Jignesh Shah, the 46-year-old promoter of Blackstone-backed Financial Technologies India Ltd (FTIL) and MCX, along with Shreekant Javalgekar, former MD and CEO of MCX, were arrested on Wednesday evening by the Economic Offences Wing (EOW) of Mumbai Police, in relation to their alleged involvement in the National Spot Exchange (NSEL) scam.
This takes the total number of people arrested in the NSEL scam to 11 to date.
Shah, who holds a Bachelor of Engineering (BE) degree from Mumbai University with specialised training in Money and Capital Markets as well as Futures and Options Trading at New York Institute of Finance, has been much feted as an entrepreneur.
His arrest marks the most high-profile development in what is estimated to be a scam worth Rs 5,600 crore. Last year former NSEL chief executive Anjani Sinha was arrested. He continues to be in jail.
The arrests follow complaints filed by NSEL investors. NSEL was hit by a payment crisis last year even though it faced a show cause notice two years ago on allegations that the spread contracts it ran violated forward contract law.
A spokesperson of the Mumbai Police said that the arrests were necessitated as Shah and Javalgekar did not cooperate during interrogations and diverted questions while putting the onus on the former CEO of NSEL.
Over the last few months, FTIL as a group came under the scanner of various regulatory bodies, including securities market regulator SEBI and Forward Markets Commission (FMC). Both FTIL as a company and Shah as an individual were deemed to be unfit to run any exchange in the country.
They have been previously asked to cut their holding in MCX, a listed commodity exchange operator, from 26 per cent to 2 per cent. The proposed share sale which was to be completed sometime back is pending.
FTIL counts Blackstone, Norwegian sovereign wealth fund Government Pension Fund Global and Citigroup Venture Capital International as shareholders. MCX has shareholders such as Intel Capital and Blackstone.
Blackstone owns 7 per cent in FTIL besides 4.8 per cent in MCX.
(Edited by Joby Puthuparampil Johnson)