ED freezes Rs 700 crore worth shares of Karvy CMD & kin

HYDERABAD: Enforcement Directorate (ED) has issued an order freezing shares worth Rs 700 crore of accused in Karvy scam under the Prevention of Money Laundering Act (PMLA). The estimated value of the shares, Rs 700 crore, was arrived as per the valuation report. Incidentally, the order was issued on Friday, but came to light on Saturday.Karvy had taken loans to the tune of Rs 3,000 crore. Investigation revealed that Rs 1,096 crore was transferred by Karvy Stock Broking Limited (KSBL) to its group company Karvy Realty (India) Ltd between April 2016 and October 2019. ED probe also found that recent deletion of files and emails from computer servers by using anti-forensic tools had been done under the instructions of Karvy chairman and managing director (CMD) C Parthasarathy.ED had on September 22 conducted searches at six KSBL offices and froze shares of Karvy Group held directly and indirectly by Parthasarathy, his sons Rajat Parthasarathy and Adhiraj Parthasarathy, and their entities in order to safeguard the proceeds of crime.ED has issued an ECIR under the PMLA based on FIRs by Hyderabad Central Crime Station (CCS) police on the complaint of HDFC Bank alleging that KSBL had illegally pledged the securities of its clients and taken a loan of Rs 329 crore and diverted it. In a second case, Hyderabad police said Karvy directors were booked for defrauding IndusInd Bank to the tune of Rs 137 crore, while Cyberabad police had registered one more FIR (third case) for defrauding ICICI Bank to the tune of Rs 562 crore.“Karvy under the leadership of C Parthasarathy had committed gross irregularities and all the illegally taken loans have become NPAs (non-performing assets). The total loan proceeds taken from multiple banks using the same modus operandi is around Rs 2,873 crore. NSE and SEBI are also investigating the affairs of KSBL. ED is conducting investigation under PMLA against Karvy Group of Companies for their involvement in the offence of money laundering to the tune of Rs 2,873 crore,” ED said.The investigation revealed that KSBL did not report one of the depository participatory (DP) accounts in the filings made between January 2019 and August 2019. KSBL fraudulently transferred shares belonging to its clients to its own demat account (which was not disclosed to the exchanges) and pledged the shares held in these accounts with lenders/banks (HDFC Bank, ICICI Bank, IndusInd Bank, Axis Bank, etc.). “The securities, lying in the DP account of KSBL, actually belonged to the clients who are the legitimate owners of the pledged securities. KSBL did not have any legal right to create a pledge on these securities and generate funds. The quantum of such loans taken by KSBL from illegal pledge of shares is to the tune of Rs 2,873 crore. KSBL credited the funds, raised by pledging of client securities, to six of its own bank accounts (stock broker-own account) instead of the ‘stock broker-client account’ and further has not reported these six own bank accounts held with various private banks to SEBI,” ED added.“KSBL did large-scale trading activities in the names of nine companies that included Karvy Consultants Limited (KCL), which is a group company of Karvy, and eight other shell companies, in the guise of doing insurance business. During the investigation conducted under PMLA, it also came to light that crores of rupees were diverted for acquiring immovable properties through the group company, KRIL, and other group companies,” the agency said.The bank statement analysis of these companies revealed that there was large value rotation of funds between the Karvy Group Companies and the shell companies’ bank accounts. Earlier, ED had recorded the statement of Parthasarathy at Chanchalguda jail.