hai

1. www.capitalvia.com GLOBAL RESEARCH LIMITED
INDIAN MARKET
SCAMS

2. SCAMS
SCAMS
GLOBAL RESEARCH LIMITED
THE MEMOIR OF THE INDIAN MARKETS SCAMS
A
lot is heard in the past and till today we hear a lot about the financial markets scams. Financial Market Scams
are the attempts by scamsters who indulge in crooked activities to fulfil the bellies of their own at the stake of
common man. These scamsters through various fraudulent activities gather big chunks of money. Our report is
one such initiative to highlight a few scams in India, how it was done and the money that was involved in these scams.
1992
HARSHAD MEHTA SECURITIES SCAM Rs. 5000 crs
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 1992.He and his associates draw off
funds from inter-bank transactions and bought shares 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 banking system to finance
his buying. The amount that was involved in this scam was approx. to Rs. 5000 crs.
How Harshad Mehta financed his deals?
Harshad Mehta worked on the mechanism of READY FORWARD (RF) DEALS. It's a secured short-term (typically 15-day) loan
from one bank to another. The bank lends against government securities. The borrowing 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 settlement process, deliveries of securities and payments were
made through the broker. That is, the seller handed over the securities to the broker, who passed them to the buyer, while the
buyer gave the cheque to the broker, who then made the payment to the seller. Thus , both the parties may not know 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 borrower, 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 and the seller holds
the securities in trust of the buyer.
Having figured this out, Mehta needed banks, which issue fake BRs, or BRs not backed by any government securities. “Two
small and little known banks - the Bank of Karad (BOK) and the Metropolitan Co-operative Bank (MCB) - came in handy for this
purpose. These banks were willing to 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, obviously 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 and 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, and 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 whopping Rs 4,000 crore.
www.capitalvia.com | 2

3. SCAMS
SCAMS
GLOBAL RESEARCH LIMITED
2001
KETAN PAREKH SCAM Rs. 1250 crs
Ketan Parekh is a former stock broker from Mumbai, India, who was convicted in 2008, for involvement
in the Indian stock market manipulation scam in late 1999-2001. He was involved in rigging up the stock
prices. A chartered accountant by training, Parekh came from a family of brokers, which helped him
create a trading ring of his own. Between 1999 and 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 Investment firms. By the time he became famous to rig
the prices everyone be it investment firms, promoters of listed companies, overseas corporate bodies
etc , all were ready to hand the money to him. Scrips like Visualsoft rose from Rs 625 to Rs 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 cartel 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.
2001
UTI SCAM Rs. 4800 crs
The Unit Trust of India is the largest mutual fund in the country created in 1964. 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 individuals were basically
done in debt, but after the liberalization of the economy more allocation was made to equity investments. The US-64 did not
came under SEBI regulations, its investment details were kept secret and the chairman has arbitrary powers to personally
decide its investment. This led Mr. P Subramanyam the chairman to involve himself in the fraud. Small investor's funds were
.S.
used to promote big business houses, shower favours to politicians, and invest huge amounts in junk bonds all for a fat
commission. He was a key player in the Ketan Parekh scam. Huge amount of UTI funds were channelled into the infamous K-10
list of Keten Parekh stock, such as Himachal Futuristic, Zee Telefilims, Global Tele, DSQ, etc. The UTI continued to buy these
shares even when their market value began to crash in mid-2000, in order to prop up the share values of these stocks. This
whole story led to the ultimate decline of the fund.
2008
SATYAM SCAM Rs. 10,000 crs
Ramalinga Raju founded Satyam Computers in 1987 and was its Chairman until January 7, 2009 when he
resigned from the Satyam. In January 2009, the founder indicated that Satyam's accounts had been
falsified over a number of years. He admitted to an “accounting fraud” to the tune of 7000 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 scandal than grew bigger than the Rs. 7000 crore highlighted earlier.
www.capitalvia.com | 3

4. SCAMS
SCAMS
GLOBAL RESEARCH LIMITED
2008
THE 2-G SPECTRUM SWINDLE Rs. 60,000 crs
The 2G spectrum scam involved officials in the government of India illegally undercharging mobile
telephony companies for frequency allocation licenses, which they would use to create for 2G
subscriptions for cell phones. It is alleged that A. Raja arranged the sale of the 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 company to Etisalat for Rs. 4200 crore. Similarly, a
company formerly invested in real estate and not telecom, the Unitech Group, purchased 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 licenses were to be sold at market value, and the fact
that the licenses were quickly resold at a huge profit indicates that the selling agents issued the licenses below market value.
The 2-G Spectrum case is still on and the approximate figures that this scam involves is Rs. 60000 crs which the street knows.
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 August 2008. He is alleged to have involved in Money-
laundering 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. 4000 crore — almost a
fifth of the annual budget of the state he once ruled — were unearthed. Among others, these assets
were reported to include hotels and three companies in Mumbai, property in Kolkata, a hotel in
Thailand, and a coal mine in Liberia.
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 same.
Year Scam Name Approx. Amt. Involved ( Rs. Crs)
1992 Harshad Mehta Securities Scam 4,000
1994 Sugar Import Scam 650
1995 Preferential Allotment Scam 5,000
Meghalaya Forest scam 300
Yugoslav Dinar Scam 400
www.capitalvia.com | 4

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

6. SCAMS
SCAMS
GLOBAL RESEARCH LIMITED
CONCLUSION The frauds in the financial markets have been known since years. The greed of the scamsters leads
to involvement in unhealthy practices and corruption. It's the common man who has 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 the trap it's too late
and the Common Man already suffers. So, always be careful with your investments everywhere.
Disclaimer
The information and views in this report, our website & all the service we provide are
believed to be reliable, but we do not accept any responsibility (or liability) for errors of
fact or opinion. Users have the right to choose the product/s that suits them the most.
Investment in Stocks has its own risks. Sincere efforts have been made to present 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 information 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 financial
instrument.
Analyst or any person related to CapitalVia might be holding positions in the stocks
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 either 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 forward 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 Serious Legal Actions can be taken.
Any surfing and reading of the information is the acceptance of this disclaimer.
All Rights Reserved.
www.capitalvia.com | 6