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www.capitalvia.

com GLOBAL RESEARCH LIMITED INDIAN MARKET SCAMS

SCAMS A 1992 HARSHAD MEHTA SECURITIES SCAM THE MEMOIR OF THE INDIAN MARKETS SCAMS lot is heard in the past and till today we hear a lot about the financial market s scams. Financial Market Scams are the attempts by scamsters who indulge in cro oked activities to fulfil the bellies of their own at the stake of common man. These scamsters through various fraudulent activities gather big chu nks of money. Our report is one such initiative to highlight a few scams in India, how it was done and the m oney that was involved in these scams. Harshad Mehta known to be Big Bull of the trading floor was an Indian stockbroker and is alleged to have engineered the rise in the BSE stock exchange in the year 199 2.He and his associates draw off funds from inter-bank transactions and bought s hares heavily at a premium across many segments, triggering a rise in the Sensex . When the scheme was exposed, the banks started demanding the money back, causing the collapse. The broker was dipping illegally into the bank ing system to finance his buying. The amount that was involved in this scam was approx. to Rs. 5000 crs. SCAMS GLOBAL RESEARCH LIMITED Rs. 5000 crs How Harshad Mehta financed his deals? Harshad Mehta worked on the mechanism of READY FORWARD (RF) DEALS. It's a secure d short-term (typically 15-day) loan from one bank to another. The bank lends against government securities. The borr owing bank actually sells the securities to the lending bank and buys them back at the end of the period of the loan, typically at a slightly higher price. The deal was done between the banks through brokers for commissions. In this settlem ent process, deliveries of securities and payments were made through the broker. That is, the seller handed over the securities to the b roker, who passed them to the buyer, while the buyer gave the cheque to the brok er, who then made the payment to the seller. Thus , both the parties may not kno w each other. It was this idea that made the mind of Harshad to involve into the modus operandi. Harshad in his scam took the help of Bank Receipts. In a ready forward deal, securities were not moved back and forth in actuality. Instead, the borro wer, i.e. the seller of securities, gave the buyer of the securities a BR. A BR confirms the sale of securities. It acts as a receipt for the money received by the selling bank. Hence the name - bank receipt promises to deliver the securities to the buyer a nd the seller holds the securities in trust of the buyer. Having figured this out, Mehta needed banks, which issue fake BRs, or BRs not ba cked by any government securities. Two

small and little known banks - the Bank of Karad (BOK) and the Metropolitan Co-o perative Bank (MCB) - came in handy for this purpose. These banks were willing t o issue BRs as and when required, for a fee . Once these fake BRs were issued, they were passed on to other banks and the banks in turn gave money to Mehta, obvious ly assuming that they were lending against government securities when this was not really the case. This money was used to drive up the prices of stocks in the stock market. When time came to return the money, the shares were sold for a profit an d the BR was retired. The money due to the bank was returned. The game went on as long as the stock prices kept going up, a nd no one had a clue about Mehta's modus operandi. Once the scam was exposed though, a lot of banks were left holding BRs which did not have any value - the banking system had been swindled of a whoppi ng Rs 4,000 crore. www.capitalvia.com | 2

SCAMS 2001 KETAN PAREKH SCAM Ketan Parekh is a former stock broker from Mumbai, India, who was convicted in 2 008, for involvement in the Indian in rigging up from a family ween 1999 and stock market manipulation scam in late 1999-2001. He was involved the stock prices. A chartered accountant by training, Parekh came of brokers, which helped him create a trading ring of his own. Bet 2000, when technology bubble was seen in the

world, the Indian Markets at that time were also flourishing, he started rigging up stock prices. He rigged up the prices by borrowing from big banks and Invest ment firms. By the time he became famous to rig the prices everyone be it invest ment firms, promoters of listed companies, overseas corporate bodies etc , all w ere ready to hand the money to him. Scrips like Visualsoft rose from Rs 625 to R s 8,448 per share and Sonata Software from Rs 90 to Rs 2,150. The inflated stocks had to be dumped to someone in the end, and Parekh used the financial institutions like the UTI to control the situations. A bear c artel started disrupting Parekh's party by hammering prices of the K-10 stocks, it was this that led to the collapse of the market and the scam discovered. SCAMS GLOBAL RESEARCH LIMITED Rs. 1250 crs 2001 UTI SCAM Rs. 4800 crs The Unit Trust of India is the largest mutual fund in the country created in 196 4. The UTI (of which the US-64 scheme is the largest) was set-up specifically to channel small savings of citizens into investments giving relatively large returns/interest. The investments of the ind ividuals were basically done in debt, but after the liberalization of the econom y more allocation was made to equity investments. The US-64 did not came under S EBI regulations, its investment details were kept secret and the chairman has ar bitrary powers to personally decide its investment. This led Mr. P Subramanyam the chairman to involve himsel f in the fraud. Small investor's funds were .S. used to promote big business hou ses, shower favours to politicians, and invest huge amounts in junk bonds all fo r a fat commission. He was a key player in the Ketan Parekh scam. Huge amount of UTI fun ds were channelled into the infamous K-10 list of Keten Parekh stock, such as Hi machal Futuristic, Zee Telefilims, Global Tele, DSQ, etc. The UTI continued to b uy these shares even when their market value began to crash in mid-2000, in orde r to prop up the share values of these stocks. This whole story led to the ultim ate decline of the fund. 2008 SATYAM SCAM

Rs. 10,000 crs Ramalinga Raju founded Satyam Computers in 1987 and was its Chairman until Janua ry 7, 2009 when he resigned from the Satyam. In January 2009, the founder indica ted that Satyam's accounts had been falsified over a number of years. He admitted to an accounting fraud to the tune of 70 00 crore. In order to hide the company's poor performance during the quarters he indulged in falsifying accounts. Also, he had also used dummy accounts to trade in Satyam's shares, violating the insider trading norm. The amount of the scand al than grew bigger than the Rs. 7000 crore highlighted earlier. www.capitalvia.com | 3

SCAMS 2008 THE 2-G SPECTRUM SWINDLE The 2G spectrum scam involved officials in the government of India illegally und ercharging mobile telephony companies for frequency allocation licenses, which t hey would use to create for 2G subscriptions for cell phones. It is alleged that A. Raja arranged the sale of t he 2G spectrum licenses below their market value. Swan Telecom, a new company with few assets, bought a license for Rs. 1537 crore. Shortly thereafter, the board sold 45% of the compan y to Etisalat for Rs. 4200 crore. Similarly, a company formerly invested in real estate and not telecom, the Unitech Group, pur chased a license for Rs. 1661 crore and the company board soon after sold a 60% stake in their wireless division for Rs. 6200 crore to Telenor. The nature of the selling of the licenses was that licens es were to be sold at market value, and the fact that the licenses were quickly resold at a huge profit indicates that the sellin g agents issued the licenses below market value. The 2-G Spectrum case is still on and the approximate figures that this scam inv olves is Rs. 60000 crs which the street knows. SCAMS GLOBAL RESEARCH LIMITED Rs. 60,000 crs 2009 MADHU KODA SCAM Rs. 4000 crs Madhu Koda (born January 6, 1971) is an Indian politician who was Chief Minister of Jharkhand from 2006 to 2008. He was sworn in as the fifth Chief Minister of Jharkhand on September 18, 2006 and remained in office until he resigned on 23 A ugust 2008. He is alleged to have involved in Moneylaundering and mining scam. He was charged with laundering money worth over Rs. 4000 crores. In nationwide raids by the Enforcement Directorate, assets allegedly worth Rs. 4 000 crore almost a fifth of the annual budget of the state he once ruled were uneart hed. Among others, these assets were reported to include hotels and three compan ies in Mumbai, property in Kolkata, a hotel in Thailand, and a coal mine in Libe ria. OTHER SCAMS DIRECTORY These are some of the big scams that we have highlighted above. The practice of fraud, money laundering, politics, bribery, dirty money is seen in abundance in other cases too. We are highlighting the scams and the money involved in the sam e. Year 1992 1994 1995

Scam Name Harshad Mehta Securities Scam Sugar Import Scam Preferential Allotment Scam Meghalaya Forest scam Yugoslav Dinar Scam Approx. Amt. Involved ( Rs. Crs) 4,000 650 5,000 300 400 www.capitalvia.com | 4

SCAMS OTHER SCAMS DIRECTORY Year 1996 Scam Name Fertiliser Import Scam Urea Scam Bihar Fodder Scam 1996 Sukh Ram Telecom Scam SNC Lavalin Power Project Scam Bihar Land Scandal C.R. Bhansal i Stock Scam 1998 2001 Teak Plantation Swindle UTI Scam Dinesh Dalmia Stock Scam Ketan Parekh Securities Scam 2002 2003 2005 Sanjay Agarwal Home Trade Scam Telg i Stamp Paper Scam IPO-Demat Scam Bihar Flood Relief Scam Scorpene Submarine Sca m 2006 Punjab's City Centre Project Scam Taj Corridor Scam 2008 Pune Billionaire Hassan Ali Khan Tax Default The Satyam Scam Army Ration Pilferage Scam 2G Spect rum Swindle State Bank of Saurashtra Scam Illegal Monies In Swiss Banks 2009 The Jharkhand Medical Equipment Scam Rice Export Scam Orissa Mine Scam Madhu Koda M ining Scam Approx. Amt. Involved ( Rs. Crs) 1,300 SCAMS GLOBAL RESEARCH LIMITED 133 950 1,500 374 400 1,200 8,000 4,800 595 1,250 600 172 146 17 18,978 1,500 175 50,000 10,000 5,000 60,000 95 71,00,000 130 2,500 7,000 4,000 www.capitalvia.com | 5

SCAMS CONCLUSION Disclaimer The information and views in this report, our website & all the service we provi de are believed to be reliable, but we do not accept any responsibility (or liab ility) for errors of fact or opinion. Users have the right to choose the product /s that suits them the most. The frauds in the financial markets have been known since years. The greed of th e scamsters leads to involvement in unhealthy practices and corruption. It's the common man who ha s always been at stake. The poorer become poorer and the richer the richest. It' s not that these scams are coming to the highlight these days it's a sin that is present since years. Bribery, dirty money, greed, politics have all helped the scamsters to survive. And when they are actually caught in t he trap it's too late and the Common Man already suffers. So, always be careful with your investments everywhere. Investment in Stocks has its own risks. Sincere efforts have been made to presen t the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal inf ormation and we are not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above. The stock price projections shown are not necessarily indicative of future price performance. The information herein, together with all estimates and forecasts, can change without notice. CapitalVia does not purport to be an invitation or an offer to buy or sell any f inancial instrument. Analyst or any person related to CapitalVia might be holding positions in the st ocks recommended. It is understood that anyone who is browsing through the site has done so at his free will and does not read any views expressed as a recommendation for which e ither the site or its owners or anyone can be held responsible for. Our Clients (Paid Or Unpaid), Any third party or anyone else have no rights to f orward or share our calls or SMS or Report or Any Information Provided by us to/ with anyone which is received directly or indirectly by them. If found so then S erious Legal Actions can be taken. Any surfing and reading of the information is the acceptance of this disclaimer. All Rights Reserved. SCAMS GLOBAL RESEARCH LIMITED www.capitalvia.com | 6