NSEL investors seek forensic audit of all major brokers
Moneylife Digital Team 26 December 2013

According to NSEL Investor's Action Group, brokers of the Exchange have played an active role in theRs5,600 crore scam and the EOW must also investigate the disparity in pair trades

Calling National Spot Exchange Ltd (NSEL) as a 'dummy exchange with Ponzi financing scheme', the NSEL Investor's Action Group has requested Mumbai police to initiate a forensic audit of all major brokers and investigate the role of brokers in the pair trade scam in the Exchange.


The Action Group, in a letter, said, "There were only 18 borrowers (after removing sister companies) on one side and 13,000-odd investors on the other side. There cannot be any genuine exchange in the world, where the disparity between the two sides of players would be so huge. The brokers who used to receive and raise bills on these 18 companies fully knew about this. Also, the prices of commodities were never ‘market discovered’ by ‘live bids and offers’ (like any other exchange), but rigged from the back-end with the full knowledge of brokers".


The Action Group has requested the Economic Offences Wing (EOW) of Mumbai Police to consider 15 points in their investigation in the Rs5,600 crore NSEL scam. The points include, disparity of number of players on both sides of NSEL pair trades, non-collection of delivery order or warehouse receipts by brokers, difference in time between purchase and sale transactions, purchase effected without order from client, manipulation of market, changing of code in the Exchange, cancellation of purchases, brokers themselves acting as carry & forward (C&F) agents, payment of sales tax where there is no stock, collection of brokerage, transaction charges and delivery charges when the stock never existed, financing clients through their non-banking finance companies (NBFCs), maintenance of Settlement Guarantee Fund (SGF), false inducement of safety, the nexus between brokers and borrowers and brokers knowledge about financing NBFC-like activity.


As pointed out by Moneylife, the fact is that it was the brokers, who lured investors in the first place to get risk-free gains from NSEL.


Earlier in August, NSEL filed a complaint against five of its defaulting members, Ark Imports Pvt Ltd, Lotus Refineries Pvt Ltd, NK Proteins Ltd, Vimladevi Agrotech Ltd and Yathuri Associates before the investigation authorities.


As per the rules and bye-laws, the Exchange also asked these defaulting members to submit their books of accounts and hand-over all the collaterals to NSEL.


Here is the letter sent by NSEL Investor's Action Group...


Free Helpline
Legal Credit