The Central Bureau of Investigation (CBI) on Tuesday arrested Jignesh Shah, promoter of Financial Technologies India Ltd (FTIL) and commodity exchange MCX, and conducted searches at nine places in Mumbai in a case of alleged cheating and suppression of facts in getting Sebi extension to MCX-SX to continue as a private stock exchange in violation of norms.
The CBI searched the residence and office premises of Shah, FTIL, MCX, senior Sebi officials including executive director Murali Dhar Rao, DGM Rajesh Dangeti and AGM Vishakha More and JN Gupta, a former executive director of the Sebi. “Incriminating documents, including transfer of shares by private companies, FDR, purchase of assets etc., recovered during searches are being scrutinised for further investigation,” CBI said.
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According to the CBI, the case was registered against the promoter of FTIL, four former Sebi officials and others on allegations of connivance of Sebi officials with private company/stock exchange (MCX-SX) in fraudulently allowing renewal of recognition of the stock exchange to conduct trade in currency derivatives in 2009-10.
“It was further alleged that the said private company/stock exchange had dishonestly entered into a buyback arrangement with some financial institutions in violation of the Securities Contract Regulation Act, 1956 and other rules & regulations and deliberately suppressed this material fact while applying for extension of its recognition to operate in currency derivative,” CBI said. The Sebi allegedly rejected the request of private company/stock exchange for trading in other segments in 2010, but renewed the registration granted to said company/stock exchange even though it was not compliant to Sebi norms.
In a statement issued on Tuesday, 63 Moons (formerly known as FTIL) said: “Pursuant to the applicable Regulations of Sebi (LODR), Regulations 2015, please be informed that CBI, Economic Offence Wing, Mumbai, is conducting search in connection with FIR No. RC.0682014E0009 relating to recognition granted by Sebi to MCX-SX (now Metropolitan Stock Exchange of India Limited).”
MCX-SX started an equity trading platform in 2012. MCX-SX and Sebi fought a long battle, with the latter refusing to grant the exchange permission to trade in equities till it met prescribed norms on ownership. There was speculation then that extensions were denied to then Sebi whole-time director KM Abraham and chairman CB Bhave over their refusal to accommodate MCX-SX. Abraham also wrote a letter to the Prime Minister citing pressure from the finance minister’s office on a few cases including on MCX.
In March 2014, Sebi barred Jignesh Shah-promoted FTIL from owning stakes in the country’s stock exchanges. The regulator said FTIL was not ‘fit & proper’ to hold shares in bourses and directed it to sell its holding in the four exchanges and a clearing corporation within 90 days.
Earlier this year, ED had arrested Jignesh Shah, director of the National Spot Exchange Ltd, in connection with the Rs 5,600 crore scam at the commodity spot exchange.