India's economic crime investigation agency, Enforcement Directorate (ED) on Tuesday arrested Jignesh Shah on charges of assisting money launderers at National Spot Exchange Limited (NSEL). As a promoter of 63 Moons (earlier Financial Technologies), the parent company of NSEL, Shah is alleged to have colluded with defaulting members and management at the commodity exchange platform.
"Fresh" findings under prevention of money laundering act (PMLA) prompted the arrest, ED sources told Economic Times.
However, 63 Moons is expected to contest the arrest and apply for bail as Shah will be produced before a PMLA court on Wednesday by ED. The agency, however, will request further grant of his custody, based on the new evidence that remains under the wrap for now.
ED official told Indian Express that number of fraud transactions between Shah and some associated companies, remained unanswered at Tuesday's interrogation. They added that Shah remained non-cooperative during the probe and his arrest was required for further questioning. Times of India added that Shah was unable to explain one such alleged "paper transactions" between FTIL, Indian Bullion Market Association, NSEL and other entities.
However, 63 Moons in a public statement expressed dismay at the agency's move calling it coercive at a time when Shah has been fully cooperative. "...ED's own complaint has failed to establish any money trail to either Mr. Shah or 63 moons. We have full faith in Indian judiciary and sincerely believe that truth will prevail," the spokesperson was quoted.
ED said in its March 2015 chargesheets that Shah as a director of the NSEL Board had shrugged off his duties to maintain basic checks and balance at the exchange. He had given a free reign to the Managing Director and Chief Financial Officer of the company to carry out economic crimes. Therefore, "by his acts, Jignesh Shah has assisted in the money laundering activities of the defaulting members and the management of NSEL," the charge sheet said.
The Rs. 5,600 crore commodity exchange scam had its genesis in NSEL launching several investment products for easy money making by investors on its spot exchange platform. IE said that NSEL collaborated with 25 companies on the forward trading market to trade fake stocks by forging documents. On suspicion of illegal trading, the government in August 2013 cracked its whip to halt all further contracts. This led to huge payment crisis in turn affecting nearly 13,000 investors on the exchange.
ET reported that some large colluding investors had profited in the venture and their ill-gotten wealth was ploughed into real estate sector, or even laundered by sending it oversees. To help the affected investors, the government sought to merge NSEL with its richer parent FTIL (or 63 Moons). However the order stands challenged in the court.