Karvy Stock Broking CEO and CFO Arrested in Bank Loan Default Case
Hyderabad: Managing Director of Karvy Stock Broking Private Ltd (KSBL) Rajiv Ranjan Singh and Chief Financial Officer G. Hari Krishna were arrested on Thursday in a bank loan default case.
The Central Crime Station (CCS) of the Hyderabad police made the arrests as part of the investigation into a fraud case at the IndusInd Bank to the tune of Rs 137 crore.
The two defendants were brought before a court, which placed them in judicial detention for 14 days.
Police arrested KSBL Chairman and CEO C. Partha Sarathy on August 19 after filing a complaint over IndusInd Bank’s complaint that KSBL used a loan of Rs 137 crore by pledging securities and actions of its clients without their consent and by abusing the power of counsel.
The company defaulted on the loan by diverting the funds to its own and related business entities.
Police had questioned Partha Sarathy while in police custody this week to gather more information. Investigations have revealed that under his leadership, the CFO allegedly embezzled funds raised from banks by pledging clients’ securities as collateral to nine shell companies to show huge turnover.
As head of trading and brokerage, the CEO has reportedly executed unauthorized trades on behalf of nine companies since 2014.
In November 2019, the Securities and Exchange Board of India (SEBI) banned KSBL for defaults worth Rs 2,000 crore. He was prohibited from accepting new clients and executing transactions for existing clients.
This follows a National Stock Exchange (NSE) investigation which found that KSBL allegedly sold customer shares pledged with it through associated entities.
On August 23, Cyberabad police filed a complaint against Partha Sarathy and others for allegedly duping ICICI bank of 563 crore rupees.
A case of fraud and criminal breach of trust has been registered against KSBL, Partha Sarathy, Yugandhara Rao and others, on a complaint filed by the director of ICICI bank.
The plaintiff alleged that the KSBL, “with the dishonest and fraudulent intent to cheat, by planning a criminal conspiracy, in collusion / connivance with other unscrupulous unknown persons, if any, had embezzled financial assistance to their personal profit, which caused a criminal breach of trust, an unjustified loss for ICICI Bank with a corresponding unjustified gain for themselves â.
The funds raised by KSBL by pledging shares of its six bankers were transferred to KSBL’s own bank accounts, and not to a “securities broker client account”, which is contrary to SEBI guidelines. Cyberabad police said.
In addition, all securities pledges have been transferred to KSBL’s end customers, severely affecting the safety of all lenders, including ICICI bank, he said.