2 more arrested in Karvy stock scam

The police unearthed the involvement of promoters of the Karvy Stock Broking Limited in unauthorisedly emptying cash from the DMAT accounts of the clients on Thursday. The Hyderabad police arrested two more persons in connection with the case. Till now, the police received complaints that Karvy unauthorisedly pledged shares of clients with banks and raised loans.

They took into custody chief operating officer (COO) Rajeev Ranjan Singh who heads the broking division and chief financial officer (CFO) G. Krishna Hari and produced before the magistrate for judicial remand. In another development, the court rejected the bail application of Parthasarathy, whose custody will now be sought by both the Hyderabad and Cyberabad police as part of investigation into new cases. “We will seek court’s permission for custody to probe further into the financial frauds committed by him,” joint commissioner of police Avinash Mohanty said.

A fresh complaint was lodged against Karvy by one Vijaya Kumar and his wife alleging that the stock broking firm had operated their DMAT account and indulged in transactions without their knowledge. The complainants initially had a balance of `2 crore in their account but to their

utter shock, a charge of `25 crore was created by the respective bank. “Prima facie we are of the view the money was transferred to other accounts and at a later stage, invested in futures trading in which the loss occurred,” a senior police official said. Sources said Parth-asarathy and Krishna Hari, set up at least nine shell companies, including Classic Insurance, Champion, Buoyant, Zenith, Nova, Wizard, Vitalink and Telecon Health Advisory and diverted money.

In some firms, the routine corporate fraud of keeping drivers and other workers as directors took

place. Preliminary probe indicated that Karvy officials either diverted money or unauthorisedly invested in stocks and futures about `600 crore that led to huge loss of `300 crore, sources pointed out.

According to the police, the COO and the CFO were called for questioning a couple of times but did not reveal much except admitting they merely followed oral instructions from Parthasarathy and made investments or transfers. The case is being investigated by K. Mahender, additional deputy commissioner of police, and S.V. Hari Krishna, ACP.