Brightcom's troubles mount as ED conducts searches at 5 offices, residences of top officials

Hyderabad-based ad tech firm Brightcom Group Ltd's troubles mounted as Enforcement Directorate said on Saturday it has conducted searches at five offices of the firm and residences of its top officials and auditors. 

The searches were initiated under the provisions of Foreign Exchange Management Act (FEMA), 1999, the probe agency said in a press release. 

The searches at Brightcom Group offices and residences of Chairman, Managing Director and Chief Executive Officer M Suresh Reddy, CFO Narayana Raju and auditor P Murali Mohana Rao were conducted from Wednesday to Friday, the agency said. It has also sealed the residential premises of Reddy and said further investigation is under progress.

The investigation was on the basis of the probe being conducted by the Securities and Exchange Board of India regarding impairment of assets worth Rs 868 crore by Brightcom Group through its subsidiaries abroad. 

Enforcement Directorate said that it has found several violations by the company under the provisions of Foreign Exchange Management Act. 

"It was revealed that Brightcom itself financed the preferential issues by round-tripping funds through subsidiaries and conduit entities, that Brightcom falsely claimed to have received full payment for preferential shares/warrants by providing ‘forged and fabricated bank statements’ to SEBI," the release said. 

The investigating agency said more than Rs 300 crore advanced as loans to subsidiaries were partly siphoned off or remained unaccounted. 

The enforcement body said the statutory auditors of the company--P Murali & Co and PCN & Associates--failed to report outright fraud and colluded with the management and promoters of the company to misguide SEBI and investors. 

During the searches, the officials seized various incriminating documents, digital devices and unaccounted cash of Rs 3.3 crore and Rs 9.3 crore worth of gold jewellery at auditors’ premises.

On Tuesday, SEBI has issued an interim order against Brightcom Group and its chairman and managing director, chief financial officer and 22 other persons and entities for alleged breach of its regulations on prohibition of fraudulent and unfair trade practices. 

This interim order by SEBI follows an earlier interim order of April 13 against the company and its directors for issuing fraudulent financial statements and breaching listing norms. 

On Friday, shares of Brightcom Group ended at Rs 20.85 on the National Stock Exchange, down 5% from previous close.