NATIONAL SPOT EXCHANGE LTD (NSEL)

A SYNOPSIS OF THE SCAM AND

NOTES ON POSSIBLE REMEDIAL ACTION

THE SCAM

� A premeditated countrywide commodity scam of Rs.5600 Crores (appx 1 Billion US$) affecting 13000 retail

investors spread across the country

� NSEL was a commodity exchange floated by Financial Technologies India Ltd (99.9999% owner) and

NAFED. Only token 100 shares were given by FTIL to NAFED with an idea to misuse and exploit NAFED’s

brand and to pitch it as a farmer friendly exchange to credulous investors

� Huge monies of PSUs like MMTC /PEC also stuck along with retail investors

� Scam masterminded by FTIL (NSEL was an alter-ego of FTIL) and its CMD Jignesh Shah as evident by various

forensic audits and charge-sheet filed by Mumbai police EOW wing

� About 90% of the investors in this ponzi scheme-scam are retail investors sucked in by brokers working in

cahoots with Jignesh Shah/FTIL who induced investors by false promises of safety

� Fixed returns were assured to investors by brokers/NSEL with knowledge of FTIL

� T+2 (short duration buy) and T +25 (long duration sell) contracts were to be executed simultaneously by the

investor generating arbitrage profits of 13-14% per annum (pre-tax) and 9-9.5% post tax.

� On 31st July 2013 when the exchange went bust it had neither money nor the goods to pay investors for

which it was a counter-guarantor. Promoter FTIL tried to wash its hands off calling it an employee scam and

hiding behind ‘corporate veil’

� No warehouse receipts were ever printed and the warehouse allocation reports and QC certificates issued

by NSEL turned out to be bogus

� Out of the total scam, Rs 2510 Crore is spread over 11,755 small investors which works out to an average

of Rs 22 Lakh per investor. This contradicts the fact that only HNIs are affected

KEY PLAYERS

� FTIL : The promoter of NSEL

� NSEL : The bogus and fraudulent exchange floated by FTIL

� IBMA : A subsidiary of NSEL used for bogus trades and money laundering

� Jignesh Shah : Promoter, Chairman Managing Director of FTIL and vice Chairman and key management

personnel in NSEL (arrested and charge-sheeted)

� Shreekant Javalgekar : Finance Director of FTIL, Director NSEL , MD and CEO of MCX, Director in IBMA ,

Group CFO FTIL (arrested out on bail)

� Anjani Sinha : CEO at NSEL (arrested out on bail)

� Joseph Massey : A close confidant of Jignesh Shah and a director and KMP on NSEL, CEO of MCX

� Shankarlal Guru : The chairman at NSEL appointed by FTIL board whose son-in-law is the biggest defaulting

borrower

� Mukesh P Shah : Jignesh Shah’s uncle and an auditor of NSEL and MCX

� Sunil Daga Khairnar : Jignesh Shah’s liaison man in Delhi and a director at NSEL

� 23 defaulting borrowers : Given money as term loans by NSEL board/FTIL. Massive cash withdrawals and

real estate investments. Most also conducted bogus (wash) trades on MCX

� Anand Rathi, Motilal Oswal, IIFL and other brokers : Peddled this NSEL ponzi scheme assuring safety and

some even assured falsely existence of stocks. Most brokers very close to Jignesh Shah

� Forward Markets Commission : National regulator of commodity future contracts under FCR Act. Was

appointed as an agency to collect information from NSEL in February 2012

� Ministry of Consumer Affairs : the Parent body of FMC which exempted 1 day forward contracts of NSEL

even before it started its operations.

� NAFED : marketed as a promoter by giving a meager 100 shares

HOW IT ALL HAPPENED

� FTIL ran multiple exchanges around the world (most exchanges were loss making) including MCX, MCX-SX and NSEL

� About 46% of FTIL is owned by Jignesh Shah and his family company La-Fin financial Services Pvt. ltd.

� An exchange with ‘national’ in its name started by FTIL group to hoodwink investors and NAFED brand was used to give it ‘quasi government’ look

� By a gazette notification dated 5 June 2007, the Ministry of Consumer Affairs exempted one day forward contracts at NSEL from FCRA subject to certain conditions. Ironically Mr. Paul Joseph who signed this exemption (even before NSEL started functioning ) subsequently joined the FTIL group

� In 2008 NSEL started functioning as a delivery based spot exchange but had no significant business and was making huge losses

� In 2009 fraudulent ‘paired trades’ were launched to generate business and profits for NSEL/FTIL. These contracts were ab initio illegal as the exemption provided to NSEL was only for contracts up to 11 days where as pair trades extended till 25 or 35 days

� The first borrower in 2009 that was loaned money was NK protein Ltd a company owned by Mr. NileshPatel –the son-in-law of then chairman Mr. Shankarlal Guru.This shows the complicity of promoters/board with borrowers

� NBFC -Lending Activities started much before Anjani Sinha became the CEO. This is thus a fraud masterminded by FTIL Board

� In 2010 Anjani Sinha was appointed as CEO of NSEL and he applied under section 14 A of FCRA for registration of NTSD (non transferable Specific Delivery) contracts with Forward Markets Commission (FMC)

� The FMC neither accepted nor rejected this NTSD contract registration which it received form NSEL for 3 years and rejected it only in November 2013 after the scam broke out

� Without bothering about FMC’s response to its pending request for registration of NTSD contracts, NSELwent on adding more NTSD ‘paired contracts’ and the volumes on the exchange and thus profits for NSEL-FTIL sky-rocketed

� On 6 February 2012 The Ministry of Consumer Affairs to protect investors’ interest designated Forwardmarkets Commission to collect ‘all information or returns’ and supervise trades on NSEL

� Based on information provided by FMC about violation of exemption conditions of 2007 gazette, theMinistry of Consumer Affairs issued a show cause notice to NSEL mainly because there was short sale atNSEL, NSEL did not have mechanism to ensure stocks being deposited and 55 contracts at NSEL extendedbeyond 11 days. This 15 day SCN to NSEL was not acted upon by MCA for 15 months

� On 12 July 2013 the Ministry of Consumer Affairs wrote to NSEL to stop and settle all contracts extending 11days

� The ponzi scheme peddled by NSEL came to a screeching halt as NSEL could not find new investors whowould be interested in newly launched T+10 day contracts. Without new investors coming in NSEL could notpay old investors whose amounts were due for payment

� On 31st July NSEL unable to meet payment obligation merged all its settlements and promised that a newsettlement calendar will be announced after 15 days

� A settlement plan proposed by NSEL and announced by Jignesh Shah was approved by FMC on 16 August2013. In spite of this, NSEL defaulted on every installment promised in the settlement plan

� It was found by investors that their Rs 5600 Crore was distributed among 24 borrowers (19 borrowers minussister companies) sans any collateral or any significant stock (found in SGS audit)

� There was a huge disparity on both sides of the exchange with 13000 assorted investors on one side andonly 24 borrowers on the other side

� It was found that NSEL was conducting NBFC like activity (fact known to FMC and confirmed by them in

their letter dated 29 October 2012 to NSEL signed by Mr. P.C. Rao) and most defaulting borrowers were

given term loans under the garb of commodity trade

� Most of the borrowers were shell companies formed just to siphon off money from the NSEL platform.

One of the biggest borrowers- Mohan India Ltd who owes about 972 Crores to NSEL has a share capital of

merely Rs 17 Lakhs

� All NSEL warehouses were in the premises of the defaulting borrowers themselves with no control of NSEL

or its management

� The ‘Settlement Guarantee fund ‘ (SGF) of about Rs 850 Crores was non-existent and apparently the money

was used up to pay selected players out of turn

� IBMA – The subsidiary of NSEL was used for rampant money laundering , related party trades and wash

trades. About 95% of the turnover on NSEL eseries platform was created by IBMA by trades punched from 2

computers at the same rate and time (wash trades). IBMA had 2 directors Devang Neralla and Shreekant

Javalgekar who were also FTIL directors. Devang Neralla was also one of the founder directors in FTIL. This

shows FTIL’s knowledge and collusion in bogus activities at IBMA-NSEL

� Funds of NSEL Paired Trade Investors ( Rs 30.5 Crs) were routed by borrowers as bogus fees to IBMA to help

IBMA cover up the speculation losses in their books

EXPLANATION OF PAIRED TRADES

• An investor for example bought a commodity for Rs 100 in ‘T+2 ‘and sold it back simultaneously in ‘T+25’ at Rs 101 thus pocketing Rupee 1 (about 13% return annualized pre-tax)

• When the scam broke the borrowers had neither money to give back nor the stocks.

• No warehouse receipts ever published by the exchange/collected by the broker

CUI BONO? ROLE OF FTIL-JIGNESH SHAH

� The whole NSEL scam was meticulously planned by Jignesh Shah along his cronies and flawlessly executed with thehelp of borrowers and brokers and blessings of bureaucrats. Jignesh Shah owns about 46% of FTIL and FTIL almost100% owns NSEL. All profits from NSEL went into consolidated balance sheet of FTIL. As most exchanges of FTIL-Jignesh Shah were loss making, FTIL needed cash to show a healthy bottom line and to maintain its marketcapitalization and market reputation. On the back of NSEL profits the value of the shares of Jignesh Shah in FTILshot up manifold giving him the benefit of a spectacular market capitalization of his investment in FTIL running intothousands of Crores of Rupees

� The bogus profit of NSEL was padding up FTIL bottom line. Bogus software charges were pegged to the turnover ofNSEL (33.8 Crores in 2012-2013) and taken away by FTIL.NSEL income constituted 55% of FTIL income in 2012 and ifwe include the bogus software charges it may go up to 65-70% of FTIL consolidated income. FTIL was collecting 20%of trading charges generated on NSEL under the guise of ‘software charges’ and wanted that to go up to 30%

� Jignesh Shah himself used to draw hefty salary, dividend, commission and other perks linked to the profits of FTIL,which were linked to NSEL profits. His Salary & Commission doubled from 2010-11 to 2012-13 as a result of strongNSEL profits

� Jignesh Shah was the key management personnel (KMP) at NSEL from 2006-2012 but conveniently removed hisname in 2013 fully knowing about the scam

� FTIL and NSEL functioned form the same building and shared common infrastructure including key IT infrastructure.All NSEL servers were managed by FTIL

� FTIL conducted a system-process audit of NSEL in 2011-2012 but never acted on shortcomings found

� The bogus pair trades at NSEL were approved in the NSEL board meet of December 2009 where Jignesh Shah waspresent and the same were also ratified by the FTIL board in January 2010 showing complicity of all FTIL/NSELboard of directors

� Mr. Mukesh P Shah, a Chartered Accountant and an uncle of Jignesh Shah is also the auditor of NSEL and MCX. Heoperates his professional services in the name of Mukesh P Shah & Company from Damodar Niwas, CP tank Mumbaiwhich was the office address of La Fin Financial Services Pvt. Ltd. (Holding company of FTIL which is owned byJignesh Shah) showing collusion between the two

� The funds of the initial margin account at NSEL were utilized for meeting the Exchange obligation fordefaulting members and financial obligations of the other business operations .FTIL was fully aware of it butdid not stop this activity as illustrated by an email from Devendra Agarwal of FT Finance & accounts toShashidhar Kotian of NSEL dated 15 October 2010 with a copy to FTIL finance director Shreekant Javalgekar

� An email dated 29 June 2013 from Amit Mukherjee NSEL business development with a copy to FTIL says thatNSEL/Brokers should not send fixed return calculators related to T+25 and T+2 contracts. If at all suchcalculators are to be sent they should be sent from personal Email IDs. This shows FTIL was aware ofunlawful acts of fixed returns being promised

� IBMA (NSEL subsidiary) was trading on MCX in capacity of a client through Karvy Commtrade and SaritaPrem Singhal which was patently illegal. The resolution for IBMA to trade as a client on MCX platform wasapproved in the meeting of Board of Directors of IBMA where Mr. Devang Neralla (Founder Director, FTIL)and Mr. Shreekant Javalgekar (Finance Director, FTIL group) were present showing full knowledge of FTILand Jignesh Shah about illegal activities

� The board minutes of NSEL on 11 August 2010 and 31st March 2010 state that NSEL approached KarvyFinancial Services Ltd to extend credit facilities to NK protein Ltd. The board extended guarantee of Rs 14Crores to Karvy to give credit to NK Protein Ltd. Jignesh Shah and Joseph Massey both were present inthese meetings. Board of Directors of NSEL approved corporate guarantees in favour of HDFC bank andfinancial institutions to allow credit facilities to notorious fraudulent defaulting borrowers like AasthaMinmet and NK protein Ltd even after their repeated defaults

• Jignesh Shah headed the NSEL audit committee along with Shreekant Javalgekar and Joseph Massey butpurposely overlooked glaring irregularities and the fraud

• Mukesh Shah (auditor) in his internal audit report of NSEL for the period April 2011 to 30th September 2011pointed out that NSEL was taking higher risk of credit default as it does not hold any security or line. Theactivity entails funding of the transactions and the provisions of NBFC. No action was taken by the board.

• NSEL borrowers including NK protein were also active on MCX platform and conducted speculative trades

� The NSEL board which included Jignesh Shah repeatedly allowed fraudulent borrowers without KYC to trade after multiple defaults and even gave them repeated margin waivers

� All forensic audits conducted on NSEL/MCX /MCX-SX by 4 independent auditors found a host of fraudulent activities, irregularities, bogus donations, round tripping of money , bogus purchases, insider trading etc. In MCX audit it was found that for a lot of irregularities the orders came from ‘the group chairman’s office’ (Jignesh Shah) or they were done pursuant to the directions of his brother Manjay Shah (neither employee nor director in MCX)

� The financials of NSEL for period of April 2011 to February 2012 were placed before the board of directors of NSEL with 1149% rise in profit before tax. The board including Jignesh Shah congratulated Anjani Sinha and applauded his performance. Such anomalous jump in profit would not have gone unnoticed. NSEL also contributed 55% to FTIL’s 2013 consolidated profits and it is impossible that FT group would not know what was going on at NSEL which was a cash cow for them

� The auditor of NSEL and MCX, Mukesh P Shah was found to be the recipient of bogus donations to the tune of about Rs.2.5 Crore. Another ex director of NSEL Mr. Sunil Daga Khairnar who was looking after liaison work of FTIL group in Delhi was found to be the recipient of bogus donation of about Rs.17.7 Crore. These donations to Mr. Khairnar correlate with the period in which the April 2012 SCN issued by the Ministry of Consumer Affairs was kept in abeyance. CBI needs to investigate this aspect

� In the presentation made by Shri Jignesh Shah, Director of NSEL in the presence of Secretary, Department of Consumer Affairs on 10th July, 2013, had mentioned that trading on NSEL is a safe and smooth economic activity, as over 100% stock are held as collateral (managed by independent collateral manager), 10–20% as margin money and backed by 100% of Post Dated Cheques from participants offering highest level of safety for participants. This shows Jignesh Shah purposely misled DCA and hid material facts in order to fool them

� In the charge-sheet filed by Mumbai police it is confirmed that a company close to Jignesh Shah where his company La Fin had an investment of Rs 5 Crores took out all its money (he was the largest investor on NSEL) just before the scam without losing a penny showing Jignesh Shah’s complicity

� Even the FMC passed its order where FTIL, Jignesh Shah, Joseph Massey and Shreekant Javalgekar. Were found ‘unfit and improper ‘ to run exchanges and biggest beneficiaries of the fraud

� ‘Paired trades ‘ which were 25% of Turnover of NSEL in 2009-10 became 99% of the NSEL turnover in 2013-14. This shows that they had totally deviated from their core business model.

� Even though FTIL managed NSEL mail server ‘crashed’ just after the scam (sanitized-tampered), some emails were recovered by Mumbai EOW and these emails exchanged between Jignesh Shah, Anjani Sinha and Shreekant Javalgekar disclose startling facts.(Anjani Sinha’s email dated April 5, 2011 7.15 PM to JigneshShah and copied to Shreekant Javalgekar is crucial). They prove clinching facts:

1. Jignesh Shah knew about IBMA's bogus trades (wash trades) on NSEL as Anjani refused to share those revenue with FTIL

2. FTIL was very keen to show more profits and was taking 20% of trading charges/revenue collected by NSEL as bogus “software support-technology charges”

3. IBMA created bogus volumes in MCX and suffered loses which were being adjusted by round tripping of bogus profits to full knowledge of Jignesh Shah

4. If profits and activities of 3rd level subsidiary like IBMA were monitored to smallest amount (about a Crore) by Jignesh Shah how could Jignesh Shah be ignorant of Rs. 5600 Crores being doled out to shell companies

5. Jignesh Shah was fully monitoring profits and other NSEL activities

6. Jignesh Shah and Anjani Sinha refer to NK protein Ltd as (NK) showing very close contacts and familiarity. Jignesh Shah also knew about Rs 6 Crore bogus profits given by NK Protein Ltd to NSEL (NK Protein Ltd is the biggest borrower)

7. Mukesh Shah (auditor and Jignesh’s uncle) fully knew about bogus profit adjustments as he was sent a copy of the mail on his private email ID.

8. Shreekant Javalgekar mentions that FTIL should be kept clear from bogus profit adjustments.

9. “De-hiring of unproductive warehouses” clearly shows Jignesh Shah knew NSEL is not using 3rd party warehouses for saving money and using borrowers' own warehouse which was like allowing the cat guard the milk.

� The fact that only borrowers were supposed to sell in T + 2 and buy in T+25 and never the other way round

proves the whole criminal conspiracy was hatched by NSEL and FTIL as this was not a genuine market and

was ab initio only a financing platform

� While the investors thought it was a live market for arbitrage where price discovery happens by live bids

and offers, brokers and NSEL/FTIL fully knew it was rigged form the back-end as there was hardly any price

movement (whereas physical commodity markets are highly volatile in nature)

� FTIL/NSEL when they launched new contracts exactly knew there are only a handful of borrowers whereas

13000 assorted retail investors on the other side making it abjectly lopsided and rigged exchange

� There was not a single case of delivery being offered by any defaulting borrower or taken by any investor as

one way contract by investors were not allowed by the exchange and any buy trade without matching sale

trade was nullified at the end of the day and the investor penalized

� Jignesh Shah himself came on TV on 5th August 2013 and claimed existence of stocks and SGF. He even

argued “What will investors do with commodities so let’s go for a financial closeout rather than selling

stocks”. This shows he clearly knew there were no stocks

� There was a story in Economic Times on 19 July 2013 before the scam broke about NSEL inflating castor

stocks. The FTIL website rebutted this allegation immediately showing FTIL’s conspiracy to hide facts from

investors and public at large

� Even in the audit of MCX it was found that some warehouses existed only on paper (just like NSEL)

reconfirming the fact that it was FTIL masterminding all the fraudulent activities in the group.

REGULATORY SET UP /CONTROLS

� NSEL was given an exemption from FCRA in 2007 only for 1 day forward contracts limited to max 11 days

settlement

� FMC was by default the regulator under FCRA for trades extending 11 days (NTSD contracts)

� NSEL’s application for registration of NTSD contracts under section 14 A of FCRA in 2010 was shockingly

kept pending by FMC for 3 years and rejected only after the scam broke out.

� FMC was appointed as a designated agency to collect data from NSEL to ensure investors’ safety

� FMC by virtue of data collected by it since February 2012 fully knew about the disparity in number of

players on both sides and knew about lack of stock verification mechanism but did not act

� Ministry of consumer affairs did not act on the SCN issued in April 2012 for 15 months and meanwhile the

scam size ballooned many times

� The finance ministry had rung alarm bells multiple times in the past about lack of regulatory framework at

NSEL and even in 2008 expressed concerns about lack of regulation of NSEL in various communications to

Department of Consumer Affairs

� NSEL had obtained licenses of various state Governments under the respective APMC Act to deal into

notified agricultural product. Most licenses has expired but NSEL continued to trade

� In spite of receiving private complaints the FMC did not act or take any remedial action against NSEL

SITUATION SO FAR

� About 13000 investors collectively lost Rs 5600 Crores

� PSUs like MMTC and PEC have lost about Rs 350 Crores

� The Government of India will lose about 30% i.e. about Rs 1650 Crores by way of Income Tax set offs alone not to mention direct losses to PSUs

� The investors have so far only received measly 6% in last 12 months which net of inflation is nothing

� The FMC has declared Jignesh Shah, Shreekant Javalgekar, Joseph Massey and FTIL as unfit and improper to hold ownership of any exchange

� The interim ROC report also found that the promoters of NSEL have not acted in good faith and failed in their fiduciary duties (but no action)

� The EOW Wing of Mumbai police has registered an FIR in the case and arrested Jignesh Shah as well as several borrowers and invoked MPID act

� Various properties of defaulting borrowers and Jignesh Shah etc have been attached under MPID but the liquidation of these properties is an excruciatingly slow process and may take 5-7 years going by history of MPID auctions in other scams

� ED has booked a case under PMLA ( where there is no distribution provision to pay investors) and has attached several properties of defaulting borrowers. EOW Mumbai police and ED seem to be working at cross purposes

� CBI also booked an FIR and is investigating the scam. However no action has been taken on any Govt. official in spite of glaring irregularities and cover up

� Various court cases in Mumbai HC /MPID court pending against NSEL, Jignesh Shah and FTIL and defaulting borrowers

� No action against FTIL by any govt. agency (including ministry of corporate affairs ) who are merrily still siphoning funds out of the system

CONFLICT OF INTEREST

Exchange vs. Borrower:

� One of the largest borrowers (approx. Rs. 930 Crores), N.K Proteins promoted by the son-in-law of the NSEL Chairman, Mr. Shankarlal Guru

Promoter vs. Auditor:

� In 2012, auditing firm S.V. Ghatalia & Associates (E & Y) was replaced by the CA firm, Mukesh P. Shah & Co. , where the partner Mukesh P. Shah is an uncle of Jignesh Shah

� Auditor S.V. Ghatalia & Associates (E & Y) also happened to be an auditor of NK protein Ltd one of the largest borrowers. The bogus NSEL turnover did not reflect in NK Protein’s books

Related Party Trades

� IBMA is held 61% by NSEL. IBMA was a clearing and trading member of NSEL and cleared around 20% of total trades of NSEL. IBMA also received bogus profits from various NSEL defaulters

� Jignesh Shah apparently speculated on MCX through IBMA and conducted bogus trades on MCX and lost about Rs 75 crores which were debited to SNP Designs P Ltd. to hide the losses. There seems to be no financial dealing between IBMA and SNP Designs P Ltd

� MCX audit found bogus donations to Auditor Mukesh P Shah who was an uncle of Jignesh Shah

Insider Trading

� Massive selling of FTIL shares by a coterie of investors close to Jignesh Shah in July 2013 with knowledge of scam exposure. (Needs SEBI investigation). (before it crashed from about Rs 800 to Rs 150)

� Withdrawal of NSEL investments by a group close to Jignesh Shah in July 2013 which was the biggest investor on NSEL platform.

JIGNESH SHAH -FTIL’s ACTS POST SCAM

� The blame for the scam was pinned on Anjani Sinha who was merely a paid employee and actually ’ Paired

trades were started before Anjani even became the CEO at NSEL

� Jignesh Shah impounded Anjani Sinha’s passport and made him file incriminating affidavit by force

� FMC entrusted same NSEL-FTIL management for recovery of money which gave money to borrowing

defaulters. FTIL appointed team is managing the recovery now without any seriousness and the whole

process is a sham

� FTIL started selling their assets/stakes and tried and liquidated following holdings-

� SMX (Singapore) - Sold for US$150 million (Rs 900 crores)

� 5% Stake in IEX (Indian Energy exchange) sold for 72.89 Crores

� 15% Stake in MCX sold at 600 Rs per share to Kotak when market price was around 850 Rs per share amassing Rs 495 crores

� 2% stake in MCX sold to Rakesh Jhunjhunwala for 66 Crores

� Stake in NBHC sold for 242 Crores

� Now FTIL has nearly sold 27% stake in DGCX (Dubai) for 110 Mn US$ (Rs 660 Crores)

� Total assets sold by FTIL in last 1 year after the scam= About Rs 2436 Crores

� FTIL prepaid ECB to take the money out of the ambit of Indian courts and investigation agencies. The foreign

loans of FTIL seem to be their own black money as the company with Rs 2600 Crore reserves and about Rs

1500 Crore liquid investments did not need any foreign loans.(Needs ED investigation)

GALAXY Of EX-BUREAUCRATS WITH FTIL GROUP

� Mr. Venkat Chary: Ex FMC chairman, Chief Secretary Maharashtra

� Mr. Ashok Jha : Ex Finance Secretary

� Mr. B.C. Khatua (his son works for FTIL group): Ex FMC Chairman

� Mr. G.N. Bajpai : Ex chairman SEBI

� Mr. Paul Joseph : Ex Senior Economic Adviser Department of Consumer Affairs , principal adviser

Planning Commission

� Mrs. Dharmistha Rawal : Ex ED SEBI

� Mr. S. Narayan : Ex Secretary Finance and Eco. Affairs, Secretary Department of Revenue ,Coal

� Dr. Nitish Sengupta : Ex Revenue Secretary and Secretary Planning Commission

� Justice S.U. Kamdar : Ex Mumbai HC Judge

� Mr. Atul Rai : Ex Director Ministry of Finance

� Mr. P.K. Singhal: Ex Director FMC and SEBI

� Mr. Shashi Shekhar : Ex Joint secretary Mininstry of Power

� Mr. S.N. Tuteja : Ex Secretary department of food and public distribution

� Mr. P.R. Ramesh : Ex Director Legal SEBI

Role of Brokers

� False inducement of safety and bogus assurance of existence of stocks

� Non collection of delivery order and warehouse receipts (No WR ever printed)

� Brokers acted as C & F agents , collected false C & F charges and issued bogus VAT bills worth thousands of Crores without underlying goods.

� Bogus charges like Warehouse receipt transfer charges, Transaction charge and Delivery allocation charge, C & F charge levied on investors over and above brokerage

� Collusion with Jignesh Shah. Most NSEL brokers also traded on FTIL’s other exchanges abroad and rigged those exchanges and collected cash incentives form Jignesh Shah through hawala (FEMA violations to investigated by ED)

� Rigged market where NSEL and brokers used to punch trades in concert and no genuine market discovery of price with often huge time difference between buy and sell arm of the contracts

� Purchases effected without client’s orders in the morning in bogus client names and then allocated to other users. Rampant client code modifications by all top brokers.

� Most top brokers were also wealth managers and took powers of attorney to handle goods on behalf of investors.

� Brokers had full knowledge about the end borrowers while investors thought the trades were anonymous

� An employee of Motilal Oswal franchisee was a director in Juggernaut Projects as highlighted by ShriKirit Somaiya

WHY SHOULD GOI HELP

� Financial markets of the country are sacrosanct and the safety and stability of financial markets is the very backbone of economic growth

� An exchange defaulting on its counter guarantee and investors remaining unpaid is unheard of in the world. This shakes the very faith and foundation of investors in India and also of the FIIs now eyeing India as a hot investment destination

� Various Government officers /departments seem to be complicit in the crime and had swift action been taken earlier by them the scam could have been prevented. FMC and ministry of consumer affairs are guilty of nonfeasance, misfeasance and malfeasance. Now it is the duty of the government to right the wrongs and ensure that investors’ suffering ends

� The brand name of ‘NAFED’ was used to entice investors (on the website and presentations) which was to the knowledge of NAFED as they were trading on NSEL platform

� There are a lot of retired people, widows , students, etc who have lost their life time savings and will be driven to suicide if there is no succor form the government. Lot of investors have lost relatives for want of money for medical treatment

� The government of India is a benevolent democracy and should protect its law abiding citizens from systematic frauds and deliver justice. Nearly 13000 families living now in abject penury have ‘right to life’ which is a fundamental right enshrined in the constitution

� A lesson has to be taught to the masterminds of the fraud to ensure others don’t take the system for granted and abuse it to harm gullible investors

� This is a clear case of fraud by FTIL which it is chicanerously trying to pass it off as an ‘employee fraud’. The Chairman-Managing Director , Finance Director, Group CFO of FTIL were cooking the books of NSEL to hoodwink gullible investors

� This govt. which has got elected on the plank of fight against corruption should set an example to the perpetrators of this scam and public at large that the new govt. means business and will not tolerate scams unlike their predecessors.

WHAT SHOULD GOI DO

� Take over FTIL under various provisions of CLB and companies act as FTIL was the mastermind of the fraud and they are already sitting on about Rs 3000 Crore liquid cash (Satyam-like restructuring)

� Amend PMLA to allow for legitimate restitution of investors’ funds in case of properties attached where the ownership of the funds can be established and the origin of money is not tainted (here tax-paid money of investors)

� Immediate liquidation of properties already attached under PMLA in NSEL case

� Amalgamation of NSEL with FTIL (and establishment of NSEL investors as direct creditors to FTIL ) under section 396 of the companies Act 1956

� Application to CLB for changing the board of directors at FTIL under Section 408 of companies Act 1956

� Investigation into the affairs of NSEL /FTIL under section 210 of companies act 2013 by independent investigators appointed by the central Govt. or under section 212 of companies act 2013 by Serious Fraud Investigation Office

� Investigation under section 216 of the companies act 2013 for determining the persons who are financially interested in exercise control over the affairs of FTIL

� Constitution of interdepartmental group of secretaries to ensure coordination and to avoid agencies working at cross purposes/duplication of efforts

� Digital and forensic audit of the whole FTIL group including email reconstruction where servers crashed

� Prioritizing claims of investors over the claims of statutory authorities such as ED/Income Tax etc.

� Appointment of an OSD to take charge of FTIL and its affairs who can recover money and distribute them in a fair manner to aggrieved investors

� Establish fast track courts to process all court cases including all property auctions making it a time-bound process

� CBI –ED action against all players in the scam including brokers, auditors and Govt. servants

� Investigation agencies should unearth the trail of money and unravel the layering of transactions used by JigneshShah/Borrowers/brokers to siphon funds. These funds should be brought back and paid to the investors

INVESTORS’ ASSOCIATIONS:

NSEL INVESTORS’ ACTION GROUP ( NIAG)

NSEL INVESTORS JUSTICE GROUP (NIJG)