Hyderabad: Investigation carried out by the Enforcement Directorate (ED) has revealed that the Karvy Group CMD Comandur Parthasarathy and CFO G Krishna Hari were the main conspirators in transferring the borrowed funds to WoS of Karvy Stock Broking Limited (KSBL), Karvy Realty India Limited (KRIL) and 14 shell companies.
The funds were further diverted by layering through a complex web of transactions from the several accounts of group companies without any financial rationale. Various financial consultants and defunct NBFCs were used to route the funds, according to a press release issued by ED.
Further, it was found that KSBL availed loans from Non-Banking Financial Companies (NBFCs) to the tune of Rs 400 crore in the name of five shell companies by pledging shares of clients of KSBL illegally.
The fraudulently availed loans were used to clear pending loans of related companies, do massive stock transactions which have allegedly turned into complete losses, and diverted to personally held family companies, the ED press release said.
The ED, which had earlier frozen shareholding of Parthasarathy worth around Rs 700 crore, is investigating the money trail to trace the proceeds of crime which are close to around Rs 2,000 crore.
The ED has arrested Parthasarathy and Krishna Hari under the Prevention of Money-laundering Act (PMLA) in a money laundering case connected with the fraud committed through the illegal diversion of clients' securities by KSBL worth Rs 2873.82 crore and pledging of these securities with banks and NBFCs for seeking loans and subsequent loan default.
The ED initiated a money-laundering investigation based on the FIR filed by HDFC bank with the Central Crime Station (CCS) of Hyderabad police under various Sections of the Indian Penal Code (IPC) for defrauding HDFC bank. Subsequently, more FIRs have been filed by other banks and a few investors.
The ED has recorded the statement of various employees of the Karvy Group and conducted searches at nine locations on September 22, 2021. It uncovered the complex web of transactions designed by the senior management of the Karvy Group to misuse the securities of their clients and to raise loans fraudulently which were then rotated via multiple related companies and diverted away from the stated purpose.
The shares of clients who did not owe any funds to KSBL were also transferred to the margin/pool account of KSBL and were pledged with the banks and NBFCs. The Power Of Attorney (POA) given by clients to KSBL to facilitate exchange settlements was grossly misused by KSBL at the directions of the CMD and senior executives, the release added.
Parthasarathy and Krishna Hari were lodged in the central jail in Bangalore and on a production warrant of ED court. They were produced before the PMLA special court in Hyderabad on January 20. The court has remanded the CMD and CFO of the Karvy Group to four days of ED custody from January 27 to 30.