ED charge-sheets 54 for trapping investors into trading on NSEL platform

MUMBAI: The Enforcement Directorate (ED) has filed a charge-sheet against 54 accused, including 19 broking firms and their directors, as part of its ongoing money-laundering investigation into the alleged fraud at National Spot Exchange Limited (NSEL). The broking entities stand accused of colluding with officials of NSEL to trap investors into trading on the NSEL platform for promised hefty returns.

According to the ED charge-sheet, the brokerage earned through these illegal means was further utilised in business operations. The charge-sheet was submitted on January 28, and cognisance was taken of it by the special PMLA (Prevention of Money Laundering Act) court on Monday.

The ED charge-sheet focuses upon the role of the 19 broking firms in particular. The brokerage earned by the companies worth ₹34.74 crore was earlier attached under the provisions of the PMLA by the ED and the same was subsequently confirmed by the PMLA’s adjudicating authority, New Delhi, the ED said on Tuesday.

As part of its probe, the ED has so far provisionally attached assets worth ₹3,288.76 crore via issuance of 32 provisional attachment orders. It had earlier submitted six charge-sheets in the case against 94 accused persons.

The investigation revealed that after getting registered with the NSEL, the broking companies allegedly misled their clients by providing false assurances about the NSEL exchange and promoting illegal pair trade contracts. The NSEL, in collusion with them, allegedly established a system that skipped the system of collection of warehouse receipts or physical commodities for their clients, even though they were aware that they were facilitating trade in a dubious manner.

HT on Tuesday contacted an official of the M/s 63 Moons Technologies Ltd (earlier known as ‘FTIL’ which was NSEL’s promoter) for a comment on ED probe’s allegations in the case but there was no response.

NSEL was an online platform that facilitated trading in 52 commodities, including agro-products. The NSEL irregularities surfaced in July 2013 when trade was suspended by a central government order, which disallowed fresh contracts and allowed only the squaring off of existing contracts. It was found that two dozen members allegedly traded on the exchange without having underlying commodities to back the contracts, which was itself in violation of spot trading norms.

The ED had initiated its investigation based on an FIR of September 30, 2013, registered by the Economic Offences Wing against NSEL’s then directors and key officials, 25 defaulters of NSEL and others. It was alleged that the accused persons had hatched a criminal conspiracy, inducing investors to trade on the NSEL platform through creation of forged documents, including bogus warehouse receipts, manipulation of accounts, and thereby committed criminal breach of trust with respect to ₹5,600 crore of around 13,000 investors.

The investigation revealed that the money collected from various investors was diverted by borrowers/trading members of NSEL for other activities like investment into real estate and repayment of outstanding debts.

The ED had on September 30, 2016, provisionally attached assets of M/s 63 Moons Technologies Ltd (earlier known as ‘FTIL’), worth around ₹1,170 crore. It had accused the NSEL, its promoters and senior management and 25-odd defaulters of indulging in criminal conspiracy, cheating and collusion, wherein NSEL allowed trading on commodities by sellers without ensuring goods of appropriate quantity and quality stored in the exchange-controlled warehouses which resulted in thousands of investors trading in non-existent goods and being defrauded.

The probe revealed that the NSEL was acting as a platform for these defaulters and was earning by charging various fees / penalties including application-processing fees, annual subscription fees, delivery fees and so on. The ED had then alleged that the gross income earned by NSEL from such paper transactions was around ₹1,112 crore during 2008-09 to 2013-14 and that the trades executed on NSEL`s portal were rarely backed by the equivalent quantity of goods, which the NSEL executives knew. “All circulars launched were discussed in the board meeting comprising key management personnel of FTIL in the Board of NSEL and the board used to ratify and approve the same,” the ED said on September 30, 2016.