The Serious Fraud Investigation Office (SFIO) ON Thursday arrested Rahul Kothari, former director of Rotomac Global and son of Rotomac promoter Vikram Kothari, for his alleged involvement and manipulating bank statements to obtain bank funds.
It also arrested the managing director of Frost International Uday Desai and CEO Sujay Desai for fraudulent round tripping of funds and manipulating financial statements to get funds from banks. The Rotomac group has defaulted on loans of around Rs 4,000 crore, while the Frost International group has defaulted on liabilities of Rs 3,500 crore, according to the SFIO.
“During the course of investigation, it has been revealed that the companies were indulging in fraudulent round tripping of funds abusing the scheme of Merchanting Trade,” said an official note reviewed by The Indian Express.
Merchanting trade is the activity of shipping products from one foreign country to another foreign country.
Both groups are alleged to have hidden foreign exchange losses from their fraudulent trade activity by issuing fake debit notes to foreign entities which were also controlled by them and showing trade receivables on their books to make their balance sheets appear healthy.
“They inter-alia issued fictitious debit notes to many foreign entities, which were under their control, in order to fraudulently transfer these foreign exchange losses incurred during the fraudulent merchanting trade to trade receivables,” said the note.
According to the note, the Rotomac group of companies is alleged to have manipulated trade receivables by around Rs 3,000 crore while
Frost International Limited is alleged to have manipulated trade receivables by around Rs 3,500 crore.
The Central Bureau of investigation too has initiated multiple cases against the promoters of Rotomac group and Frost International for bank fraud.
The Rotomac group had outstanding dues of Rs 4,000 crore while Frost International has outstanding dues of around Rs 3,500 crore, according to the SFIO.
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