Karvy scam | ED holds searches at properties linked to firm

The ED recorded a statement from KSBL CMD Comandur Parthasarathy last month for allegedly cheating IndusInd Bank of ₹137 crore.   | Photo Credit: Twitter@dir_ed

The Enforcement Directorate has conducted searches at six locations linked to Karvy Stock Broking Limited (KSBL) in connection with bank fraud cases involving ₹2,873 crore. It has also issued an order freezing Karvy group shares worth ₹700 crore held directly or indirectly by the KSBL chairman-cum-managing director (CMD) and others.

The ED’s freezing order is with respect to the shares held by KSBL CMD Comandur Parthasarathy, his sons, Rajat and Adhiraj, and their entities. Their estimated worth has been arrived at as per the valuation for 2019-20.

Last month, the Hyderabad police had arrested Mr. Parthasarathy for allegedly cheating IndusInd Bank of ₹137 crore. The ED recorded his statement when he was lodged in Chanchalguda Jail there.

Another case against KSBL was lodged with the Telangana police by the HDFC Bank for illegally pledging the securities of its clients to take a loan of ₹329 crore, which was diverted. A First Information Report (FIR) has also been instituted by the Cyberabad police for cheating ICICI Bank of ₹562.50 crore.

The ED has alleged that KSBL, headed by Mr. Parthasarathy, committed gross irregularities. “It is learnt that more FIRs are being registered by other banks and also individual shareholders/investors. The total loan proceeds taken from multiple banks using the same modus operandi is about ₹2,873 crore,” it said.

The National Stock Exchange and the Securities and Exchange Board of India (SEBI) are also investigating the affairs of KSBL.

According to the ED, KSBL had not reported the Depository Participatory account number 11458979, named Karvy Stock Broking Limited (BSE), in the filings made from January 2019 to August 2019 with the regulators or exchanges. It fraudulently transferred shares of its clients to its own demat account, which was not disclosed to the exchanges, and pledged them with the lending banks.

“KSBL did not have any legal right to create a pledge on these securities and generate funds,” it said.

It is alleged that KSBL credited the funds raised by the pledging of client securities to six of its own bank accounts, instead of the “stock broker-client accounts” held with various private banks, which had not been reported to the SEBI. Prima facie, a net amount of ₹1,096 crore was transferred by KSBL to its group company, Karvy Realty (India) Limited [KRIL], from April 2016 to October 2019.

The agency also alleged that KSBL did large-scale trading activities in the names of nine companies, including Karvy Consultants Limited and eight shell entities, in the guise of insurance business. Huge funds were diverted for acquiring properties via KRIL. A bank statement analysis of the companies revealed that there was large value rotation of funds between the Karvy group firms and the shell entities’ accounts.

Anti-forensic tools were used by the accused to delete the evidence of irregularities, the agency alleged.

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Printable version | Oct 28, 2021 10:00:27 PM |

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