Mumbai: The Enforcement Directorate (ED) has conducted searches under the Foreign Exchange Management Act (FEMA) 1999, across multiple locations in Mumbai and Kolkata on Monday. The operations are part of an ongoing investigation into a front-running business linked to Axis Mutual Fund, with a focus on forex violations.
During the raids, ED officials seized movable assets, including foreign currencies (GBP, Euro, and AED) valued at Rs. 12.96 lakh. Additionally, incriminating documents related to overseas immovable properties, foreign bank accounts, and digital devices were confiscated, the ED said in an official statement.
The ED investigation stems from an interim order by the Securities and Exchange Board of India (SEBI), which levied allegations of front-running against Viresh Joshi, former chief trader and fund manager at Axis Mutual Fund, and others. The accused are alleged to have gained approximately Rs. 30.56 crore through illegal means. ED’s recent searches are part of the broader probe into this high-profile front-running scandal.
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 is considered unethical and illegal, as it undermines the integrity of the market and cause disadvantages to other investors.
According to ED official statment, evidence has surfaced revealing the intricate methods employed in the scam.
In this case Viresh Joshi is alleged to have shared market-sensitive information in exchange for kickbacks from brokers with terminals in Dubai,who could execute trade on his instructions. He also contacted few other individuals and entities based in India who could lend their trading accounts on rental basis. The illegal profits generated through these trades were received by Viresh Joshi in cash from the said brokers.
Further investigations uncovered that Joshi allegedly used operators in Kolkata to funnel these cash earnings into various bank accounts of shell entities. These entities then provided unsecured loans to Joshi, his family members, and firms beneficially owned by them.
ED’s Preliminary findings revealed that illegal gains made from front running was utilized for the purchase of immovable properties in UK. Documents related to two such properties have been found during the search operation, which an amount of Rs 14 Crore was remitted abroad.the financial probe agency said.
Additionally,ED stated that they found overseas entities namely M/s Vintage Capital Investment LLC in Dubai and M/s Vincent Capital Holding Limited in UK were incorporated with these funds and illegitimate gains to the tune of Rs 12 Crore were parked in those accounts.
The illegal proceeds were also reportedly used to form fixed deposits (FDs) and acquire properties in India. The ED has indicated that further investigations are underway to trace the complete flow of funds and determine the full extent of the violations.
