Karvy Stock Broking: According to sources, “the case was transferred to Cyberabad’s Economic Offenses Wing, where a special squad was formed to examine the crime.”
ICICI Bank has filed a complaint against C. Parthasarathy, the promoter of Karvy Stock Broking Ltd, and others for allegedly defrauding the bank of Rs 563 crore.
The police issued a press statement on Tuesday evening, and the case was filed against the accused under IPC Sections 406 (criminal breach of trust), 420, r/w 34 (cheating).
The money was raised by pledging the shares of Karvy Stock Broking’s six bankers. The cash was then allegedly transferred to the firm’s personal bank account rather than the Stock Broker Client Account.
According to the announcement, this action was in violation of the Securities and Exchange Board of India’s (SEBI) norms.
Furthermore, all securities pledges were closed without clearance, and securities were transferred to Karvy Stock Broking’s end clients.
According to the press statement, this had a significant impact on the security of all lenders concerned, including ICICI Bank.
Following this, the case was transferred to Cyberabad’s Economic Offenses Wing, where a special squad was constituted to examine the event.
According to reports, Parthasarathy was arrested by city police on August 19 on suspicion of defaulting on a Rs 137 crore loan from IndusInd Bank.
According to a statement released by Avinash Mohanty, “the Joint Commissioner of Police, the Chairman of the stockbroking firm not only defaulted on the loan but also shifted money to other bank accounts.”
By allegedly transferring these monies to itself and other associated corporate organisations, the accused company had become a defaulter. SEBI revoked the firm’s pledge of securities with banks and NBFCs on November 22, 2019, as a result of this.
According to a press release from the police, “the banks in question were left with no collateral, and as a result, Karvy Stock Broking failed on repayments of Rs 137 crore as of March 2021.”
The accused had earlier moved roughly Rs 720 crore of its client’s funds to the firm’s trading account, according to a further inquiry into the issue.
The firm was also accused of obtaining loan facilities worth Rs 680 crore from various other NBFCs by pledging its clients’ holdings without their authorization.
This caused the repayments to default. There were also two more complaints filed against the brokerage firm and Karvy Commodities for allegedly conducting loan fraud against HDFC Bank.
Karvy Stock Broking was forbidden from taking on any new brokerage clients by the SEBI in November 2019 after it was discovered that it had allegedly misused the clients’ securities worth Rs 2,000 crore.
For being an alleged defaulter, the brokerage business was also delisted from the Bombay Stock Exchange. Its membership in the National Stock Exchange was also terminated.
