ED Raids Uncover Forex, Foreign Assets in Axis Mutual Fund Scandal

The Enforcement Directorate (ED) has accused Viresh Joshi, a former chief trader and fund manager at Axis Mutual Fund, of sharing sensitive market information in exchange for kickbacks from brokers with terminals in Dubai. This allegation is part of a front-running scam. On September 9, the ED conducted searches in Mumbai and Kolkata under the Foreign Exchange Management Act (FEMA) related to Axis Mutual Fund.

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Seizure of Assets and Documents

During these searches, the ED seized movable properties including foreign currencies such as GBP, Euro, and AED amounting to Rs 12.96 lakh. They also confiscated various incriminating documents related to overseas immovable properties, overseas bank accounts, and digital devices. The Income Tax Department had previously raided Joshi in August 2022 concerning the same case.

Front running involves a broker or trader executing orders on a security for their own account while exploiting advance knowledge of pending customer orders. This practice is deemed unethical and illegal by the ED as it undermines market integrity and disadvantages other investors. The ED's action followed an interim order by SEBI alleging that Joshi and others engaged in front running to earn wrongful gains of Rs 30.56 crore.

Illicit Gains and Overseas Investments

Joshi allegedly shared market-sensitive information with brokers in Dubai who could execute trades on his instructions. He also contacted individuals and entities in India to rent their trading accounts, according to the ED. The illicit gains from these trades were received by Joshi in cash from these brokers.

The ED claimed that Joshi used operators based in Kolkata to route this cash into bank accounts of multiple shell entities. These entities then provided unsecured loans to Joshi, his family members, and firms beneficially owned by them. The illegal gains from front running were used to purchase immovable properties in the UK, with documents found for two such properties for which Rs 14 crore was remitted abroad.

Creation of Shell Entities

The agency also claimed that some overseas entities like Vintage Capital Investment LLC in Dubai and Vincent Capital Holding Limited in the UK were incorporated using these funds. Illegitimate gains amounting to Rs 12 crore were parked in those accounts. Additionally, funds were used to create fixed deposits and buy properties in India.

The ED's investigation highlights the complex network of transactions and entities used to launder money gained through illegal trading practices. This case underscores the ongoing efforts by regulatory agencies to clamp down on financial crimes that undermine market integrity.

The investigation continues as authorities seek to uncover more details about the extent of the scam and hold those involved accountable.