NMCE founder Kailash Gupta arrested for alleged fraud

Gupta was ousted from NMCE following a controversy in 2011

Kailash Gupta, founder and former vice-chairman of the National Multi-Commodity Exchange (NMCE), has been arrested for alleged multi-crore fraud under the Foreign Exchange Management Act and the Prevention of Money Laundering Act.

He was arrested late last night. Today, he was presented before a magistrate, who remanded him to 10-day judicial custody.

In 2011, Gupta was ousted from NMCE, following a controversy. Currently, he doesn’t hold any position in the NMCE board.

According to sources privy to the development, Gupta’s bank and share trading accounts had been frozen and the properties he had bought using the funds from the alleged fraud were being attached.

Investigators involved in the case estimated the fraud at about Rs 10 crore. They said Gupta had floated a number of companies only on paper, and these had been used for money laundering. Efforts are on to ascertain whether others had aided Gupta in the fraud. The investigators suspect the involvement of NMCE employees and bankers.

In 2011, Gupta had made headlines when the Forward Markets Commission (FMC), after conducting a detailed enquiry, found him guilty of a fraud. FMC had said Gupta had been “grossly abusing” his position to favour companies run by his family. The regulator had asked NMCE to file a criminal case against Gupta and the others involved.

After a probe by the regulator, it was found Gupta had breached his fiduciary responsibility to the exchange and “systematically defrauded it, misused and misappropriated its property and committed series of crimes under various laws...for benefiting himself, his family and his family-owned/controlled firms”.

From the inception of the exchange in 2003 till May 2010, Gupta held the post of managing director and chief executive. Subsequently, he served as executive vice-chairman till February 26, 2011.

In July 2011, FMC had asked Gupta to reduce his 30.18 per cent stake in the exchange, which he held through a wholly-owned company (Neptune Overseas) to two per cent. Gupta had challenged the order in the Supreme Court and the matter is sub judice. In an interim order in March 2012, the Supreme Court had upheld the FMC order, subject to the final outcome of the related petitions.