Assets worth Rs 1,984cr attached in money laundering case

New Delhi, March 9 (IANS) The Enforcement Directorate (ED) on Wednesday said it has attached immovable and movable properties in the form of lands, buildings and share holdings worth Rs 1,984 crore in connection with a money laundering case pertaining to Karvy Stock Broking Ltd (KSBL), and its Chairman Comandur Parathasarathy and others.

The ED initiated money laundering investigation on the basis of FIRs filed by the CCS Police Station, Hyderabad Police, on the complaints of lending Banks who complained that the Karvy Group had availed large amounts of loans by illegally pledging their clients' shares worth about Rs 2,800 crore and the loans became NPA after the release of the client's securities as per the orders of NSE and SEBI.

KSBL was one of the leading Stock Brokers in the country with millions of clients. The scam came to light after a limited purpose inspection of KSBL conducted by NSE in 2019 revealed that KSBL had not revealed a DP Account and credited the funds raised by pledging of client securities to 6 of its own bank accounts ("Stock Broker-own Account") instead of the "Stock Broker-Client Account".

The ED collected the audit conducted by NSE and the orders passed by SEBI and ROC against KSBL and the forensic audit reports of BDO India LLP.

In 2021, the ED conducted searches at nine locations. In 2022 Parathasarathy, and G Hari Krishna, CFO, were arrested, and sent to judicial custody.

The ED said that the accused individuals were evasive throughout the questioning.

According to the ED investigation, KSBL had misused the Power of Attorney given by its clients and misused the same to illegally raise loans. Shares of clients who did not owe any funds to KSBL had been transferred to the Pool Account of KSBL and were pledged with the banks by making misleading declaration of ownership.

"Share transfers were done from the client's accounts for which the KSBL's Sales Team claimed that they had taken clients' approval for stock lending through phone or orally, but there were no supporting documentary evidence," said the ED official.

Large amounts of proceeds of crime were 'invested' by the accused in the form of investments, short term advances, loans to group companies. This resulted in enhancement of the value of the subsidiary companies of KSBL.

"The accused were trying to sell these subsidiary businesses at a profit to yield indirect windfall gains to the main accused," the ED said.

Further investigation is underway.