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GDR fraud case: Financial advisor to Farmax India sent to judicial custody for money laundering

GDR fraud case: Financial advisor to Farmax India sent to judicial custody for money laundering

GDR fraud case: Financial advisor to Farmax India sent to judicial custody for money laundering
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By CNBCTV18.com Oct 3, 2022 4:29:08 PM IST (Published)

The Enforcement Directorate (ED) had arrested Sanjay Aggarwal of La Richesse Advisors Pvt Ltd based on an FIR lodged by the Telanga police which accused the companies and individuals involved in the case of causing losses of Rs 54 crore to Indian investors.

The Telangana court on Monday sent Sanjay Raghunath Aggarwal of La Richesse Advisors Pvt. Ltd to a 14 days judicial custody on the charge of money laundering in the fraudulent global depository receipt (GDR) case involving Hyderabad-based Farmax India.

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The Enforcement Directorate (ED) had arrested Aggarwal based on an FIR lodged by the Telangana police which accused the companies and individuals involved in the case of causing losses of Rs 54 crore to Indian investors.
ED's claims
"Aggarwal along with the promoters of the GDR issuing Company and others curated a scheme of duping the Indian investors by fraudulently subscribing to the GDR of Indian companies from loan obtained from EURAM Bank by pledging the proceeds from the same GDR issue," the ED said in a statement.
With Aggarwal's financial advisory services via his company, Farmax India had raised USD 71.91 million in the June to August 2010 period in Europe via issuing the GDR.
The regulator said that the entire GDR was subscribed by just one entity - Vintage FZE, which was floated by Arun Pachariya and controlled by him asll well. It was floated "out of loan funds taken from EURAM Bank by pledging the GDR proceeds of the Indian Company, even before the GDRs were subscribed. The Indian Company in connivance with Sanjay Aggarwal and Arun Pachariya and others fraudulently offered the GDR proceeds as mortgage security to the Bank to arrange loan to Vintage FZE," the ED said.
Eventually, Vintage FZE failed to repay the loan and the bank adjusted the GDR proceeds against the outstanding loan.
The proceeds were also never repatriated to India. The GDRs were converted to equity by the foreign institutional investors (FIIs), controlled by Pachariya, and then sold in the stock market in India at an inflated rate, causing Indian investors a loss of around Rs 54 crore.
"Further investigation is on," the ED stated.
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