Less than two years after the fraud of Karvy Demat occurred, Karver Group Chairman C Parthasarathy was finally arrested in Hyderabad on Thursday on default charges on bank loans.
Swati Bharadwaj & Partha Sinha broke the details for you.
What is the Karvy Demat Scam? Hyderabad Based on Karvy Group Flagship Carving Bricing (KSBL) promised the effect of lying on the client’s Demat account, without their permission, to raise funds from many banks and financial institutions.
This fund was then transferred to other carvy group companies such as Karvy Realty.
What is the amount of fraud? The initial estimate shows that the KSBL guarantees more than 95,000 clients illegally and raises more than Rs 2,300 Crore through loans to shares (weld) of several lenders such as HDFC Bank, ICICI Bank, Indusin Bank, AXIS Bank, Bajaj Finance, Aditya Birla.
How can scam done? Broking Firm transferred shares from the client’s Demat account, which was inactive, into a fever account called Karvy Stock Broking (BSE) and showed this stock as its own securities to take a loan.
How and when was it excavated? On June 20, 2019, the SBI market regulator came out with a circular on handling client securities which said that the broker could not promise client securities to increase loans for themselves, which until then was a well-established market practice.
Sebi has set a deadline of September 30, 2019, for brokers to separate client and securities funds but when the KSBL fails to do it with the time limit given, the investor complains to Sebi, which then asks NSE to investigate what problems are taken by whatever the action of the supervisory body? On November 22, 2019, Sebi issued a command that prohibits KSBL from broking services and said the company has transferred the RS 1096 Crore to the Karvy Realty Group Company between April 2016 and October 2019.
Sebi also requested a detailed forensic audit while working with storage participants (DPS) And stock exchanges to quickly move some securities transferred illegally back into the investor account.
In January 2020, the Ministry of Corporate Affairs Union also ordered the company registrar (ROC), Hyderabad, to investigate the financial fraud of the Karvy Group.
What about investor compensation? In December 2019, immediately after fraud was revealed, SEBI worked with DPS and stock exchanges to transfer almost 83,000 from more than 95,000 KSBL fraud clients from the Karvy Demat account back to their respective accounts.
In November 2020, NSE said it had settled a claim worth 2,300 crore to around 2.4 lakh KSBL investors with balance of funds up to RS 30,000.
At the beginning of 2021, under the direction of Sebi, the KSBL Demat account was auctioned to IIFL Securities and the trading account was auctioned into the letter axis as part of an effort to compensate for investors.
Track Scam 2019november 22 | Market Regulator Problem Sebi Message Banning Carvy Stock Broking Ltd (KSBL) from Broking Activities November 26 | Karvy Group Cmd C Parthasarathy resigned from the Council of Karvy Fintech, which was then taken back as K-fin technology December 2 | Under the direction of Sebi NSDL and NSE Transfer Securities worth around RS 2,300 Crore nearly 83,000 KSBL clients return to their account December 2 | NSE & BSE suspend the KSBL of all market segments for violations of compliance norms December 4 | SAT rejects the KSBL lender to regain securities transferred back to the client so that the promise can be called December 14 | Sebi Refuses Help to KSBL Lenders December 31 | Karvy Group kicks the company’s rejig and management reshuffle as damage control exercises; Bring Amitabh Chaturvedi as CEO of Financial Services Business 2020January | Union Ministry of Affairs Company (Moca) ordered an investigation into the field of Karvy Group August | Telangana High Court Stops Writ Petitions Submitted by Kelvy Group Challenging Probe SFIO & ROC into financial affairs in Build Demat Scam November | NSE completed a claim worth 2,300 crore to around 2.4 lakh KSBL investors with balance of funds until RS 30,000 2021 February | Depositor and exchange of Auction KSBL shares and trade accounts to IIFL Securities and Axis Securities, each April | IIFL Securities Start Activation 11 Demat Accounts for Karven Lakh Frozen with assets under management worth RS 3 Crore held by NSDL and CDSL August 19 | Chairperson of the Karver Group and Promoter C Parthasarathy was arrested by CCS from Hyderabad Police based on the default complaints of loans by Indusind Bank