NSEL Investors Hanged Drawn and Quartered

 To be hanged, drawn and quartered was a  penalty in England  where convicts were fastened to a hurdle, or wooden panel, and drawn by a horse to the place of execution, where they were hanged (almost to the point of death), emasculated, disemboweled, beheaded and quartered (chopped into four pieces).

The more I see the plight of NSEL investors, the more I can relate to this English phrase.Though this penalty in England was reserved only for high treason, in India it seems to be the fate of people who invested (on strong recommendation of  national level brokers-wealth managers)  their  tax paid legitimate money at 13% in NSEL -an exchange semi regulated by the Forward markets Commission and promoted by FTIL who also promoted MCX.

NSEL investors  may be ridiculed for being greedy and reckless, called stupid for investing in an 'unregulated exchange' , found deserving of this fate for being 'speculators' and now even be branded 'bogus traders' .  If expectation of a meager 13% pre tax ( 9% post tax in an economy where food prices rise by 20% every year) return on investment is greed what would you call the stock market investors-punters who expect a daily upper circuit in the scrip they've invested? This same very greed-expectation on return on capital (which just about beats inflation) keeps the capital markets of the world and the economy ticking.

Innocent investors of NSEL seem to be a fair game for every Tom Dick and Harry (who love to take potshots at 'em)  in India as they neither have the numbers nor the political vote bank clout  to warrant attention or help. I have never been a big fan of P. Chidambaram but my disgust for him reached a new nadir when he said 'NSEL investors are no babes in the woods and they knowingly invested'.  My respect for Sucheta Dalal also nosedived the day she highlighted NSEL investors coming out of costly cars rather than focusing on her core specialty of exposing scamsters. My respect for judiciary also came down a notch when the Mumbai HC order 2 days back on Jignesh Shah's bail called me 'bogus trader' who knowingly invested in NSEL.  

Nothing can me more shocking, convoluted and  illogical.Which investor in this world would knowingly invest his tax-paid money in a fraudulent exchange sans any stocks. You need to be seriously hating your money or need to be a 'loony bin case' in order to do that. Does my money burn a hole in my pocket?  Hell No!!  Now the 'bogus'  investors in NSEL include 2 large public sector units  MMTC - PEC , an ex PM's family and an ex MP's family not to mention widows, students and middle class investors who have lost their life time savings. The criminal investigation wing of Mumbai Income Tax has already verified the authenticity of investments and account books of most NSEL investors and not found anything amiss at all.

As for we not being 'investors', here is the Oxford English dictionary definition- 'Investor': One who puts money into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit:' Do you need to be a brain surgeon or a rocket scientist to figure out such a simple term? Is Greed to generate return on your investment bad? Ask Gordon Gekko of the movie Wall Street and this is what he would say-

"Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures, the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge, has marked the upward surge of mankind and greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A"

There is another English phrase which comes to my mind thinking of Jignesh Shah's journey so far- 'Money talks and bullshit walks'. Bigger the money , bigger bullshit it can make walk !  Mr. Jignesh Prakash Shah the mastermind and biggest beneficiary of the NSEL scam seems to be cocking a snook and having a big laugh at all of us investors of NSEL.  Mr. Jignesh Prakash Shah listen carefully- the mills of the gods may grind slow but usually they grind exceedingly fine. There is only so much bullshit you can make walk with your ill-gotten pelf and somewhere your luck will run out.The game has now changed a little in last 3 months, Your zealous  protectors and benefactors at Delhi have gone and a new brand of  upright politicians are now in the seat. We investors might have lost a battle but the war will still rage on.

Jigneshbhai ,You can also tell your sidekick Joseph Massey who claims to be a devout Christian that the bread not earned by the sweat of ones' brow is no good and 'better is a poor man who walks in his integrity than a rich man who is crooked in his ways' : Bible Proverbs 28:6

Further Letter to Ramesh Abhishek and all FMC directors

Dear Mr. Abhishek and all at FMC

Further to my several mails in the past as an NSEL investor , there is no response from you. I have in the past email clearly written to you how the selective payment to investors with exposure up to Rs 10L was bad in law and divisive in nature. It was a clever trick on the part of Jignesh Shah to knock out 50% investors by paying just about 3% of the total outstanding. It is surprising that FMC was aware of this but did nothing to stop this illegal act.

I request you immediately to ensure that going forward FT/NSEL don't make any extra payment selectively to investors of any particular financial slab and any payment they want to make must come to the escrow account with Axis bank and distributed pro-rata only. As you are supervising settlement/payouts of NSEL it is your legal duty to ensure that legal/financial rights of all investors are equally protected.if you fail to do so,we investors shall be forced to move court for a stay/injuction  against FT/NSEL/Jignesh paying investors selectively.

We also expect to know what is happening with your following directives to NSEL

1) To furnish stock positions in all warehouses assessed by SGS (I believe only few warehouses are assessed)

2) To initiate default proceedings against borrowers and auction commodity stock/assets/properties of borrowers.

While NSEL is holding PDCs worth Rs 4900 crores (confirmed on their website) from borrowers why are they not deposited and criminal proceedings initiated against all borrowers ?  We investors are also shocked that after a month of the breaking out of this scam there is no punitive action from FMC/GOI against Jignesh Shah/FT/NSEL in spite of their lies and criminal acts which are now publicly confirmed.

I would appreciate if you can put up on your website answers to such common questions which thousands of NSEL investors are asking but have no reply to.

Thanks 

NSEL lodges EOW complaint against defaulters.- Can't get more farcical

In spite of the grave crisis facing NSEL and investors , it seems NSEL guys haven't lost their sense of humour. National Spot Exchange Ltd (NSEL) has now lodged complaints against five defaulters, including N K Proteins, with the Economic Offences Wing as they have failed to meet Forward Markets Commission's (FMC) norms on adequate stocks in warehouses.  http://profit.ndtv.com/news/market/article-nsel-files-complaints-against-5-defaulting-members-326304

Now it is NSEL's warehouse where the stock is inadequate or missing not the borrower's. Lending thousands of crores to dodgy companies without ensuring adequate stocks was NSEL's  fault. One must give it to brazen NSEL bosses that even after criminal complicity of its promoters and shady borrowers the  NSEL still has the audacity to file an EOW complaint.! There was no need to chase borrowers if the stocks were there and it was freaking exchange's responsibility to ensure quality and quantity of stocks. Besides, there is no explanation how the chairman's son-in-law was given about 970 crores without any commodity or how the SGF shrunk form 850 crores to 5 crores ! I bet the jugglery and great vanishing tricks of NSEL can even put Harry Houdini to shame.

After gross regulatory and compliance issue violation and hatching a criminal conspiracy to defraud gullible investors, the bosses at NSEL and wily borrowers prepared fake warehouse receipts and robbed 5600 crores of 15000 investors. Somebody needs to take these crooked bastards to task for this.  It may be noteworthy that it was FTIL's baby NBHC (National Bulk Handling Corporation Ltd)which was in charge of the warehouses. Talk about clash of interest here!

I am at my wit's end why the NSEL investor's forum is not lodging a criminal complaint against Jignesh and NSEL board now that it is official that there is hardly any stock. Investor's patience is running thin and I won't be surprised if there are investor suicides in near future as a lot of investors have borrowed/leveraged and invested their lifetime earnings in this fraud called NSEL

A criminal act has to be proven to lift Jignesh's corporate veil and hold him personally liable for this fraud and attach his assets/properties to pay off investors who are being given a pittance by NSEL jokers every week.

NSEL Scam press release by AAP Maharashtra

Aam Aadmi Party Maharashtra

2 hours ago

21st August 2013
AAP-Maharashtra Press Release


AAP decries 5700Cr NSEL Scam - NSEL still being protected by powerful politicians

5700 Crore default by commodities exchange NSEL
National Spot Exchange Limited (NSEL) is defaulting on payments to investors. It owes the market 5700 crores. It is a huge scam that is being carefully downplayed by the media because when the cookie crumbles, big names will tumble.

False Warehouse Receipts
NSEL is a commodity exchange, one assumes that all trading is backed up by stocks of equivalent value. So they should be no cause for panic. But the shocking truth is that the stocks don’t exist! Warehouse Receipts are all that exists. The status of most ware houses is:

a. The warehouse doesn’t exist
b. In some cases the supposed Warehouses companies are totally fake with peons as directors!
c. If they exist they do not have any goods
d. Some warehouses exist but they take no cognizance of the receipts claiming they are fake

Illegal Forward Trading thrived at NSEL
No Regulatory Control - blessed by Sharad Pawar?
How did this happen? The common man sleeps sound assuming that there are checks and balances for the share market and there would be even more stringent checks and balances of commodity exchanges - especially those dealing in agricultural produce. But the shocking truth is the from the time NSEL began trading in 2008 end till around 2012 there was absolutely no check on its operations, not even any monitoring.

NSEL was India’s foremost agricultural trading exchange, promoted by Jignesh Shah whose impeccable credentials seem hollow now, and supported by the government (through NAFED), whose complicity in the whole fraud is laid bare.

The crux of the matter is that in agricultural commodities “forward trading” is improbable because you are actually buying/selling goods which are meant for timely consumption. When NSEL, began a buyer was supposed to sell within two days “T+1” formula. But between 2009 and 2011 NSEL traded in T+25 and T+36 periods without any questions! It is interesting that the Ministry of Consumer Affairs (MCA) which is the only body to which NSEL reported, was led by Sharad Pawar during that period. It is only in 2012 that the Department of Consumer Affairs (DCA) began questioning NSEL. NSEL kept skirting DCA for almost a year until the scam came to light in July 2013

Illegal Hoarding of essential commodities - Exchange fuelled Inflation?
There is no sanction for such forward trading in agricultural commodities - in fact it amounts to illegal hoarding of essential commodities! World over queries are being raised whether commodities exchanges are fueling inflation. Experts and activists have strongly advocated against speculation on agricultural commodities:

“The FAO has already reported that enhanced speculation in futures of agricultural produce has led to at least 30 per cent rise in food prices globally. How the spot market could be prevented from the overwhelming sway of the capital in futures trading could be judged from the following facts: India produces mentha oil worth $250 million odd but futures trade in this commodity generally goes up to $2,500 million. The case of guar is most interesting; its production in India was around 1.6 million tone last year while its quantity traded on the futures market reached 169 million tone- around 1700 times more.” Jaspal Siddhu, senior agriculture journalist.
The Economic Survey (2007-08) of Indian Government clearly underlined that "Direct participation of farmers in the commodity futures market is somewhat difficult at this stage as the large lot size, daily margins, high membership fees etc work as deterrent to farmers participation in these markets. Farmers can directly benefit from the futures market if institutions are allowed to act as aggregators on behalf of the farmers".
If we look at following graph the rise of prices of commodities like Rice, Sugar and Wheat we see a obvious spike in 2008 - the same time NSEL began operations.
Background
2003
Jignesh Shah of Financial Technologies (India) Limited began MCX, India’s first commodities exchange that traded in metal, bullion and energy.

2004
Sharad Pawar became Agricultural Minister

November 2004
MCX signed MOU with FTIL and NAFED to start an agricultural commodities spot exchange

May 2005
FTIL & NAFED launches NSEL

2007
MCA gives sanctions to NSEL to do one day trading in agricultural commodities. Interestingly NSEL is exempted from regulation from The Forward Contract (Regulation) Act (1954), FCRA*.

October 2008
NSEL began trading. Interestingly its initial work was conducting E-auctions for NAFED, FCI, MMTC, PEC, and Hindustan Copper, all public sector organizations.

2009
NSEL starts trading in T+25 and T+36 formats without any approval. Here we need to understand the nature of trading

NSEL did not give warehouse receipts of T+1 transactions to the investors but kept with the warehouse receipts on behalf of the customers. It was treated as early pay-ins for T+25 transactions and thus encouraged traders for futures trading. So traders never got warehouse receipts, the only tangible proof of their commodities. NSEL seems to have benefitted in two ways from this - they did not have to furnish the actual proof of the commodity and they blatantly forced double transactions on the traders.

The unsuspecting traders went with NSEL’s assurance that goods are under the custody & control of the exchange so there is no risk. And that NSEL will release the receipts to the final buyer on getting full payment. Since NSEL is counter party for all settlements of trade, people did not mind. NSEL gave assurance in writing guaranteeing the quality, quantity and weight of the goods. Most important, all goods were allegedly covered by insurance.

The Woes

February 2012
The Consumer Affairs Ministry issued an notification appointing Forward Markets Commission (FMC) as the designated agency to which all information or returns relating to the trade shall be provided by NSEL.

April 2012 to April 2013
NSEL received letters from DCA but did not disclose the content. When brokers questioned the contents of the letter NSEL claimed they were some queries which had been adequately responded too.

July - August 2013
However, in July 2013 when the brokers became jittery of the going ons, there was a meeting between Secretary of Company Affairs Pankaj Agarwal and NSEL where it became clear DCA was not allowing forward trading in the T+25 and T+36. NSEL reduced the forward trading to T+10.

But by now the investor confidence was shaken and trading volumes fell, causing what seemed like a liquidity crunch at NSEL. The situation reached a peak when NSEL failed to meet 31st July pay outs.

NSEL assured brokers that all payouts will be made. They said they would merge the payouts and share a revised calendar. The brokers demanded to know if there were any serious defaults. But there was no disclosure made. Instead NSEL assured them saying they had 6200 crores worth of goods and a settlement guarantee fund of 840 crores.

On 4th August there was a meeting of FMC, NSEL, Brokers, and Borrowers. NSEL assured they will pay 5% of outstanding on a every week over 30 weeks. They also assured that they would pay ___% interest if there were delays.

By now the brokers had begun independent searches into the wareshouse and were alarmed to discover that there were goods!

As per the settlement calendar the first payment was due on 20th August of 174.72 crores. NSEL has only been able to pay 92.12 crores.




THE SCAM

1. Investors cheated: The promoters, directors, and shareholders of NSEL have deliberately tricked investors 13000 investors await payment of 5700 crores.

2. Inflation: The forward trading has led to serious price hikes in the price of commodities. The hoarding in warehouses would have led to shortages and now, the disappearance of the stock itself will lead to further shortages.

3. Insider information: NSEL has been running an exchange without any regulatory controls simply because those close to the Minsiter for Agriculture are on its Board.
a. Chairman Shankarlal Guru is a leading expert on who the Government of India relies to make policy decision regarding trading of agricultural commodities. He has served as Chairman of a high powered committees on agricultural marketing set up by GoI. In fact the Guru Committee Report recommended scrapping of Essential Commodities Act (1955) and review of other 27 legislations to make them facilitative towards free trade. (Exhibit Guru Committee Recommendations). Undoubtedly there is a conflict of interest wherein a GoI Advisor is a Chairman of an exchange - his recommendations will be skewed to protect the exchange.
b. Chairman Shankarlal Guru and Director B D Pawar are also directors in Center For International Trade In Agriculture & Agro - Based Industries (CITA) wherein Supriya Sule, daughter of Sharad Pawar is a director. “CITA is a non - profit organization founded by Great Visionary Shri. Sharad Pawar committed for services to farmers and rural population. Our mission is to guide the farmers, stakeholders, policy makers and other related organizations..... in particular to encourage farmers to sell their products profitably in domestic and export markets.” There is a direct conflict of interest here - the Chairman and Director of NSEL are directors of CITA which influences policy and farmers. CITA has always been led by Sharad Pawar’s close coterie - Anuradha Desai, Vijay Mallya, KD Goenka.

4. Loot: NSEL intially tried to protect the names of the defaulters. Out of the defaulters NK Proteins Ltd which has defaulted payment of 952 crore belongs to the ChaiRman’s son in law!

Name of borrower Outstanding amount
Mohan India Pvt Ltd/ Tavishi Enterprise Rs 952 cr
N K Proteins Pvt Ltd Rs 930 cr
Ark Imports Pvt Ltd Rs 730 cr
Loil Health Foods Ltd / Loil Overseas Foods Rs 690 cr
P D Agroprocessors Pvt Ltd Rs 618 cr
Yathuri Associates Rs 460 cr
Lotus Refineries Rs 247 cr
Aastha Minmet India Pvt Ltd Rs 236 cr
Other defaulters are NCS Sugars Ltd, Spin Cot Textiles Pvt Ltd, and Vimladevi Agrotech Ltd.

AAP Demands

1. All forward trading in agricultural commodities should be stopped.

2. In order to pay the investors the following must be done:
a. Sell all goods and realize their value
b. Utilize the alleged settlement guarantee fund
c. Freeze all assets of defaulters and realize the dues
d. All goods have allegedly been insured - the goods are missing so make the insurance companies liable to pay.
e. GoI have been claiming VAT on each transaction at NSEL. (Surprising in the first place since same goods are being traded without any value add) Since all these transactions were null and void, GoI should refund the VAT and use it to pay the investors.
f. Freeze assets of all directors, promoters, shareholders of NSEL as well as FTIL and MCX should be frozen till the investors are paid off.

3. There is a need to investigate those in GoI who allowed the creation of NSEL and allowed it to run without any regulation and make them accountable for it. FMC has been asking for some years to have spot exchanges and warehouses under its jurisdiction, in addition to its existing responsibility. This hadn’t been conceded. The Warehousing Development and Regulatory Authority (WDRA) had put a set of proposals on its website on regulations for spot exchanges. This, too, wasn’t taken forward by the DCA.

Kirit Somaiya's letter to PM on NSEL Scam -a must read

A letter to KV thomas and FMC

Dear Shri Thomas and other FMC officers involved with NSEL settlement

I am a Mumbai based investor and have invested more than half of my life's earning / tax-paid capital in NSEL. This product was offered to me by my brokers (Motilal Oswal and Philip Capital) as a legitimate arbitrage income product (On which I again paid tax). Before investing my money I checked out the website of NSEL which claimed the exchange being jointly promoted by FT and NAFED (an organization under ministry of Agriculture , GOI) which generated enough confidence in me to invest. I am sure your ministry was aware of this claim of NAFED being a co-promoter. I was also told it is a govt. recognized exchange and it offers counter party guarantee, there were also a host of govt. companies shown as using this platform.( http://www.nationalspotexchange.com/%5CNSELuploads%5CResourceCentre%5CNSEL_Presentation.pdf) 

I now learn that about a year back GOI had problems with products/business model being offered by NSEL. I wonder why it was allowed to function in the first place if the shortcomings were already known to your ministry even back then. Also it is amusing that the issue of regulation and governance of a public commodity exchange of India NSEL was being passed between ministries like a shuttlecock. 

When the shit hit the fan on 31st July we were jolted to learn the suspension of trading and merging of settlement cycles. Mr. Anjani Sinha claimed that there was a Settlement Guarantee Fund of Rs.850 crores plus there was extra 'margin' and there was no problem at all.  The FMC also gave a statement on 2nd August that there is no 'immediate risk of  NSEL default'. http://in.reuters.com/article/2013/08/02/india-nsel-regulator-ftil-idINDEE97102R20130802 .

On 3rd August there was a meeting at Trident Mumbai between NSEL, FMC and borrowers where some borrowers claimed that they had no problem paying (about 40% of borrowers) and rest of them could pay in installments. On 5th August Mr. Jignesh Shah  came on TV and gave commitment that there will be a financial closure and investors will be fully paid in 5 months (claiming a majority of borrowers were even ready to pay upfront) .The delay he promised would be remunerated by 16% interest (incentive to pay early) . A committee of 4 including   Mr Sharad Upasani, Justice Kochar,Mr Bajpai, IPS Mr Sivanandan was announced which would oversee the settlement and strict action would be taken against those who don't pay. You can view these jokes  here http://www.youtube.com/watch?v=xPR3Clw5IFs  http://www.youtube.com/watch?v=PCn3qkv-4oE  http://www.youtube.com/watch?v=OL7BK5J5grg and laugh today.  (Mr. Sivanandan's experience from police will come very strongly ,we will see no one dare not pay!! )

After a long wait and much heartburn on 14th August NSEL finally announced a protracted payout calendar where 39-40% upfront promised payment surprisingly vanished and smaller tranches were assured. They (NSEL) also thanked FMC and GOI for 'support' in their press release. On the promised payout day of 20th August , NSEL shamefully defaulted on the very first tranche cocking a snook at FMC , Investors and also GOI.

On 20th August the board of NSEL was sacked by management as a part of 'disciplinary action' and  Mr. P.R. Ramesh was appointed as 'OSD'. This was another whitewash (like appointing that committee of 4) as Mr. P.R. Ramesh is known to be a Jignesh henchman. On 21st August  the investors got only half the money promised and perhaps first time in the history of free India a government recognized and regulated exchanged defaulted. Some key questions that every investor in NSEL wants to know are:

1) Why was NSEL permitted to function when MCA/FMC were aware of its shortcomings

2) What sort of mickey mouse exchange was being licenced to run with about 15000 investors on one side of the exchange and a twenty odd looters on the other?

3) Why FMC consented to financial closure in early August without ensuring the wherewithal of NSEL /Borrowers to do so  

4) Even after knowing fully well that NSEL management/promoters have been inveterate liars (confirmed by FMC in various circulars) and suspecting that books are being cooked why is the exchange not being taken over by FMC/GOI?

5) What happened to that Settlement Guarantee Fund?

6) Why is this letter game being played by NSEL charlatans and FMC babus ? This is costing us investors dear. please don;t mock us investors with this facetious game as some of us might be driven to suicide in despair.  

7) Why haven't you/FMC frozen/seized assets of borrowers who have not been paying?

8) Why the delay in verifying stocks in warehouses? Why the stock or whatever was lying in exchange warehouse was not auctioned in these 20 days?

9) Above all Why Shankar Guru (after Giving 1000 odd crores to his son-in-law of NK Proteins) and Jignesh Shah (after criminally hoodwinking all of us) are free men?

The action plan I humbly suggest :

a) Immediately take over functioning of NSEL, rather than directing NSEL to do things your way (which they don't listen to) why not you do it your way!

b) Sell present stocks and generate whatever money it can to distribute quickly among investors

c) Go after Jignesh  and his crooked associates hammer and tongs, seize their assets, immediately take over MCX, FT and merge it all with NSEL (from revenues most of the NSEL deficit can be made up)

d) Arrest all the dodgy borrowers along with their facilitators in NSEL for criminal conspiracy to defraud gullible investors of India and falsifying records (Jignesh has himself on record stated now that he doubts quality and quantity of stocks). Lift the corporate veil and seize all the personal assets of promoters under criminal proceedings.

e) Check the money trail, involve finance ministry/ IT /ED /SEBI and find out if the money has gone out of the country.

f) Do not let Jignesh Shah distance himself from NSEL and allow him pin it all on the management. It is an insult to our intelligence (and yours) if we are forced to believe that a paid manager can siphon thousands of crores without the knowledge of promoters/bosses.

Please stop taking this issue lightly and go after the crooks all guns blazing. Enough is enough as not only our lives but the reputation of India and Indian markets/bourses will depend on your actions in coming days.

All the very best.