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Evidence of hawala, benami trades in NSEL, says interim EOW report

NSEL has been caught in a payment crisis since August 2013

BS Reporters  |  Mumbai 

Jignesh Shah
Jignesh Shah

The economic offences wing (EOW) of the city Police has found evidence of irregularities on the part of brokers in the Rs 5,600-crore Spot Exchange Ltd (NSEL) payment crisis.

An interim report on the police's forensic audit had thrown up evidence of hawala transactions, benami trades and illegal code changes, said a source privy to the development.

The report added brokers were aware of the concerns at NSEL, as evidenced by them scaling back trades before the scam came to light.

NSEL has been caught in a payment crisis since August 2013. Allegedly, the exchange had been used as a platform to raise capital from thousands of lenders. Subsequently, the borrowers defaulted.

There have been allegations of money laundering and routing of the capital to real estate and other businesses.

The forensic audit report on the role of brokers in the scam has thrown up a number of anomalies.

These include benami trading, which involves illegal transactions using front entities.

The report also mentions hawala transactions of Rs 20-30 crore.

The interim report also states some of the directors were aware of the impending danger at NSEL; the EOW found volumes of the spot exchange saw a sudden fall in April and May 2013.

The report mentions evidence of illegal and unauthorised changes at the back-end of NSEL severs. The names of clients on NSEL servers were found to be different from those in brokers' ones.

Ketan Shah, a member of the NSEL Investors Action Group, said brokers were culpable.

"We have always maintained it (the scam) could not have happened without the knowledge of brokers; they should make good the money that investors lost," he said.

Other irregularities mentioned in the report included the fact that though clients had paid the money, they weren't offered memberships, nor did they get their money back. Also, brokers offered different rates to different clients, in violation of rules.

About 200 brokers, including several big names, are said to be implicated in the scam.

Though a number of brokers have been called for questioning, the police has not arrested any broker so far.

The source quoted earlier said the EOW would summon the brokers for interrogation again.

Among those arrested are exchange officials and three borrowers.

First Published: Sat, March 08 2014. 00:49 IST