Gulail had first reported how National Spot Exchange Limited (NSEL) was involved in duping more than 17,000 investors through trading of fake stocks, fake warehouse receipts and exchange of money rather than commodities and misled investors by giving them false information.
The EOW had filed a preliminary enquiry case against NSEL, Shah and others in connection with the scam, which has now been converted into a FIR that names all the directors of NSEL, including Shah and Massey. The FIR also includes the names of the 24 members who owe money to about 13,000 NSEL investors. All the accused will reportedly be charged under the Prevention of Money Laundering Act (PMLA) by the Enforcement Directorate (ED). The PMLA allows ED to seize properties involved in money laundering.
NSEL never had the amount of commodities it claimed to possess. As per the rules for trading of commodities through NSEL, the sellers and buyers have to complete the business transactions within a stipulated time. The buyer gives the entire amount to the seller on the last day; only then does he get the commodity quantity. This was never done; just the money was returned to the buyers. This implies that commodity exchange never really took place, only money exchanged hands. All financial transactions took place through NSEL.
NSEL Investors’ Forum had lodged a complaint against NSEL with the Enforcement Directorate (ED) pointing out that they were going to face a payment crisis of Rs 5500 crore. As per the complaint NSEL and its management as well as FTIL started issuing fake warehouse receipts to trade in items that they never possessed. The payment crisis that has emerged in NSEL will negatively affect the entire financial market of.
Under NSEL’s management are 24 companies that have outstanding dues of over Rs 5572 crores, due to which nearly 17,000 investors are unable to get their money back. On 14 August NSEL refused to make the payment on the grounds that it was unsuccessful in gathering margin money, guarantee etc. This shows the complicity between this company’s management, FTIL and the 24 defaulter companies in cheating the investors.