NSEL crisis: FTIL's Jignesh Shah arrested for alleged role in Rs 5,600-crore scam

Written by PTI | Mumbai | Updated: May 8 2014, 03:56am hrs
Jignesh ShahJignesh Shah had been the chairman and managing director of Financial Technologies since January 2001 and now serves as group chief executive. PTI
The Financial Technologies and Multi Commodity Exchange (MCX) promoter Jignesh Shah was arrested today 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 said.

Jignesh 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.

Jignesh 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.

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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.

Timeline: Rise and fall of Jignesh Shah

April, 1988: Jignesh Shah-led FTIL was incorporated as company in Chennai

November 2003: Jignesh Shah enters into the business of commodity futures markets and commences MCX operations

October 2008: FTIL subsidiary National Spot Exhange Ltd (NSEL), which is facing Rs 5,600 crore payment crisis, commenced live spot trading in commodities

May 2012: The Consumer Affairs Ministry issued show cause notice to NSEL saying that the spot contracts allowed on the bourse violated forward contract law

July 31, 2013: After government order, NSEL suspends most spot trading contracts in view of violation of certain regulatory norms.

August 6, 2013: Government bans trading in e-series contracts on NSEL, resulting into the complete halt of trading at the exchange

August 15, 2013: NSEL submits 33-week settlement plan to regulator Forward Markets Commission (FMC)

August 20, 2013: NSEL defaults the first settlement and sacks exchange CEO & MD Anjani Sinha

September 2013: Finance Ministry took over regulation of commodity futures markets from the Consumers Affairs Ministry after the payment crisis surfaced at NSEL

October 9, 2013: NSEL Vice-President Business Development Amit Mukherjee arrested, the first arrest in the scam

October 10, 2013: Jignesh Shah resigns as Vice Chairman and Shareholder Director of another group exchange MCX-SX

October 17, 2013: Arrest of NSEL former MD and CEO Anjani Sinha

October 31, 2013: Jignesh Shah resigns as Chairman of MCX

December 17, 2013: Regulator FMC declares Jignesh Shah and FTIL as unfit to run any exchanges and orderd FTIL to reduce its stake in MCX from 26 per cent to 2 per cent

December 20, 2013: FTIL moves High Court against the FMC order

March 13, 2014: CBI files case against NSEL, questions Jignesh Shah for the whole day.

May 7, 2014: Mumbai Police arrests Jignesh Shah.

Chairman of India's Financial Tech arrested in fraud probe

(Reuters) The chairman of Financial Technologies (India) Ltd, Jignesh Shah, was arrested on Wednesday as part of an investigation of fraud at a commodity exchange owned by the Indian bourse operator, a Mumbai police official said.

Shah has been under police investigation since August after National Spot Exchange Ltd (NSEL), the commodities exchange owned by Financial Technologies, abruptly suspended trade in most of its commodities contracts on July 31.

Investigations by commodities regulator the Forward Markets Commission showed what it said was a 55 billion rupee ($916 million) fraud, as the exchange defaulted on obligations to market participants because it did not have enough collateral.

Rajvardhan Sinha, additional commissioner in the Mumbai police unit that investigates white collar crime, said Shah had run "a criminal conspiracy with other accused who were running this exchange", referring to NSEL.

A Financial Technologies spokeswoman said the company was working on a statement regarding the matter.

Financial Technologies and Shah have previously denied knowledge of any fraudulent activity at NSEL, which ceased operations in August.

Shah's arrest is the latest blow to Financial Technologies, which also sells trading software.

The company was ordered by India's market regulator in March to cut its stake in a separate commodities exchange, Multi-Commodity Exchange of India Ltd (MCX), from 26 percent to 2 percent.

The commodities regulator had ruled that MCX was not "fit and proper" to run a bourse.

Financial Technologies subsequently announced it would sell the 24 percent MCX stake, although it has not yet completed the sale. ($1 = 60.0725 Indian Rupees)