Indian FX fraudsters subjected to three-day interrogation by authorities in $17.4 million case

India is not necessarily considered to be a nation synonymous with a wide-reaching FX industry, and national regulators in the region are not world renowned for consumer protection in the same way that the established Western regulators in the UK, North America and Australia have become.

Whilst Indian authorities are less advanced when it comes to overseeing electronic trading compared to their counterparts away from the sub-continent, an occurrence reported today by the Times of India demonstrates that regardless of the smaller FX industry in India, the nation’s criminal prosecutors are a force to be reckoned with should an FX firm seek to perpetrate fraud.

A court responsible for upholding the The Tamil Nadu Protection of Interests of Depositors (TNPID) Act yesterday allowed the directorate of enforcement (ED) to interrogate the two directors of the Paazee Forex trading firm for three days. The directors are currently incarcerated at Coimbatore and Salem central prisons.

Officials of the ED from Chennai filed a petition before the TNPID court on Monday this, seeking three days permission to interrogate K Mohanraj and his father, K Kathiravan, both directors of the Paazee Forex trading firm, which allegedly cheated 48,000 investors across 12 states of 870 crore. Crore is a unit of measurement in the South Asian numbering system which equates to ten million, therefore the total monetary value of this particular alleged fraud is 8,700,000,000 rupees. In dollar value, this equals approximately $17.4 million in consumer losses.

Officials claimed that the firm had deposited $20 million (97 crore according to 2010 value) in four separate accounts at two private banks in Singapore. The officials subsequently wanted to interrogate the two directors about the deposited money.

TNPID court judge Chandransekaran has allowed the directorate of enforcement to interrogate Mohanraj and Kathiravan for three days on May 12, 13 and May 15. While Mohanraj has been lodged at the Salem central prison, Kathiravan is serving time at the Coimbatore central prison. The court allowed the agency to conduct inquiry with the duo at the central prisons.

Initially, Tirupur Central Crime Branch was probing the case and Mr. Mohanraj obtained anticipatory bail from Madras high court in 2010. In his bail petition, Mohanraj had mentioned that he had deposited Rs one crore in a private bank in Singapore. The ED tried to trace the amount in Singapore but failed to get enough details.Meanwhile, ED officials had traced four accounts of Mohanraj and the Paazee Forex trading firm in two private banks in Singapore. Hence, they had planned to interrogate both the directors to get further details about the accounts.

Another director of the company, A Kamalavalli, is out on bail. The trio was arrested from Assam on charge of financial frauds to the tune of Rs 870 crore on August 11, 2011.

The directors were booked under Sections 120 (B) (criminal conspiracy), 420 (cheating and dishonestly inducing delivery of property) of Indian Penal Code, Section 4 of The Prize Chits and Money Circulation Schemes (Banning) Act 1978 and Section 5 of Tamil Nadu Protection of Interests of Depositors.

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