A New York Bankruptcy Court has refused to accept the plea of diamantaire Nirav Modi seeking quashing of fraud charges against him. Nirav Modi was accused of fraud by Richard Levine. The court has appointed Levine, a trustee of three American corporations. Earlier, Nirav Modi had authority over them indirectly. The three corporations of Nirav Modi for which Levin has been appointed as trustee include Firestar Diamond, Fantasy Inc and A Jeff.
Levin has demanded a fine of at least $ 15 million on Nirav Modi. Levin has said that this compensation should be taken to compensate for the loss caused by Nirav Modi and his associates Mihir Bhansali and Ajay Gandhi.
Judge Sean H. Lane of the Southern District of New York’s Bankruptcy Court (SDNY) issued a notice last Friday. This is a big setback for Nirav Modi. Indian-American lawyer Ravi Batra said, “The judge of the SDNY Bankruptcy Court in a clear judgment has dismissed the petitions of Nirav Modi, Bhansali and Gandhi. They are accused of fraud, not fulfilling their duty as trustees and breaking other laws. is charged with.”
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The court has issued a 60-page order. Regarding this order, Batra said that Nirav Modi has increased the share price and valuation by showing wrong sales of the company so that maximum profit can be made. Nirav Modi did this whole strategy to defraud Punjab National Bank of $1 billion. Batra said that even after withdrawing funds from Punjab National Bank, Nirav Modi had tried to hide it as if it was an ordinary transaction.
How did the fraud happen?
The letter from Punjab National Bank states that a junior officer of the branch fraudulently issued Letter of Undertaking (LOU) on behalf of some companies of Nirav Modi group through SWIFT trail. SWIFT is a global financial messaging service.
Through this, millions of dollars are sent internationally. These transactions do not come under the purview of Core Banking System (CBS) nor is CBS kept in the loop. Daily banking transactions come in CBS.
The letter of undertaking (LOU) is at the root of the entire scam. This is a kind of guarantee, on the basis of which other banks give money to the account holder. In such a situation, if the account holder defaults, it is the responsibility of the bank providing the LOU to pay the dues to the bank concerned. The suspicious financial transactions in the PNB case were in connivance of bank officials and employees.
Normally there is some kind of mutual agreement between banks for such transactions. And if one bank issues such a letter of undertaking, then the other bank respects it and provides credit of the same to the traders or buyers.
How did the scam come to light?
These jewelery companies have stores in overseas locations such as Hong Kong, Dubai and New York. These stores were availing buyer’s credit on LOU basis since 2010. But the matter got messed up when the payment due on last 25 January 2018 was not done.
According to reports, PNB officials also used to charge an additional 10% of the amount from jewelery companies for such a facility. Later, when the jewelery companies could not return the money, then this complete fraud came to the fore. PNB, on the other hand, refused to give money against the LOU issued, so one of the other banks reported the matter to the Hong Kong Monetary Authority, which is the local regulatory authority.
The scam started with Mehul Choksi’s diamond companies – Gitanjali Gems, Gili India, Nakshatra and Nirav Modi group companies approaching PNB for issuing letters of credit or letters of undertaking for rough diamond imports.
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