A Hyderabad-based PMLA Special Court has remanded Karvy Group’s CMD Comandur Parthasarathy and CFO G Krishna Hari to the custody of the Enforcement Directorate (ED) till 30th January to enable further investigation in a money laundering case. ED had arrested the duo under PMLA (Prevention of Money Laundering Act) for an alleged fraud committed through illegal diversion of clients’ securities by Karvy Stock Broking Limited (KSBL) worth Rs. 2,873.82 crores, which also included pledging of these securities with banks/NBFCs for seeking loans and subsequent loan default. Earlier, ED had frozen the CMD’s shareholding worth Rs. 700 crores, even as its probe of the money trail continues to trace the proceeds of crime of around Rs. 2000 crores.
ED had initiated money laundering probe based on an FIR filed by HDFC Bank with Hyderabad Police, which had sought criminal proceedings against the accused for defrauding the bank. Subsequently, more FIRs were filed by other banks as well as investors. Thereafter, ED recorded statements of various employees of the Karvy Group and conducted searches at 9 locations on 22nd September 2021.
ED’s probe revealed a complex web of transactions designed by the senior management of the Karvy Group to misuse their clients’ securities and to raise loans fraudulently which were then diverted via multiple related companies. ED has alleged that 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 banks/NBFCs. The Power Of Attorney (POA) given by clients to KSBL to facilitate exchange settlements was also grossly misused by KSBL at the directions of the CMD and senior executives.
ED’s fund trail investigation has shown the transfer of borrowed funds to other group companies, particularly to M/S Karvy Realty (India) Limited (KRIL) and then to 14 shell companies floated by the Karvy Group. The accused, till now lodged in a jail in Bengaluru, have also been charged with engaging in a complex web of transactions from the several accounts of group companies without any financial rationale. ED claimed that various financial consultants and defunct NBFCs were used to route the funds, and found that KSBL availed loans from NBFCs to the tune of Rs. 400 crores in the name of 5 such shell companies by pledging shares of clients of KSBL after illegally transferring these shares to their account. The fraudulently availed loans were allegedly used to clear pending loans of related companies, engage in massive stock transactions which turned into complete losses and were diverted to personally held family companies.
