Axis Mutual Fund: ED carries out searches in Mumbai, Kolkata in front running case

ED has initiated investigation on the basis of an interim order passed by SEBI levelling allegations of front running against Viresh Joshi and others for earning wrongful gains of approximately Rs 30.56 crore.

Front running is a term used in the securities market to describe a practice where a broker or trader executes orders on a security for their own account while taking advantage of advance knowledge of pending orders from their customers.

This practice is considered unethical and illegal, as it undermines the integrity of the market and causes disadvantages to other investors, the ED has said.

ED’s investigation has found evidence which unravels the modus operandi identified in the front running scam.

In this case, Viresh Joshi was allegedly sharing market-sensitive information in return for kickbacks from brokers having terminals in Dubai who could execute trades on his instructions. He also contacted few other individuals or entities based in India who could lend their trading accounts on rental basis. The illicit gains generated through the trade was received by Viresh Joshi in cash from the said brokers, ED has stated.

Joshi used Kolkata based operators to route the said cash in the bank accounts of multiple shell entities which in turn gave unsecured loans to Joshi, his family members and the firms/companies beneficially owned by them.

Preliminary investigations by the anti-money laundering agency has revealed that the said illegal gains made from front running was utilised for the purchase of immovable properties in the UK.

Documents related to two such properties have been found for which an amount of Rs 14 Crore was remitted abroad.

It is also found that overseas entities namely M/s Vintage Capital Investment LLC in Dubai and M/s Vincent Capital Holding Limited in UK were incorporated with these funds and illegitimate gains to the tune of Rs 12 Crore were parked in those accounts. Funds were also used to form FDs and buy properties in India., the central agency said.