Axis Mutual Fund Scam: ED conducted Raids in Mumbai and Kolkata, Know all about this Scam

Axis Mutual Fund Scam: The Enforcement Directorate (ED) conducted search operations on September 9, 2024, at multiple locations in Mumbai and Kolkata as part of an investigation into a front-running scam involving Axis Mutual Fund. These searches were conducted under the Foreign Exchange Management Act (FEMA), 1999. During the raids, ED seized foreign currencies worth ₹12.96 lakh, along with important documents related to overseas properties, bank accounts, and various digital devices.

Background of the Case

The investigation by ED began after the Securities and Exchange Board of India (SEBI) issued an interim order accusing Viresh Joshi and others of front-running, which earned them wrongful gains of about ₹30.56 crore.

What is Front Running?

Front running is an illegal and unethical practice in the stock market where a broker or trader uses confidential information about upcoming orders from clients to make trades for personal gain before the client’s order is executed. This practice distorts the market and puts other investors at a disadvantage.

Details of the Scam

According to the ED’s investigation, Viresh Joshi allegedly shared sensitive market information in exchange for kickbacks from brokers who had trading terminals in Dubai. These brokers would execute trades on his instructions, allowing Joshi to profit from this inside information. Joshi also contacted other individuals in India who rented out their trading accounts, which were used to carry out the illegal trades.

The illicit profits generated from these trades were received by Joshi in cash through these brokers. To further hide the illegal earnings, Joshi worked with operators in Kolkata who helped route the cash into the bank accounts of several shell companies. These shell entities then provided unsecured loans to Joshi, his family members, and businesses owned by them.

Use of Illicit Gains

Preliminary investigations revealed that the illegal earnings from the front-running activities were used to buy properties overseas, specifically in the UK. Documents related to two such properties, for which approximately ₹14 crore was sent abroad, were found during the raids. Additionally, Joshi used the funds to set up overseas companies, including Vintage Capital Investment LLC in Dubai and Vincent Capital Holding Limited in the UK. These companies were used to park around ₹12 crore of the illegal gains. The funds were also used to create fixed deposits and purchase properties in India, further demonstrating the extent of the misuse of the illegal profits.

What’s Next?

The ED’s investigation is ongoing, and further actions are expected as more details emerge about the front-running scheme and the misuse of funds. The findings so far highlight the complex web of illegal activities involving trading accounts, shell companies, and offshore investments, all orchestrated to exploit confidential market information for personal gain.

Conclusion

This case serves as a stark reminder of the risks and ethical responsibilities in the securities market. The ED’s efforts aim to bring those involved in such scams to justice and restore the integrity of the financial system. As the investigation continues, the focus remains on uncovering the full extent of the front-running activities and ensuring that those responsible are held accountable.