NSE co-location scam: ED arrests former Mumbai Police Commissioner Sanjay Pandey

“During investigation, we found that a firm linked to Pandey snooped on as many as 91 office-bearers of the NSE on the directions of its then managing director Ramkrishna and such tapping was going on since 1997. We have made the arrest after finding sufficient technical evidence against him (Pandey),” ED sources said.

“We want to know the motive behind tapping the phones of so many NSE office-bearers and with his arrest, we will confront both of them (Ramkrishna and Pandey),” sources said.

The ED case is based on a CBI FIR registered in 2018 against 1986-batch IPS officer Pandey, an audit company linked to his family, and others, including Ramkrishna.

The CBI is probing how the audit company iSec Services Pvt Ltd, which was incorporated in 2001 by Pandey and subsequently contracted by NSE, did not red flag that the exchange’s servers were compromised. According to investigators, the compromise allowed one of the trading companies to allegedly get unfair access to the system, resulting in windfall profits.

When iSec Services Pvt Ltd was incorporated in March 2001, Pandey was not in service. He quit the directorship in May 2006, with his mother Santosh and son Armaan becoming directors in the company. Based out of Oshiwara in Andheri, it was one of the IT companies tasked with conducting security audits at NSE during 2010 to 2015 when the co-location scam is believed to have taken place.

The CBI’s investigation over the course of the last four years had led to the arrest of Ramkrishna and the NSE’s former group operating officer Anand Subramanian.

In the money laundering case, sources said the ED has found documentary and electronic evidence to show that phones of 91 NSE employees had been tapped by iSec Services Pvt Ltd. According to the sources, the agency also found transcripts and voice recordings — most of them purportedly about information on stocks and functioning of the NSE.

Pandey had served as the Acting Maharashtra DGP before his four-month stint as Mumbai’s Police Commissioner, which ended with his retirement recently.

Seeking Ramkrishna’s remand last Thursday, the ED had told the court of Special Judge Sunena Sharma that a Rs 4.54 crore payment to iSec for the phone tapping was allegedly agreed upon by NSE officials, including Ramkrishna and the company representatives.

On Monday, the ED, through its lawyer advocate N K Matta, sought a five-day remand of Ramkrishna, arguing that new facts that have surfaced in its investigation show that phone-tapping was going on at the NSE since 1997.

Meanwhile, investigators in the co-location scam are probing allegations that some brokers who had leased space at the NSE co-location facility were able to log on to the exchange’s systems faster with better hardware specifications, which gave them an unfair advantage from 2012 to 2014.

Co-location is typically associated with a facility where a third party can lease a rack/ server space along with other computer hardware.