NSEL Spot Exchange Scam

CBI registers case against NSEL promoter Jignesh Shah

Jignesh Shah-headed Financial Technologies India Limited promoted National Spot Exchange Limited (NSEL) whose operations were suspended after it failed to clear dues worth Rs.5,600 crore to 13,000 investors.
Investigations revealed:
- NSEL claimed to have its own designated warehouses where listed saleable commodities were to be deposited in advance
- NSEL would issue scanned ‘warehouse receipts’ for the same
- under a separate contract,the producer would sell the purchased commodity to buyer through transfer of these receipts against simultaneous delivery of funds
- this would be realised that day itself
- thereon, investor would sell purchased commodity to second-tier investor under a separate contract
- there was a gestation period for effective exchange of warehouse receipts & second-tier investor’s payment of due funds
After 24 buyers and their clients defaulted on payment of due to the exchange, the crisis was unearthed.
When enquiries were made by first-tier investors, it was found that NSEL had no virtual designated warehouses to liquidate the commodity stock against investments.

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