Indications are that the government may soon drop the kid gloves treatment to NSEL and its management and allow the CBI to take over. If that happens, most investors will not get anything back from their investment
Even as the government begins to distance itself from the woes of National Spot Exchange Ltd (NSEL) investors, we learn that actual recovery, in the form of physical assets, is unlikely to be more than 60%. Moreover, this information is already known to the investigation agencies and the government. It may be recalled that Jignesh Shah and his team borrowed a lot of time by saying that it was imperative for all involved to be on the same side so that recovery of assets would give investors their money back. Our information from insiders of the Financial Technologies–MCX (FT-MCX) group indicate that this 60% is probably the most optimistic estimate.
Further, we learn that Mr Shah has been negotiating with top brokers such as Anand Rathi Financial Services Ltd, Motilal Oswal Securities Ltd, India Infoline Ltd and others to accept a 20% haircut on the money recoverable. Repeated talks with the brokers have failed, since the brokers refused to accept the haircut and wanted to pass it on to investors. Some high-networth individual (HNI) investors, who were consulted, also refused to accept the loss. The FT-MCX group had suggested that brokerage houses must take part of the loss and refund money to their investors. However, brokers want to pass on the loss to their HNI investors. From our interaction, it would seem that those who have invested over Rs1 crore in NSEL are bound to take a significant hit.
Interesting, while NSEL investors have refrained from filing litigation against brokers, on the assumption that they are all working and negotiating on the same side, this is likely to be far from the truth. Indications are that the government may soon drop the kid gloves treatment to NSEL and its management and allow the Central Bureau of Investigation (CBI) to take over. If that happens, most investors will end up kissing their money goodbye. In the history of scam investigations, whenever the CBI has taken over a case, there is no question of investors’ getting back their money.
The present situation raises several questions. Although multiple agencies including the Income Tax (I-T) department, CBI, Enforcement Directorate (ED), Forward Markets Commission (FMC) and the finance ministry have investigated NSEL, there is no authentic information in the public domain about the actual assets available with defaulters, the valuation of these assets and whether enough pressure has been brought to bear on them to transfer these to NSEL.
There are also frequent rumours that several powerful people who had invested in NSEL may have used their clout to get their money back. These persons too may have been fooled by its appearance of a regulated exchange with a genuine trade guarantee, prefixed by the word ‘National’. However, it seems increasingly as though NSEL investors, who live in hope that their informal forum will get them justice, may be in for a shock. This scenario could only change if the FT-MCX group is also forced to add its own assets to the kitty to make good the loss. But there are no indicators that the government wants to bring such pressure on the group. One indicator of this is that Jignesh Shah, founder of FT-MCX blames NSEL's former managing director Anjani Sinha and a few others who have been sacked and have also admitted to their actions, but no action has been initiated against them either.
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