ED arrests Karvy Group CMD Comandur Parthasarathy and CFO G Krishna Hari in money laundering case
New Delhi, January 27, 2022
The Enforcement Directorate (ED) today said it had arrested Karvy Group Chairman and Managing Director Comandur Parthasarathy and CFO G Krishna Hari under the Prevention of Money Laundering Act (PMLA), 2002, in an alleged money laundering case.
The case is connected with the alleged fraud committed through illegal diversion of clients’ securities worth Rs 2,873.82 crore by Karvy Stock Broking Ltd and pledging of these securities with banks and NBFCs for seeking loans, and subsequent loan default.
The release said the ED initiated money laundering investigation based on the FIR filed by HDFC Bank with the Central Crime Station (CCS), Hyderabad Police under various sections of the Indian Penal Code (IPC) for defrauding HDFC Bank.
Subsequently more FIRs were filed by other banks and a few investors, it said.
The ED said it had recorded the statement of various employees of the Karvy Group, and conducted searches at nine locations on September 22, 2021.
"ED has 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/ 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. Comandur Parthasarathy and G Krishna Hari were the main conspirators who gave instructions to others," the release said.
According to it, fund trail investigation has shown that the borrowed funds were transferred to other group companies, particularly to one wholly owned subsidiary of KSBL, Karvy Realty (India) Limited (KRIL), and then to 14 shell companies floated by Karvy Group.
"The same have been further diverted by layering done through 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. 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. 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.
"ED had earlier frozen share holding of Comandur Parthasarathy worth around Rs 700 Crore. ED is investigating the money trail to trace the proceeds of crime which are close to around Rs 2000 crore," it said.
Parthasarathy and Krishna Hari were lodged in Central Jail, Bangalore and on a production warrant of ED Court, they were produced before the PMLA Special Court MSJ Hyderabad on January 20.
Through an order dated January 25, the court has remanded the Parthasarathy and Krishna Hari to four days in ED custody from today until January 30, the release added.