But there is no sign of investors getting their money back
It was the least known entity in the entire MCX group which saw meteoric growth over the past decade. Yet, on 8th May, it was the National Spot Exchange Limited (NSEL) and its Rs5,600-crore scam that probably drove the final nail in the financial market career of Jignesh Shah. Ironically, just eight days earlier, Mr Shah was back to his pugnacious ways, in the mistaken belief that he had “survived the tsunami of bad news.”
The NSEL scam, in a nutshell, is about the Exchange running a long-term lending operation disguised as paired forward contracts, which were also illegal and, worse, were without collateral. When the music stopped, the borrowers, in most cases, have not been able to refund large chunks of the money, despite arrests, interrogation and threats.
Very quickly, investigations showed that his flagship bourse and businesses were not run very ethically either. In fact, it was these findings of a forensic audit by PriceWaterHouse (PWC) that Jignesh Shah was vociferously contesting in television interviews and newspaper advertisements.
PWC’s report accuses him of involvement in illegal trading and racheting up trading volumes in his flagship—the Multi Commodity Exchange (MCX). The words were probably like a red rag before investors who had lost crores of rupees and the pressure to hold him accountable and arrest him, clearly followed. So 10 months after government action began, Jignesh Shah, its founder, was finally arrested.
Unfortunately, government actions have no positive impact on the group. The entire MCX group is now being ‘professionally-managed’ under the direct oversight of two regulators and the finance ministry; yet, the unexplained top-level exits at the bourses cause concern. Why would MCX-SX chairman, GK Pillai, and MCX managing director, Manoj Vaish, resign so abruptly and mysteriously when they had the support of the government and regulators and were appointed to clean up the mess at MCX group?
Finally, what about the investors? From Harshad Mehta to Ketan Parekh, Dinesh Dalmia (DSQ Software) to Ramalinga Raju (Satyam), one factor in the India scam story has been constant—investors either don’t get their money back or get a pittance, decades later, when its value is half, or less, and they have spent a lot of money fighting legal battles. Recovery of money is meaningless for investors, if it stays locked up with a court/ regulator-appointed custodian. Here, too, investors have got back a few peanuts, but the big losers have seen no sign of getting their money yet.
(Note: Mr GK Pillai's designation has been corrected)