UCX starts refunding money to members

Exchange has refunded Rs 3.7 cr recently to 127 members

In a relief to members of the now-defunct Universal Commodity Exchange (UCX), the exchange recently refunded Rs 3.7 crore of margins and other deposits to 127 members. A refund of Rs 2.7 crore to four members,  named in the forensic audit report done by KPMG, has been withheld. Now, the exchange owes only Rs 1.25 lakh to a member. The exchange is ascertaining bank details of the member, said a source.

The KPMG report has also found that a director of the exchange, accused of irregularities, had parked the exchange’s money elsewhere without authority.

However, given the cash positions of the exchange, shareholders are unlikely to get back their money invested in shares.

Following order from the Forward Markets Commission, the exchange’s board had assigned KPMG to undertake a forensic investigation into “the serious charges and allegations of misappropriation of funds by the promoter of UCX since the inception of the exchange.”

UCX was promoted by Commex Technologies chief Ketan Sheth, who owns 40 per cent stake in the exchange. The exchange was launched in April 2013 but following allegations of misappropriation of funds it had suspended trading in all commodities on July 19 2014. It offered futures trading in oil seeds, pulses, crude oil and natural gas.

While total money that the exchange has to repay to its member brokers could not be ascertained, sources said that around Rs.8 crore was recovered which was misappropriated and hence that is being used to repay to brokers.

A forensic audit of UCX was ordered after taking into account preliminary findings on gross financial irregularities and diversion of funds from settlement and guarantee fund (SGF).

As per latest directive by the FMC, any exchange which has suspended trading has to return margin money of brokers in a month's time. Even other deposits or minimum capital needed for trading shall also have to be refunded. However, when trading remain suspended for 12 months or no trading takes place for 12 months than FMC has to issue show cause notice to the exchange seeking why it should not withdraw the recognition of the exchange.

Since at UCX, trading is not happening since last 10 months, two months down the line FMC can send the show cause notice. Meanwhile the exchange's board is discussing what measures are required to be taken against those misused funds.