The Enforcement Directorate (ED) logo.
Credit: PTI File Photo
New Delhi: The Enforcement Directorate on Wednesday alleged that Viresh Joshi, a former chief trader and fund manager of Axis Mutual Fund, shared market-sensitive information in return for "kickbacks" from brokers having terminal in Dubai as part of a front running "scam".
The federal agency said in a statement that it conducted searches on September 9 at various locations in Mumbai and Kolkata as part of a probe under the Foreign Exchange Management Act (FEMA) in the context of Axis Mutual Fund.
"Movable properties in the form of foreign currencies like GBP, Euro, and AED amounting to Rs 12.96 lakh, various incriminating documents pertaining to overseas immovable properties, overseas bank accounts and digital devices were seized," it said.
The Income Tax Department had also raided Joshi in August, 2022 in the same case.
The ED action was triggered from an interim order passed by markets regulator SEBI that alleged "front running" business against Joshi and others for earning wrongful gains of Rs 30.56 crore.
Front running is a term used in the securities market to describe a practice where a broker or trader executes orders on a security for their own account while taking advantage of advance knowledge of pending orders from their customers.
This practice, as per the ED, is considered unethical and illegal, as it undermines the integrity of the market and causes disadvantages to other investors.
"Joshi was allegedly sharing market-sensitive information in return for kickbacks from brokers having terminal in Dubai who could execute the trade on his instructions.
"He also contacted few other individuals and entities based in India who could lend their trading accounts on a rental basis," the ED claimed.
The "illicit gains" generated through the said trade were received by Joshi in cash from the said brokers, it claimed.
The ED said Joshi used Kolkata-based operators to route the said cash in the bank accounts of multiple shell entities which in turn gave "unsecured" loans to Joshi, his family members, and firms and companies "beneficially owned" by them.
The said "illegal gains" made from front running were utilised for the purchase of immovable properties in the UK and documents related to two such properties were found for which an amount of Rs 14 crore was remitted abroad, the agency said.
It claimed that some overseas entities like Vintage Capital Investment LLC in Dubai and Vincent Capital Holding Limited in the UK were incorporated with these funds and "illegitimate gains" to the tune of Rs 12 crore were parked in those accounts.
Funds were also used to create fixed deposits and buy properties in India, it said.