The Enforcement Directorate has stated that Karvy pledged these securities with banks and NBFCs to seek loans and subsequent loan default. The agency further informed that it has got custody of the arrested accused for four days.
The Enforcement Directorate stated in a release that it initiated a money-laundering investigation against Karvy based on an FIR filed by HDFC Bank with CCS Hyderabad Police on charges of defrauding. Following that many other FIRs were filed by other banks and investors.
In September, the Enforcement Directorate authorities conducted search operations at six locations connected to the KSBL for alleged money laundering. An official release from the Enforcement Directorate said it had frozen shares of the Karvy Group. The HDFC Bank alleging that KSBL had illegally pledged the securities of its clients and taken a loan of Rs 329 crore and diverted the same.
Shares of clients that did not owe any funds to KSBL were also transferred to the pool account of the firm and were allegedly pledged with banks and NBFCs. The Power of Attorney given by clients to the firm to facilitate exchange settlements was misused at the directions of the CMD and senior executives, the Enforcement Directorate alleged.
The borrowed funds were transferred to other group companies and then to 14 shell companies that were floated by Karvy. A complex web of transactions from the several accounts of group companies without any financial rationale were undertaken to layer up. Various financial consultants and defunct NBFCs were used to reroute the funds.
“Further, it is found that KSBL availed loans from NBFCs to the tune of Rs 400 crore in the name of five such shell companies by pledging shares of clients of KSBL after illegally transferring these shares to their account,” stated the agency. The fraudulently availed loans were used to pare other pending loans of related companies, for massive stock transactions and diverted to personally held family companies. Earlier, the agency had frozen shares of Parthasarathy worth Rs 700 crore.