The Law Enforcement (ED) Directorate informed on Thursday that CMD Comandur Parthasarathy of the Karvy Group and CFO G Krishna Hari were arraigned before the Special Court of PMLA MSJ Hyderabad on January 20, 2022, and the Court has dismissed the CMD and CFO four days from ED. police custody from January 27 to 30, 2022.
In a statement, the Financial Investigation Agency said it had initiated a money laundering investigation based on the FIR filed by HDFC Bank with CCS Hyderabad Police under various sections of the IPC for defrauding HDFC Bank. Subsequently, other FIRs were filed by other banks and some investors. The agency recorded the statement of various employees of the Karvy Group and carried out searches in nine locations on September 22, 2021, and uncovered the complex web of transactions designed by the senior management of the Karvy Group to misuse their clients’ securities and to fraudulently contract loans which were then rotated through several related companies and diverted from the stated purpose.
“Shares of clients who owed no funds to KSBL were also transferred to KSBL’s margin/pool account and pledged to banks/NBFCs. The power of attorney (POA) given by clients to KSBL to facilitate exchange settlements has been grossly misused by KSBL under the instructions of the CMD and senior management,” the ED statement reads.
Parthasarathy and Hari were the main conspirators who gave instructions to the others, the agency said, adding that “the investigation of the money trails showed that the borrowed funds were transferred to other group companies, in particular to a WoS of KSBL i.e. M/s Karvy Realty (India) Limited (KRIL) and then to 14 fictitious companies launched by Karvy Group The same were hijacked by the overlay done through a network complex of transactions from several accounts of group companies without any financial justification.
Various financial consultants and former NBFCs were used to channel the funds. Further, the ED found that Karvy Stock Broking benefited from loans from NBFC to the tune of Rs 400 crore on behalf of five of these shell companies by pledging shares of KSBL clients after illegally transferring those shares to their account. Fraudulently used loans were used to repay pending loans from related companies, make massive stock trades that would have turned into complete losses and were diverted to personally owned family businesses.
The ED had previously frozen shares of Parthasarathy worth around Rs 700 crore and is investigating the money trail to trace the proceeds of crime which are close to around Rs 2000 crore. Further investigation is underway.