ED ties up properties worth Rs 1,984 crore belonging to Karvy Stock Broking Ltd – The New Indian Express

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Express press service

HYDERABAD: The Enforcement Directorate (ED) has provisionally seized properties worth Rs 1,984 crore belonging to Karvy Stock Broking Ltd, its Chairman C Parathasarathy and other KSBL officials as part of the investigation on money laundering against them.

Attached assets include 102 land properties worth Rs 213.69 crore, Parathasarathy’s stake in KFin Technologies, a sister company worth Rs 438.70 crore and tangible and intangible assets of a worth Rs 1,280 crore from other sister companies – KDMSL, KFSL NBFC and KSBL, totaling to Rs 1,984 crore.

The ED launched a money laundering investigation based on FIRs filed by the Central Crime Station of the Hyderabad City Police on complaints from lending banks who complained that the Karvy Group had profited from large loan amounts by illegally pledging their clients’ shares worth approximately Rs 2,800 crores and said loans became non-performing assets after the client’s securities were released as per the orders of NSE & SEBI.

The scam came to light after an NSE inspection in 2019 found that KSBL failed to disclose a DP account and credited funds raised by pledging client securities to six of its own bank accounts – the broker’s account. in securities instead of the “Stock Broker-Client Account.

The ED collected the audit carried out by NSE and the orders placed by SEBI and ROC against KSBL and the forensic audit reports of M/s BDO India LLP. Further, searches were carried out in nine locations in September 2021 and later C Parathasarathy and G Hari Krishna, CFO of Karvy Group, were brought on production warrant and brought before ED court in Hyderabad and arrested in January 2021 They are currently in court. keep.

Parathasarathy did not cooperate during the investigation and while admitting some wrongdoing by KSBL, he laid all the blame on the CEO, CFO and other senior officials of the group companies, the ED said. .

The ED conducted a thorough investigation, recorded the statement of the managers, directors of related entities and found that KSBL had abused the power of attorney given by its customers. The shares of the clients who owed no funds to KSBL had been transferred to KSBL’s joint account and pledged to the banks by making misleading claims of ownership. Stock transfers were made from client accounts for which the KSBL sales team claimed to have obtained client approval for stock lending over the phone or verbally, but there is no evidence supporting documentary.

Subsequently, the loans were diverted from their stated purpose by a set of senior officials working under the overall control of the CMD from a “secretariat section” which maintained a “back-office control account”.

Funds were diverted to companies like KDMSL, KRIL which was set up for real estate projects, embezzled loan funds were channeled through several former NBFCs to KFSL to clear its bad debts and much of the loan proceeds were injected into Shell insurance companies which made massive speculations. exchange of shares with KSBL as a stockbroker and apparently suffered massive losses.

A very complex network of financial transactions, using several fictitious entities and NBFCs, was executed to conceal the source of these funds with a view to projecting them as uncontaminated funds and large amounts of proceeds of crime were “invested” by infusing in the form of investments, share capital, short-term advances, loans to group companies.

This resulted in an increase in the value of KSBL’s subsidiaries. Now the defendants are trying to sell those subsidiaries for a profit to yield collateral gains to the main defendant, the ED said. Further investigation is underway.

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