Sebi widens share conversion scam probe; Sharepro, hundreds other under scanner

Expanding its probe into an alleged large-scale scam in conversion of physical shares into demat format, markets watchdog Sebi has decided to conduct a detailed forensic audit of the books of Sharepro and some other registrars and share transfer agents.

Sebi suspects hundreds of individuals and market entities to be involved in the case wherein several listed blue-chip companies are said to have been defrauded by a syndicate with the help of some registered entities, a senior official said.

The modus-operandi followed by the scamsters typically involved filing of complaints about loss of physical share certificates, followed by issuance of fresh shares in demat format and even unclaimed dividend to fictitious beneficiaries by conducting a fraudulent 'due diligence' exercise.


In several cases, the scamsters approach the real owners of physical share certificates and purchase the same for a nominal amount, after which they file a compliant about loss of physical shares and get issued duplicate shares in demat.

The scam has been traced to several parts of the country including in Mumbai, Ahmedabad, Delhi and Kolkata and the regulator has involved the local police in those areas as part of its crackdown on the syndicate members.


The fraud came to light after Sebi began probing Sharepro Services, which acted as the Registrar and Share Transfer Agent for many top companies, including Britannia, Asian Paints, Tata Communications and Kansai Nerolac.

Sebi found dividends and shares were "transferred to the persons related to the management of Sharepro", while showing in records they were being given to rightful owners.


Through an order dated March 22, 2016, Sebi has already barred Sharepro and several entities linked with the management of Sharepro from the capital markets.

Besides, the companies served by Sharepro were asked to change their Registrar and Share Transfer Agent, and also to conduct a thorough audit of their records and systems with respect to dividend payouts and transfer of securities.

Almost all such companies have already stopped taking service of Sharepro and have made alternative arrangements.

Sebi, which probed as many as 797 cases involving Sharepro, found that the company's database showed payments of dividend being made to the original shareholders, but a verification of bank accounts revealed that it was "paid to persons who were not the rightful shareholders or were not at all shareholders of the companies".

Out of the 797 cases, as many as 644 involved mismatch of dates besides other irregularities.

Expanding the probe, Sebi is now looking into the role of some other Registrars and Share Transfer Agents, while it has also decided to rope in some chartered accountant firms for empanelment to take up assignments relating to forensic audit of the Registrars and Share Transfer Agents.

Sebi introduced demat or shares in electronic form way back in 1996, but nearly 5% shares of all listed companies are still said to be in physical format.

Taking into account the companies that may no longer be listed, the total value of shares still held in physical form is estimated in market circles at over Rs 2 lakh crore, though there is no official record of this.

This makes it a ripe hunting ground for the fraudsters, though RTAs are supposed to follow a strict procedure on due diligence of people seeking to convert their physical shares, the official added.

IRS impostor scam robs elderly Americans of life savings

It's the top complaint to a US Senate hotline for seniors: fraudsters posing as IRS agents, threatening arrests and demanding money.

Treasury Department official Timothy Camus told the Senate Aging Committee yesterday that more than 10,000 people have reported falling prey to the so-called "IRS impersonation scam" over the last several years many of them elderly Americans.

Phillip Hatch, who is 81 and testified before the panel via video, told lawmakers how he received a phone call one day at his home in Portland, Maine. The caller told him there was a mistake on his tax returns and federal marshals were coming to arrest him unless he paid the money.

Worried, Hatch did as instructed and went to the local CVS to purchase iTunes cards. He then read the numbers on the backs of the cards to the caller. After four hours on the phone with the caller, Hatch was out USD 8,000. He told the panel he wishes he hadn't been "so cooperative." Republican Sen. Susan Collins of Maine, chair of the committee, says the criminals who prey on seniors are relentless. "They will harass seniors over and over again until they have drained every penny from their life savings," she said.

Federal officials, from Treasury and the Federal Trade Commission, testified about efforts to combat the fraud on senior Americans.

Last October, more than 50 people were indicted in a scam that involved call centers in India and bilked thousands of victims out of more than USD 270 million.

Camus, with the Treasury Inspector General for Tax Administration office, says it is the largest single domestic law enforcement action to date related to the IRS impersonation scam.

For some time, scammers had been duping victims into getting money orders. More recently, however, Camus says his office has seen a shift to iTunes cards because it's easier to get the money since the scammers no longer need middlemen to convert the money orders. "They're now selling the iTunes cards on the third party market and pocketing the money immediately," Camus said.

The Senate Aging Committee has a hotline for seniors to call about fraud (1-855-303-9470). Last year, the hotline received more than 2,200 calls from people all over the country more than double the number of calls from 2015.

The top complaint was the IRS impersonation scam. That was followed by lottery or sweepstakes scams, in which callers promise a huge lottery prize that can only be awarded if taxes and other fees are sent immediately to the caller.

U.S. charges 19 in international fraud, money laundering scheme

U.S. authorities on Wednesday charged 19 people with taking part in a complex international fraud and money laundering ring that tricked companies and consumers out of millions of dollars.
The charges were part of an international sweep Wednesday, in which police in the United States, Hungary, Bulgaria and Israel arrested 17 individuals accused of money laundering and wire fraud, United States Attorney for the District of Columbia Channing D. Phillips announced at a press conference.
Authorities from the U.S. Department of Treasury and the Federal Bureau of Investigation say they uncovered the organized crime groups in 2011 when they discovered a makeshift call center operated out of a Washington hotel room.
The operation was used to post phony car ads online advertising cars, luring customers with prices far below market value. Once the customers placed a deposit for the cars, the fraudsters would cut off contact and disappear with the money, authorities said.
"Money mules" would then withdraw the cash and transport it in bulk to a network of money launderers in Europe, authorities said.
After investigating that scheme, authorities say they learned members of the group, which spanned Europe, Israel and the United States, had also scammed unnamed German and Portuguese companies out of millions of dollars in phony transactions in 2014 and 2015.
Using fake email addresses to impersonate the chief executive or president of a company, authorities say the defendants would instruct mid-level employees to wire hundreds of thousands of dollars for a "secret" financial transaction, such as a corporate acquisition.
But the bank accounts were controlled by the criminals, who disappeared with the money, authorities said.
Reuters could not immediately reach the defendants for comment.

UK owes EU two billion euros after China import fraud: probe

Britain owes the European Union budget two billion euros after turning a blind eye to a major scam by Chinese importers, the EU's fraud office said on today.

"We recommended that the European Commission recovers the money from the United Kingdom," the EU's anti-fraud office OLAF said in an email to AFP, confirming a report by Politico.

OLAF accuses Britain of ignoring rampant use of fake invoices and customs claims by Chinese importers which cost 1.99 billion euros (USD 2.1 billion) in lost customs duties to the EU.

The claim comes at a sensitive time in EU-Britain relations, just before London is to embark on Brexit negotiations in which the UK's exit bill -- estimated at 60 billion euros -- has already sparked sharp exchanges.

The UK government said it rejected the report and insisted Britain was tough on fraud.

"We don't recognise the figures and (the UK's revenue authorities) are looking at it now," a spokesman for British Prime Minister said.

The matter was "entirely separate and unrelated matter to the Brexit negotiations," he added.

An investigation by OLAF showed that between 2013 and 2016, fraudsters evaded customs duties by using false invoices and incorrect customs value declarations on imports into the UK.

OLAF said that "despite repeated efforts and in contrast to the actions taken by several other member states to fight against these fraudsters," the scam in Britain continued to grow.

The office said that the scheme also cost other EU countries -- such as France, Germany, Spain and Italy -- 3.2 billion euros in lost national value-added-tax revenue.

The fraudsters involved "are in fact organised crime groups whose actions affect the entire EU; they operate in criminal networks active across the EU," OLAF said.

U.S. charges Lithuanian man with $100 million email fraud

U.S. prosecutors have charged a Lithuanian man with engaging in an email fraud scheme in which he bilked two U.S.-based companies out of more than $100 million by posing as an Asian hardware vendor.

Evaldas Rimasauskas, 48, was arrested late last week by Lithuanian authorities, Manhattan federal prosecutors said Tuesday. Rimasauskas does not yet have legal counsel, a spokesman for the prosecutors said.

The alleged scheme is an example of a growing type of fraud called "business email compromise," in which fraudsters ask for money using emails targeted at companies that work with foreign suppliers or regularly make wire transfers.

The Federal Bureau of Investigation said last June that since October 2013, U.S. and foreign victims have made 22,143 complaints about business email compromise scams involving requests for almost $3.1 billion in transfers.

In an indictment unsealed Tuesday, prosecutors said that to carry out his scheme, which they said began around 2013 or earlier, Rimasauskas registered a company in Latvia with the same name as an Asian computer hardware manufacturer.

He then sent emails to employees of the two unnamed victim companies asking them to wire money that they actually owed to the Asian company to the sham Latvian company's accounts, prosecutors said.

The victim companies are described as a multinational technology company and a multinational social media company.

After they wired money to Rimasauskas's Latvian company, Rimasauskas quickly transferred the funds to different accounts around the world, including in Latvia, Cyprus, Slovakia, Lithuania, Hungary and Hong Kong, prosecutors said.

In order to conceal his fraud from banks that handled the transfers, Rimasauskas forged invoices, contracts and letters purportedly signed by executives at the two victim companies, according to prosecutors.

Rimasauskas is charged with wire fraud and money laundering, which each carry a maximum prison sentence of 20 years, and identify theft, which carries a mandatory minimum sentence of two years.

Noida 'online' ponzi scam: ED attaches assets worth Rs 599 cr

The ED today attached assets worth Rs 599 crore in the alleged Rs 3,700 crore ponzi scam perpetrated by a Noida-based firm after promising money in lieu of 'likes' on social media to lakhs of gullible investors.

The Enforcement Directorate (ED) said it has issued a provisional order against Ablaze Info Solution Private Limited, the firm owned by the alleged kingpin of this case Anubhav Mittal, attaching properties worth Rs 599.28 crore.

The attachments, under the Prevention of Money Laundering Act (PMLA), includes "bank balances in 14 accounts totalling Rs 543.81 crore, a fixed deposit of about Rs 52 crore lying with a Hyderabad-based mobile payment gateway company and a Villa in Jaypee Greens, Greater Noida worth Rs 3.6 crore." Mittal, the agency said in a statement, had collected "several thousand crore of rupees from the customers of his company by false inducements and later siphoned off the same by means of generating false or bogus bills/invoices with the assistance of various persons who are under scrutiny." The Enforcement Directorate's zonal office in Lucknow had on January 5 registered a criminal case under the PMLA based on an FIR of the Uttar Pradesh Police's Special Task Force (STF) which had first unearthed the alleged illegal ponzi or multi-level marketing scam.

Describing the modus operandi used by the accused to perpetrate the ponzi scam, the ED had said an analysis of the bank statements of the companies involved reveals a "phenomenal increase" in the number of transactions since March, 2016 and during a period of around one month a "turnover of more than Rs 40 crore was achieved".

The central probe agency had said the fraudsters allegedly cheated about 6.5 lakh gullible investors of an estimated Rs 3,700 crore, a fraud many more times in value than the infamous Saradha chit fund scam of West Bengal and Assam which is pegged at Rs 2,500 crore.

The UP STF had arrested Mittal and three others in this case till now.