The Enforcement Directorate (ED) has registered a case under the Foreign Exchange Management Act against Viresh Joshi, the former fund manager at Axis Mutual Fund in connection with the Axis Mutual Fund front-running case.
The agency is also conducting searches on premises linked to Joshi and several other brokers since morning.
The Income Tax Department has previously investigated Joshi and several brokers for alleged tax evasion.
In July 2022, the Mumbai investigation wing of the Income Tax Department carried out searches at over 25 locations in Mumbai, Ahmedabad, Vadodara, Bhuj and Kolkata connected to Joshi. The department also questioned brokers and middlemen involved in the case.
In 2023, the Securities and Exchange Board of India (SEBI) had barred former Joshi and 20 other individuals from accessing the securities markets in the alleged front-running case. In its investigation, SEBI concluded that these individuals wrongly earned Rs 30.56 crore from the front-running activities.
The markets regulator also ordered to impound Rs 30.56 crore gained unlawfully by these individuals from the front-running activities. SEBI had directed them to deposit the amount into an interest-bearing escrow account created in a nationalised bank within 15 days.
SEBI alleged that Joshi incorporated a company in Dubai to for indulging in such fraudulent acts, including transferring the wrongful gains. The regulator also suspected that the ill-gotten wrongful gains may have siphoned off by these individuals to thwart any possible actions from the regulator for recovering such unlawful gains.
What is front running?
Front-running refers to buying or selling securities ahead of a large order so as to benefit from the subsequent price move. Under this illegal trading practice, a broker’s or analyst’s use of nonpublic information to acquire securities or enter into options or futures contracts for his or her own benefit