Karvy Stock Broking in deep trouble: COO, CFO arrested in Rs 137 Cr bank fraud case

Hyderabad: The chief operating officer of Karvy Stock Broking Private Limited (KSBL), Rajiv Ranjan Singh, and the firm's chief financial officer G. Krishna Hari were arrested on Thursday here.

The central crime station of the Hyderabad police had booked a case against the company following a complaint from the vice-president of IndusInd Bank Hyderabad who alleged that Karvy Stock Broking had availed credit facilities of Rs. 137 crores by pledging securities and shares of its clients without their consent and misusing the power of attorney.

The securities were transferred into the Demat account of Karvy Stock Broking and pledged before the bank for margin and short-term requirement in the business of KSBL from 1 March 2013. The company had become a defaulter by diverting the funds into its own and connected businesses entities. On 22 November 2019, SEBI had revoked the pledge of securities with banks/NBFCs and returned the securities and accounts. The bank was left with no collateral and thereby Karvy had defaulted repayments of about Rs. 137 crores as of 31 March 2021.

On 19 August 2021, the firm's chairman and managing director C. Partha Sarathy was arrested and remanded for judicial custody. Further investigation revealed that the CEO, Mr. Ranjan Singh, who is in charge of trading and broking, had executed unauthorized trading in the trading accounts of nine other companies from 2014 to 2019. The CFO, Mr. Hari, had diverted funds raised from banks by pledging clients' securities as collateral to nine shell companies as per the instructions of Mr. Partha Sarathy to show a huge turnover and market share. A huge loss of Rs. 300 crores was shown as book debts.

Further, several criminal cases were registered at the Hyderabad central crime station against the company and others. Mr. Ranjan Singh and Mr. Krishna Hari were produced before the court for judicial remand on Thursday.