Tuesday, December 17, 2013

After Borrowers, Brokers who pushed Ponzi scheme of Jignesh Shah promoted scam-ridden NSEL to come under probe ambit

The very first statement that Finance Minister P Chidambaram made on the Rs. 5600 crore NSEL payment crisis that later took shape of a full-fledged scam was that “investors knew that NSEL was unregulated, and they went with their eyes open”. That doesn’t seem to be the case as many of small investors are not only victims of NSEL but real victims of mis-selling by Brokers who were getting hefty commissions, as it has emerged in many cases.

Officials of EOW – Mumbai Police have already termed NSEL as not an exchange but a Ponzi Scheme

Investors who trusted and relied on their brokers to diversify their investments in commodity trading, in some cases, found that their intended investments in bullion landed up in wool. While it somewhere can be said to be a “bad decision” on part of the investors, but the brokers who were pushing them into NSEL’s ponzi schemes are more to blame. Many of these brokers would have made huge commissions when the going was good and do not stand to loose anything apart from their investors trust.

Ignorance is Bliss - Jignesh Shah proves the old dictum... as far as EOW is concerned.. Noone else buys the victim theory

The next leg of the probe will focus on such brokers and agents who found “gullible investors” to keep the ponzi scheme running. Brokers and Agents would surely have done their due diligence before recommending trading and financing on NSEL a safe bet with higher returns. Infact, the sacked and arrested CEO Anjani Sinha is understood to have claimed at EoW that many such big brokers with huge exposures at NSEL were directly dealing with Jignesh Shah and not him. Some of these brokers await payouts in hundreds of crores in behalf of their investor clients.

Being an unregulated market, it also offered a chance to brokers to make significantly higher returns than the regulated exchanges, sometimes even 100 times the margins they make in stock market purchases by their investors. A complete list of the beneficiary brokers and their agents is being prepared and scrutinized. After a few large defaulting borrowers join Nilesh Patel of NK Proteins, the heat may turn on to these brokers as Jignesh Shah feigns ignorance and continues to play the Victim card, that no one except EOW of Mumbai Police choses to buy.

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