4 May 2009,
BANGALORE: Bangalore could well be termed a hub for murky stock market dealings as skeletons are set to tumble out of some Chikpet traders' cupboards. The I-T department has detected a massive racket of laundering black money through the secondary market. Involved in these deals are many businessmen, stock exchange dealers and small-time firms. First estimates of these fraudulent transactions in Bangalore are being put at Rs 2,000 crore.
While the fraud involved in Bangalore is put at Rs 2,000 cr, recovery from across the country could total at least Rs 10,000 cr, the observation says.
It's called the penny Stock scam. Penny stocks are shares of companies which have low market cap, but listed with the BSE. Nearly 25 such small companies having roaring businesses in Baroda, Mumbai, Kanpur and Bangalore are into fake transactions with active participation of hawala operators. The audit of one Baroda-based company which traded with Bangalore businessmen revealed that the volume of shares traded was worth Rs 400 crore, while the company made annual profits of only Rs 2 lakh and didn't declare any dividends.
The scam is the fallout of nationwide raids on the premises of businessmen in April 2006, suspecting large scale money-laundering through ramping up shares of small firms. Around 25 premises were searched in Mumbai and 10 in Bangalore. After the raids, IT sleuths in Bangalore alone speeded up the probe and took the case to its logical end.
The IT sleuths of Central circle Karnataka, additional commissioner Sibichen Mathew, deputy commissioner B Jayaragavan and commissioner G M Belagali, pursued the investigations and issued orders on December 31, 2008 that are said to have national ramifications. On April 28, the Central Board of Direct Taxes billed the case as the best assessment order of the year. The sleuths picked up accounts of 30 Chikpet traders who were into penny stocks and found bogus claims through cap gains.
The finding has also debunked the claim that demat is sacrosanct though the depository participation did not have any role in the manipulation, the demat procedure was misused.
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