responsible for the affairs and the fiasco at NSEL.It is also alleged that Shah abused his position to create a false impression in the minds of investors regarding the legitimacy of the operations at NSEL. The complaint alleged that 99% of delivery business was fraud, evidenced by complete absence of underlying goods and issuance of fake warehouse receipts. The complaint alleged that NSEL built its business model around trading in "non existent" goods and giving investors an impression that goods were in warehouses, when none existed.On July 31, NSEL suspended trading in all the commodities and said that settlement for several days will be clubbed into one. After a fortnight it said that through weekly settlement worth nearly Rs 175 crore, investors will be paid over eight months. However, in each and every weekly settlement it has failed to pay investors the full amount. Currently, several of the government agencies including the Income Tax department, the Enforcement Directorate and the Serious Fraud Investigation Office are looking into the whole affair.In a related development, the income tax department on Tuesday raided several offices of Anand Rathi Securities, one of the broking houses that was very active in pushing its clients to trade in commodities on NSEL. The IT department was raiding about 20 offices of the financial services firm, sources told ToI.