Jignesh, MCX ex-CEO held in NSEL scam

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Police arrest Shah after hours of quizzing, investors seek fast trial

Jignesh, MCX ex-CEO held in NSEL scam
The economic offences wing (EOW) of Mumbai police on Wednesday arr­ested Jignesh Shah, chai­rman and group chief executive officer of Financial Technologies (India) (FT­IL) in connection with a payment crisis at the National Spot Exchange (NS­EL), a commodities exchange owned by FTIL.

Police arrested Shah after interrogating him for several hours through the day, news agency PTI reported. Shreekant Javalgekar, former chief executive officer of the Multi Commodity Exchange of India (MCX), another FTIL company, was also arrested.

FTIL has called a board meeting on Wednesday to discuss the situation. “I am really shocked at Shah’s arrest. The board meeting has been called tomorrow to take stock of the situation and decide the future course of action,” FTIL director and former MCX chairman Venkat Chary said.

Shah has been under police investigation ever since NSEL abruptly suspended trade in most of its commodities contracts in late July last year, leading to a payment crisis to the tune of Rs 5,600 crore, in which nearly 18,000 investors allegedly lost huge amounts of money.

Troubles began after the government ordered NSEL to suspend spot trade in most of its contracts due to suspected violations. The exchange could not settle the outstanding trades, sparking investigations by the police and regulators.

FTIL blamed NSEL executives and the trading parties for the default. There were 24 members who defaulted on payments to about 13,000 investors.

“The arrest should have been made many months back. Now that he is arrested, we look forward to speedy trial,” Sharad Kumar Saraf, chairman of NSEL Investor Forum, told Financial Chronicle.

With an expected change in government at the Centre, Shah will have lesser influence and the case will move faster, Saraf said. “Shah’s arrest will scare defaulters and force them to pay the money at the earliest,” forum secretary Arun Dalmia told PTI.

The entire money would have been recovered if Shah was arrested in August last year. The payment default would have been only Rs 2,000 crore had the government taken action way back in 2012, he added.

When contacted, an executive at a leading auditing and advisory firm said the arrest was inevitable. “There were many wrongs at NSEL. He (Shah) cannot escape responsibility,” he said. Shah was the chairman and managing director of Financial Technologies since January 2001 and now serves as group chief executive.

“Knowingly or unknowingly, they have created a huge mess. Trading was done without underlying physical assets at warehouses,” the auditing firm executive said. He preferred anonymity.

Seven persons have been arrested over the payment crisis so far. NSEL CEO Anjani Sinha was arrested last October and is now in jail. Since the crisis broke out, the FTIL group, Jignesh Shah and his close aide Joseph Massey have been under increased regulatory scrutiny.

Capital market regulator Sebi and commodities market regulator FMC have both ruled them “not fit and proper” to run any exchange in the country.

Shah was a group chief executive of MCX Stock Exchange, promoted by the group. Besides being the founder chairman and group chief executive of Financial Technologies Group, Shah is also the founder of MCX, the world’s eighth largest commodity futures exchange, for over 12 years. A first-generation entrepreneur, he founded the FTIL group in 1999.

Prior to that, Shah was actively involved with the automation of the trading systems at Bombay Stock Exchange (BSE) and was responsible for designing and implementing various modules of back-office systems at BSE, particularly for market operations and surveillance.

Sebi has begun a separate probe into possible listing agreement violations by MCX and FTIL in the wake of a audit report by PwC on the commodity exchange pointing to various discrepancies, including those pertaining to related party transactions.

Rejecting the report, FTIL had said it would take legal action against the bourse and PwC for painting a wrong picture in the report.


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