Law finally catches up with Jignesh Shah in NSEL scam

FTIL promoter and his colleague Javalgekar arrested on criminal conspiracy charges

Jignesh Shah was on Wednesday set to spend the night out of his plush Juhu bungalow, at “Unit 5” of the Azad Maidan police station, where he and his long-time colleague Shreekant Javalgekar were brought in a police jeep after their arrest in connection with the Rs 5,600-crore payment fraud at National Spot Exchange Ltd (NSEL).

Ten months after the scam broke out, the Economic Offences Wing (EOW) of the Mumbai Police made its most high-profile arrest by detaining Shah, founder & promoter of Financial Technologies India Ltd (FTIL), and Javelgekar, former managing director & chief executive of the Multi-Commodities Exchange.

“We have arrested Shah for his involvement in the NSEL scam,” said Rajvardhan Sinha, additional commissioner of police, EOW, as the investigations revealed Shah and Javalgekar were involved in criminal conspiracy. The volumes of trades conducted at NSEL were linked with the income of FTIL and the promoter of NSEL was able to open other exchanges from the income generated through the NSEL platform, Sinha added. (IN A TIGHT SPOT)

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The arrests have been made under the Maharashtra Protection of Interest of Depositors (MPID) Act and both would be produced in the MPID court on Thursday morning.

Javalgekar had been associated with NSEL for the past 10 years and his arrest was also due to his links with the Indian Bullion Market Association, a wholly-owned arm of FTIL. “The arrests were required as Shah and Javalgekar did not cooperate in interogations. They diverted questions and always laid the responsibility on the former NSEL CEO,” Sinha said, adding it was found that Shah approved all contracts.

EOW said this would not be the last set of arrests in the NSEL scam and brokers could be next in line, as their role was also being examined.

Meanwhile, FTIL has called a board meeting on Thursday to decide on the future course of action.

Shah, who had last week told Business Standard in an interview a that he had survived the tsunami of bad news, clearly had no inkling of the arrest on Wednesday morning. “I have come here to assist in the normal course of investigations,” he told reporters while entering the EOW office in the afternoon. But hours of questioning later, Shah was asked to remove his belt and shoes before being taken into custody.

The arrests follow a complaint filed by NSEL investors that Shah played a role in the fraud and should be held responsible. Shah had come under scanner last year, when his group company NSEL faced a payment crisis that left 13,000 investors in the lurch.

With Shah’s arrest, the total number of arrests in the scam has gone up to 11. The first high-profile arrest was of Anjani Sinha, former MD & CEO of NSEL, in October last year. Sinha is currently in jail.

“With the arrest of Shah and key borrowers, we hope the investors will get their dues,” said Arun Dalmia, secretary, NSEL Investor Forum. So far, EOW has attached more than Rs 5,000 crore worth of assets.

Since the NSEL crisis came to the fore, the FTIL group, Shah and his close aide Joseph Massey came under increased regulatory scrutiny and were declared ‘not fit and proper’ to run any exchange in the country by both Sebi and FMC.

EOW had filed its first chargesheet in the NSEL case on January 7. The chargesheet had mentioned the names of Shah, Massey and Javalgekar, but not as accused.

Former member of Parliament, Kirit Somaiya, said the police should have arrested Shah long ago. “But, it is better late than never.”

The FTIL stock closed at Rs 291.25, down Rs 8.70, or 2.9 per cent, from previous close. The arrests were made later and analysts said the stock would come under pressure when trading resumes on Thursday.