CBI arrests Jignesh Shah over MCX-SX licence

Agency conducts searches at FTIL, MCX, MSEI offices and residences of Sebi officials

The Central Bureau of Investigation (CBI) on Tuesday arrested Financial Technologies India (FTIL) founder Jignesh Shah in connection with a case granting a licence to MSEI, formerly MCX Stock Exchange.

Shah has been booked under Sections 120 and 420 of the Prevention of Corruption Act, 1988.

"He was questioned for his role in the matter, but his answers were not satisfactory. He will be produced before the special CBI court on Wednesday morning,” a CBI official said.

Shah was arrested in a case registered against four Securities and Exchange Board of India (Sebi) officials for connivance with MCX-SX to fraudulently allow renewal of its licence to conduct trades in currency derivatives in 2009-2010, the CBI said on Tuesday.

The CBI also alleged MCX-SX had entered into a buyback arrangement with some financial institutions in violation of the Securities Contract Regulation Act, 1956, and had suppressed this fact while applying for an extension of its licence to operate in currency derivatives.

“The CBI has taken Jignesh Shah into custody relating to investigation in the matter of recognition granted by Sebi to MCX-SX,” said a spokesperson for 63 Moons Technologies, formerly FTIL.

The arrest followed CBI searches at nine locations in Mumbai, including Shah’s residence and FTIL headquarters on Tuesday. Shah was later taken into custody by the CBI for interrogation.

The CBI also searched the residences of at least five current and former Sebi officials named in the first information report filed in August 2014.  Besides, the CBI searched the premises of MCX, Metropolitan Stock Exchange and the residences of Joseph Massey, former managing director and CEO of MCX and MCX-SX, and Shrikant Javelgekar, former managing director of MCX.

“Incriminating documents, including transfer of shares by private companies, fixed deposits receipts, and purchase of assets recovered during the searches are being scrutinised,” the CBI said.

Shah has been arrested for the second time this year. In July, the Enforcement Directorate had arrested him in connection with investigations into money laundering at National Spot Exchange (NSEL). Earlier, in year 2014, Shah was arrested by the economic offences wing and later released on bail in August same year.

The CBI had registered a preliminary enquiry against former Sebi chief CB Bhave, former whole-time member KM Abraham, three other Sebi officials, MCX and FTIL in March 2014 in connection with the grant of a licence to MCX-SX. The PE was turned into an FIR but the agency did not find any criminality on the part of Bhave. The other Sebi officials were accused of favouring MCX-SX.

“The CBI, economic offences wing, Mumbai, is conducting search in respect of recognition granted by Sebi to MSEI for starting its stock exchange in trading in currency and other segments in respect of case no. RC 9/E/2014", the MCX said in a statement to the Bombay Stock Exchange. An email sent to MSEI remained unanswered.