NSEL promoter Jignesh Shah arrested by economic offences wing in Mumbai
Mumbai: The Financial Technologies and Multi Commodities Exchange (MCX) promoter Jignesh Shah was arrested on Wednesday by the EoW of Mumbai police for his alleged involvement in the Rs 5,600-crore National Spot Exchange Limited (NSEL) scam.
"We have arrested Jignesh Shah for his involvement in the NSEL scam," EoW sources told PTI here.
Shah came under scanner last year, when his group company NSEL faced a payment crisis and nearly 18,000 investors allegedly lost millions in late July.
Shah had been the chairman and managing director of Financial Technologies since January 2001 and now serves as group chief executive. He served as the chief business strategist at Financial Technologies.
With Shah's arrest, the total number of arrests in the scam has gone up to seven. The first arrest was the spot exchange CEO Anjani Sinha last October. Sinha is currently in jail.
Since the NSEL crisis came to fore, the FTIL group, Shah and his close aide Joseph Massey came under increased regulatory scrutiny and was ordered by both the Sebi and FMC as not fit and proper to run any exchanges in the country.
Shah was a group chief executive of MCX Stock Exchange, promoted by the group. Significantly, his 26 per cent holding has to be brought down to nil over the next three years and to 2 per cent over the next 90 days, according to the regulators.
Besides being the founder chairman and group chief executive of Financial Technologies Group, Shah is also the founder of MCX, the world's eighth largest commodity futures exchange, in over 12 years.
Shah is a first-generation entrepreneur and the founder/promoter of the FTIL Group, founded in 1999.
He was actively involved with the automation of the trading systems at Bombay Stock Exchange (BSE) and was also responsible for designing and implementing various modules of the back-office systems of BSE, particularly for market operations and surveillance.
NSEL Investors Forum hopes to get back money
Meanwhile, NSEL Investors Forum hoped that Shah’s arrest would help in early recovery of funds in the Rs 5,600-crore payment scam at the spot exchange.
NSEL Investors Forum represents 13,000 investors, whose money is stuck following the payment crisis at the National Spot Exchange Ltd, a subsidiary of FTIL.
"Shah's arrest was long over due. His arrest will scare defaulters and force them to pay the money at the earliest," Forum Secretary Arun Dalmia told PTI.
The entire money would have been recovered if was Shah was arrested in August last year. The payment default would have been only Rs 2,000 crore had the government taken action way back in 2012, he added.
With Shah's arrest, the total number of arrests in the scam has gone up to seven. Shah's FTIL owns NSEL, a spot commodities exchange that is under investigation by the police and regulators after it struggled to settle outstanding contracts worth Rs 5,600 crore.
NSEL's payment troubles began after it was ordered by regulator Forward Markets Commission (FMC) in July last year to suspend spot trade in most of its contracts due to suspected trading violations.
The exchange could not settle the outstanding trades, sparking investigations by the police and regulators to find out whether the exchange had defrauded traders by not enforcing rules requiring sufficient collateral to be set aside.
FTIL blamed NSEL executives and the trading parties for the default. There were 24 members who defaulted payment to about 13,000 investors. FTIL owns 99.9 per cent of NSEL, which has suspended all trading operations since the payment shortages.
