Jignesh Shah, chairman and chief executive officer of erstwhile Financial Technologies Ltd. (Photographer: Scott Eells/Bloomberg News) 

Jignesh Shah Cries Conspiracy After SEBI’s Insider Trading Order

Jignesh Shah, founder of India’s largest commodity exchange Multi Commodity Exchange Ltd., said the market regulator’s order holding his close relatives and former colleagues guilty of insider trading is unfounded and without basis.

The Securities and Exchange Board of India has ordered to impound the losses Shah and 12 others averted by selling shares of MCX when the National Spot Exchange Ltd. scam unravelled between April 2012 and July 2013. The regulator said in an August 2 order that an investigation found that the trades occurred when they had unpublished price-sensitive information.

NSEL, promoted by Shah’s Financial Technologies of India Ltd., now called 63 Moons Technologies Ltd., was ordered to shut down after a probe found that the exchange allowed trading on the stock that didn’t exist in warehouses. NSEL failed to pay investors Rs 5,600 crore.

Shah and Venkat Chary, non-executive chairman of 63 Moons, at a press conference held in Mumbai, said the order against them and others, including Shah’s family members, was “part of a conspiracy”.

The sale of shares after October 2, 2012 does not amount to insider trading based on unpublished price sensitive information, Shah said. NSEL disclosed the show-cause notice it received from the department of consumer affairs about its contracts through a circular on October 2, he said. Most executives sold stock options following pre-sale procedures as laid out by the regulator, he said.

Shah, no longer the promoter of MCX, couldn't answer why NSEL, FTIL or MCX waited for five months to disclose the notice and also didn’t inform shareholders and the public about subsequent events.

Shah alleged SEBI’s interim order was passed under “political pressure” and without giving adequate opportunity to the individuals whose bank and demat accounts have been frozen with immediate effect. Mehmood Vaid, an employee of 63 Moons, said his accounts have been frozen by the regulator.

SEBI has asked the individuals to submit all details pertaining to assets and banks accounts within seven days. It has also asked these individuals to reply to the regulator within 21 days.