MUMBAI: The Enforcement Directorate (ED) on Monday carried out searches as part of its Foreign Exchange Management Act (FEMA) probe against Viresh Joshi, a former fund manager of Axis Mutual Fund (MF), for alleged contravention of the forex rules.
The agency conducted searches at four locations in Mumbai and a location in Kolkata as part of its probe to gather case-related details and documents, agency sources said. The premises searched were linked to Joshi and a few brokers who are under the ED scanner.
Joshi was earlier under the scanner of the Income Tax (I-T) department in August 2022, when it carried out a search -and-seizure operation at more than 25 premises spread across Mumbai, Ahmedabad, Vadodara, Bhuj and Kolkata that covered the ex-fund manager, related share brokers, middlemen, and entry operators. More than 20 lockers were put under restraint and unaccounted deposits exceeding ₹55 crore were seized.
The I-T department had alleged that the seized funds were acquired from certain stockbrokers in lieu of providing insider information related to MF’s proposed investments in shares of specific firms. It was alleged that such brokers, upon receiving the prior information, would influence their clients into either buying shares or selling them to earn profits, which in market parlance is referred to as the act of “front running”, agency sources said.
It was alleged that the brokers would later collect their charges from their clients for their services via collection agents and a fraction of the same would be sent to Kolkata-based hawala/entry operators. The funds that reached Kolkata would, thereafter, get parked with certain paper firms, which would shift them allegedly to bank accounts of Joshi’s acquaintances/relatives. From these bank accounts, funds were allegedly further diverted to bank accounts of companies/entities incorporated in India and other low tax jurisdictions. The gleaning of seized evidence had allegedly exposed the nexus between the ex-fund manager, middlemen, share brokers and entry operators, according to the I-T Department, sources said.
{{/usCountry}}It was alleged that the brokers would later collect their charges from their clients for their services via collection agents and a fraction of the same would be sent to Kolkata-based hawala/entry operators. The funds that reached Kolkata would, thereafter, get parked with certain paper firms, which would shift them allegedly to bank accounts of Joshi’s acquaintances/relatives. From these bank accounts, funds were allegedly further diverted to bank accounts of companies/entities incorporated in India and other low tax jurisdictions. The gleaning of seized evidence had allegedly exposed the nexus between the ex-fund manager, middlemen, share brokers and entry operators, according to the I-T Department, sources said.
{{/usCountry}}Last year, the Securities and Exchange Board of India (SEBI), in an interim order, directed impounding of ₹30 crore on allegations that it represented unlawful gains earned from prima-facie front-running activities, adding that these should be deposited in an escrow account of the regulator. Joshi and over a dozen entities were also restrained from accessing capital markets by the SEBI.
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