After 15 months of financial rape , excruciating pain and being treated like doormats by UPA, the NSEL investors saw a ray of hope in Modi Sarkar's MCA announcing a
draft order for merger of FTIL-NSEL . Just when I expected the media to laud Modi Sarkar's apt decision which may get investors' 5600 crores back (as it would rightly transfer the onus of recovery on FTIL which squandered the funds to its known accomplices) , the news-traders ( a term coined by Modiji) and presstitutes (a term coined for a sleeveless ex-CNN IBN moron and a specific dhimmi NDTV journo) pitched in with all the vigour to defend chimerical FTIL 'small shareholders' and FTIL. While these media crooks enjoyed the financial rape of 13000 innocent investors of NSEL with voyeuristic-sadistic pleasure, the first step taken by GOI against the financial rapists jolted them out of their languor. Though I'm the one who had defined the term '
paid-media' at www.urbandictionary.com
(All those journotards and media houses who sell their souls and their news for a few pieces of silver) , these FTIL-loving journos take this term to a whole new nadir.
Those who did not cover the story of an FIR in Delhi being filed on Jignesh Shah and others in bogus NSEL sugar trades (even after being emailed a copy of the FIR by me) became abruptly interested in l'affaire NSEL. All of a sudden a lot of bleeding hearts started crawling out of the woodwork in support of minority shareholders of FTIL (and against NSEL investors) with all sorts of convoluted crap. The amount of blood these FTIL sympathizers' hearts bled form every auricle and ventricle could have given a new life to at least a few thousand patients in need of blood transfusion. It's even more interesting to see that not a single 'small shareholder' of FTIL is griping about this merger but news-traders are wailing as if they've lost both their parents in one day. Not a single press article even remotely mentions the word 'fraud' anywhere in their coverage. So much for journalism ethics!
An exchange and its promoters should be like proverbial Caesar's wife- 'above any suspicion.' Here however Caesar had turned his wife Pompeia into a Jezebel who slept with anybody for a few pieces of silver. It is now in public domain that Jignesh Shah himself used to rig MCX prices using IBMA as a client (no FIR on IBMA still) where more than Rs 60000 crores (yeah no jokes) worth speculative trades were conducted and losses of Rs 66 crores were not even made good. None of these writers had any problems with FTIL running all its exchanges like Jignesh Shah's ancestral family firm including NSEL , MCX ( Rigged trades, bogus donations, bogus purchases, non- existing vendors, non -existent warehouses where orders came from Manjay or Jignesh Shah), MCX-SX (related party trades, breach of corporate governance).
NSEL was nothing but an alter-ego of FTIL and cannot be separated from it. FTIL cannot hide behind the corporate veil to disassociate itself from the affairs of NSEL. NSEL has no independent assets whatsoever, In fact even the premises from where it operates are on rent from FTIL.The key IT infrastructure including data servers were managed by FTIL. What a shame NSEL servers crashed just after the scam! You believe in coincidences? I for one don't.
It is a settled position under common law that any fraud or crime is against ‘public interest’. Therefore, by ordering the merger and thereby mitigating / curing the ‘fraud’ would per se be in the public interest. The whole concept of limited liability was to promote trade where businessmen could take risks and conduct business without risking losing their personal assets. The limited liability concept by no means gives carte blanche to perpetrate frauds and get away with it.All equity shareholders run inherent investment risk and they either prosper or perish with the company depending on the work of their promoters/directors. In all winding up petitions and SEBI delistings minority shareholders get penalized for the acts of their promoters. You think financial journos can't see this plain truth? There is none so blind as one who doesn't want to see! Oops truth and journalism! Ins't Ramnath Goenkaji dead years back ?
Before I disrobe these journos, some hard facts:
- FTIL owns 99.9998% of NSEL and mere 100 shares were given to NAFED to fool people (NAFED a quasi Govt agency was touted as a co-promoter)
- Huge monies of PSUs (about 450 crores) like MMTC /PEC (public interest) also stuck along with retail investors
- Scam masterminded by FTIL (NSEL was an alter-ego of FTIL) and its CMD Jignesh Shah as evident by various forensic audits and charge-sheet filed by Mumbai police EOW wing
- About 90% of the investors in this ponzi scheme-scam are retail investors sucked in by brokers working in cahoots with Jignesh Shah/FTIL who induced investors by false promises of safety
- Fixed returns were assured to investors by brokers/NSEL with knowledge of FTIL
- T+2 (short duration buy) and T +25 (long duration sell) contracts were to be executed simultaneously by the investor generating arbitrage profits of about13 % per annum (pre-tax) and 8.8 % post tax.
- On 31st July 2013 when the exchange went bust it had neither money nor the goods to pay investors for which it was a counter-guarantor. Promoter FTIL tried to wash its hands off calling it an employee scam and hiding behind ‘corporate veil’
- No warehouse receipts were ever printed and the warehouse allocation reports and QC certificates issued by NSEL turned out to be bogus
- Out of the total scam, Rs 2510 Crores is spread over 11,755 small investors which works out to an average of Rs 22 Lakh per investor. This contradicts the fact that only HNIS are affected
- FTIL ran multiple exchanges around the world (most exchanges were loss making) including MCX, MCX-SX and NSEL (frauds detected at all exchanges)
- An exchange with ‘national’ in its name started by FTIL group to hoodwink investors and NAFED brand was used to give it ‘quasi government’ look
- By a gazette notification dated 5 June 2007, the Ministry of Consumer Affairs under Sharad Pawar (how can his ubiquitous name not surface, we're talking about a freaking scam here) exempted one day forward contracts at NSEL from FCRA subject to certain conditions. Ironically Mr. Paul Joseph who signed this exemption (even before NSEL started functioning ) subsequently joined the FTIL group
- In 2008 NSEL started functioning as a delivery based spot exchange but had no significant business and was making huge losses
- In 2009 fraudulent ‘paired trades’ were launched to generate business and profits for NSEL/FTIL. These contracts were ab initio illegal as the exemption provided to NSEL was only for contracts up to 11 days where as pair trades extended till 25 or 35 days
- The first borrower in 2009 that was loaned money was NK protein Ltd a company owned by Mr. Nilesh Patel –the son-in-law of then chairman Mr. Shankarlal Guru (appointed by FTIL) .This shows the complicity of promoters/board with borrowers
- NBFC -Lending Activities started much before Anjani Sinha became the CEO. This is thus a fraud masterminded by FTIL Board
- Emails found by EOW wing of Mumbai police confirm how FTIL finance director, Jignesh Shah(CMD of FTIL) and auditors (Mukesh Shah- Jignesh Shah's uncle) were cooking the books of NSEL
- Along with Jignesh Shah and his 2 corrupt sidekicks, FMC and SEBI both found FTIL as a company not 'fit and proper' in conduct and unfit to run exchanges.
Here is a chart how about 81% of consolidated income of FTIL came from NSEL operations:-
Ever wondered how Jignesh Shah and FTIL got away will all their fraudulent activities? Oh shut up we all know corrupt UPA government, that's a bloody no-brainer. There was a tad more than that. Check the galaxy of senior bureaucrats who work for FTIL group. No prize for guessing why no action was being taken against FTIL and Jignesh Shah in this scam. I am surprised why under MPID act , FTIL's assets are not being attached in spite of being a clear provision to attach the assets of the promoter.
Claim: " The government is forcing a parent company to take on the liability of a subsidiary company, ignoring the fact the subsidiary was formed as a separate entity precisely so that the parent company’s liability is limited to the extent of its investment in the firm"
Fact: NSEL was promoted by FTIL with only 100 shares being given to NAFED (to give it quasi-govt. look) to fool gullible investors and commit the fraud.In spite of having MCX (tightly regulated) where this spot business could have taken place, FTIL chose to form a new company. Before even NSEL started business ,an exemption from FCRA was given by magnanimous Maratha politician and his pet bureaucrat 'Paul Joseph' who after giving this NSEL exemption immediately joined FTIL group
Claim: "If the government proceeds with the forced merger, it will appear the country doesn't respect the rule of law" and " according to the laws of the land, the risks associated with such acts by the holding company are limited to the extent of capital invested."
Fact: Quite amusing as it does not refer to any specific rule , act or law ; nor does it cite any case laws but relies on loose statements which are patently false and misleading. Had this pea-brain writer done a little more research before writing this trash he would have easily known that the MCA is headed by Shri Arun Jaitley who himself is an ace lawyer and a legal luminary. Shri Jaitley himself appeared for DDA in Supreme court where the
judgement was- "
The concept of corporate entity was evolved to encourage and promote trade and commerce : but not to commit illegalities or to defraud people. Where, therefore, the corporate character is employed for the purpose of committing illegality or for defrauding others, the court would ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties concerned." Clearly Mobis has neither checked facts nor law but who cares we are in news business.
Claim "It must be noted here that the Rs.5,600 crore or so due to NSEL’s investors isn’t listed as a liability on NSEL’s books. As of now, at least as far as the books of accounts go, they are liabilities owed by the exchange’s defaulting members."
Fact: This is a blatant and shameless lie from low-life Mobis. NSEL as an exchange took the counter-party risk and is directly liable to make good pending payments/settle contracts. This is as asinine as saying a bank has no liability to depositors but it's a liability of defaulting loan-takers. Besides, NSEL acted as an NBFC company to the knowledge of FTIL board and Jignesh Shah/Shreekant Javalagekar (finance director).
So now this Mobis dude has done his bit for FTIL with his piece at Livemint but he ain't happy. He's one hell of a news-trader, he goes online ,takes every article against the merger and retweets all. Way to go man long live journalism!
Now comes the 'old lady from Boribunder' - TIMES OF INDIA. They have this unique distinction of being featured on Wikipedia page for paid news.(http://en.wikipedia.org/wiki/Paid_News). Anybody who is Social media savvy would know that 'the New Yorker' had found out ages back - there are no walls between sales department and newsroom at TOI ( http://www.newyorker.com/magazine/2012/10/08/citizens-jain)
Their merger story: http://timesofindia.indiatimes.com/Business/India-Business/Government-proposes-FTIL-NSEL-merger/articleshow/44904556.cms
Claim :"Besides investors, the move is also expected to benefit a large number of speculators who once traded recklessly on NSEL just to make a quick buck"
Fact: All investors at NSEL were sucked in to the vortex of NSEL trades by promise of a fixed return arbitrage. An email copy from Amit Mukherjee of NSEL was sent to all marketing blokes at NSEL with a copy to FTIL warning not to use official IDs to send 'fixed return calculators' but to use private email IDs. How the hell an investor investing for 13% pre-tax and 8.8% post tax locked return become a speculator? Any logic? No but you can't expect logic from a media-house which has no walls between sales-room and newsroom. So shut up and keep reading our crap, this nonsensical rag was here before your grandfather's time and will keep peddling bull even during your grandchildren's time.
Claim: Talking to TOI, Berjis Desai, senior partner at J Sagar Associates, legal adviser to FTIL, said the notification has the potential to impact investments into India. "It makes a mockery of the limited liability principle" and "If subsidiary companies making losses are forced to merge with their holding companies, that could send a wrong message to foreign investors and cause a huge damage to the reputation of the country"
Fact: For starters limited liability cloak cannot be used to perpetrate premeditated frauds. Besides, those worried about reputation of the country and impact on foreign investors had ironically no problem with a massive (nearly a billion dollar) NSEL fraud by FTIL and its unsettled position till date which would scare away foreign investors. Irony dies a million deaths everyday at TOI.
Next in line is The Financial Express. Express Group once an august institute owned by Shri Ramnathji Goenka -a fearless crusader and the doyen of Indian journalism who never sold himself nor bowed to coercion of even Indira Gandhi. Every time I read the poem 'Invictus' ("my head is bloody but unbowed" ) by William Henley I think of this honorable man. There would be no bigger degeneration in this world than the Express group during Ramnath Goenka days and what the group is now. (Sorry I forgot Shashi Tahroor before Congress and Shashi Tahroor after joining Congress).
Here is their story: http://www.financialexpress.com/news/editorial-limited-liability-at-nsel/1301106
Claim: "Given how the individuals who lost money at NSEL were fully aware of the risks involved and that such products violated trading norms—they were essentially financing products offering substantially higher rates of interest than what was available in the market—it is not immediately clear why the government feels they need to be compensated."
Fact: Investors were deceived into false sense of safety by FTIL, NSEL and brokers. There was assurance of SGF (settlement guarantee fund) , more than 100% stocks and secure systems in place. You need to be thick in the head if you would invest in a financial product which you knew was illegal ab-initio. I don't think I would hate my money so much or anybody else would for that matter. By this warped logic anybody who trades in F & O segment of equities can be easily robbed as he's chasing higher returns and should not be compensated.
Claim: More important, since NSEL’s accounts don’t list them as liabilities—the money is owed by defaulting parties on the exchange
Fact: Yawn! Haven't we gone over this crap already??. Please read above. Ramnathji Goenka please don't turn in your grave this is Zeitgeist live with it. Oops remain dead with it.
Claim: "It is this limited liability principle, the world over, that ensured people invested in firms to set up ventures which, sadly, also went bankrupt on occasion. If investors knew their personal assets could also be attached, many would cavil about investing in any ventures"
Fact: A well-planned fraud cannot be allowed under the guise of limited liability. If the Sugar -castor prices had dropped to 5% of the original value and the commodity exchange had gone bankrupt it was understandable.Here an exchange was started with the sole purpose of defrauding people without any stocks ever. Loans were given to shady defaulters at high interest rates under paperwork of commodity trades. No that wasn't enough, to add insult to injury Jignesh Shah and other common directors of FTIL stood corporate guarantors to defaulting crooks on NSEL like NK protein and Aastha-Juggernaut group.
Claim: "If it is to be assumed NSEL’s 13,000 investors comprise the public, what of the 55,000 FTIL non-promoter shareholders? The sooner the government rescinds the merger order the better"
Fact: There is no bigger fallacy than FTIL minority shareholders. Check figures :
SHAREHOLDING PATTERN OF FTIL FOR THE
QUARTER ENDED 30TH JUNE, 2013
|
|
|
|
|
|
No Of shares
|
No Of Holders
|
% in terms of number of shareholders
|
No. Of shares
|
Shareholding percentage
|
1-500
|
46912
|
97.02%
|
22,48,845
|
4.88%
|
501-1000
|
709
|
1.47%
|
5,24,956
|
1.13%
|
1001-2000
|
309
|
0.64%
|
4,51,794
|
0.98%
|
2001-3000
|
113
|
0.23%
|
2,81,157
|
0.61%
|
3001-4000
|
56
|
0.12%
|
1,97,170
|
0.43%
|
4001-5000
|
38
|
0.08%
|
1,79,374
|
0.39%
|
5001-10000
|
80
|
0.17%
|
5,79,358
|
1.26%
|
10001-and above
|
132
|
0.27%
|
4,16,15,883
|
90.32%
|
Total
|
48,349
|
100.00%
|
4,60,78,537
|
100.00%
|
It is clear from above chart only 132 people close to management and Jignesh Shah owned 90.32% shares whereas 1-500 shares were held by only 4.88% investors. All original FTIL shareholders had 15 months to sell their holding and only speculative investors have remained in FTIL. A lot of small investors even entered at the low price of Rs 100-125 to make a quick buck. Besides, a lot of NSEL investors have also bought some shares in FTIL with a view to move SEBI- CLB later on .
Even if we were to compare absolute numbers , the market cap of FTIL is about 828 Crores (reserves of about 2400 Crores) and the value of holding of small shareholders in FTIL (under 500 shares) who constitute 5 % by market cap is only Rs 41 Crores.
Now Comes the paper Business Standard. I will given them the credit of being reasonable objective and fair in covering this issue so far.
Here is their story: http://www.business-standard.com/article/opinion/forced-mergers-are-wrong-114102200985_1.html
Claim: "What about the shareholders who own the other 55 per cent? They have just been forced by a government fiat to take a major capital loss, taking on the liabilities of another company. Is this how the government intends to protect minority shareholders?"
Fact: Haven't I gone over this shit before? It's OK, as it is BS (I have a special predilection for 'em), I'll explain once again. There are only about 10% shareholders not close to management. They too run the equity risk (as in winding up petition or SEBI delisting) of sinking with the promoters. Nobody can I repeat nobody can hide behind anything once a premeditated fraud is proven.
Claim: "A basic rule underlying modern markets is being violated here. The ministry for corporate affairs, it appears, is unsure about why subsidiaries exist. "
Fact: Subsidiaries do not exist to encourage frauds and malpractices. Limited liability is only to promote risk-free trade and commerce not to pick pockets of 13000 people who include Army veterans, widows, students, retired pensioners, PSUs etc.
What shocks me more is that these same crybabies and bleeding hearts were shockingly quiet when FTIL paid about 177 crores without consulting any shareholder to small investors in NSEL (Who could throw stones at FT tower). They also had no ivestors' interest at heart when around 40 crores were paid as legal fees by FTIL to defend Jignesh Shah. 'Honest financial journalism' indeed is a bigger oxymoron than 'peaceful Pakistan'.
This merger is indeed a bold decision from incorruptible/ untouchable #Modisarkar which I am sure now will go after these fraudulent FTIL group like Eliot Ness- the Feds went after Al Capone. The merger will help India as follows (presstitutes' rants notwithstanding)-
- A clear message to the country and the whole world that this government means business and has zero tolerance for scams and fraudsters . The ministers in Modisarkar are not for sale and their honesty is non-negotiable
- Restoration of faith of Indian investors and FIIs in Indian exchanges, markets and system
- GOI gets its PSU investments back (about Rs 450 Crores) and saves Rs 1650 Crores in Income tax
- A strict warning to scamsters that they can't hide behind limited liability cloak
- Commodity trade which has almost come to a standstill will get revived and GOI will get more revenue by virtue of this
- All markets including equity markets will get a boost if this situation is resolved resulting in overall growth and prosperity
