New Delhi: The Enforcement Directorate (ED) has tightened its grip on Capstone Forex Private Limited, a Mumbai-based firm, for allegedly purchasing Rs 700 crore worth of forex (foreign exchange) within 1.5 years via layers of shell companies.
The ED’s investigation has found that the company allegedly fudged air tickets and passports to buy forex, sources told ThePrint.
A case has been initiated by the ED Mumbai zone against the firm, which is authorised by the Reserve Bank of India.
Also read: ED ‘fails’ BJP in Delhi as its exposé linking Muslim outfit PFI to Shaheen Bagh bombs
‘Sudden spurt in turnover put company in spotlight’
Sources in the ED said information about a sharp rise in revenue had brought the company under suspicion.
In January 2019, the ED was informed that the company’s turnover rose from Rs 16.69 crore in 2016-17 to Rs 314.14 crore in 2017-18.
“This sudden spurt in the trend of turnover in 2017-18 compared to previous years caused interest to examine the business practice and the source of revenue of the said company,” said a source in the ED.
When questioned about the sudden rise in income, the company allegedly submitted copies of ‘fake’ passports and air tickets as proof of customers to whom they had sold foreign exchange.
“This led to the suspicion that foreign exchange sold by the company was not to the said individual customers as indicated by the firm in its records,” said an ED official, requesting anonymity.
The web of shell companies
Further investigation into the case revealed that Capstone Forex Private Limited had purchased foreign exchange and currencies from other banks and FFMCs (Full Fledged Money Changer) too by using funds they claimed to have received in their bank accounts from customers.
During examination of the firm’s bank account statements, the financial probe agency said it was found to have received hundreds of crores of rupees from various business entities and other companies during the period of 2017-19.
“…it was observed that these business entities had debited lakhs in each transaction during the course of 2017-19 to the company, aggregating to around Rs 700 crore,” the ED official quoted above said.
The agency then tracked all these firms that had transferred funds to Capstone and found that all of them were shell or dummy companies.
“To continue further investigation, the second layer of companies and firms who transferred substantial amounts to the first layer of companies were probed by way of calling for bank account statements and KYC,” the ED official said.
“…many of the companies in the said layer also consisted of shell and dummy companies,” he added.
Funds also transferred to reputed companies
The ED also said these shell companies were found to have transferred funds to other reputed companies too.
According to the agency, some of these firms include the CG Power Solution Ltd, Indiana Polis Hospitality Pvt Ltd of the Jay Mehta group, Consultshah Financial Services Pvt Ltd (the director of which also serves as an independent director in Edelweiss group of companies, Eros International Media Ltd, Jain Energy Ltd (Jain Irrigation group), Navkar Builders, Next Gen films Pvt Ltd and Swatantryaveer V D Savarkar Multistate Cooperative Credit Society.
“To identify and track these shell companies and examine business transaction between them, Capstone Forex and other reputed companies were investigated,” the official said.
But these reputed firms were unable to give proper justification for the funds transferred to shell companies, said the official.
Also read: ED attaches assets of KKR, Kolkata’s St Xavier’s College in Rose Valley ponzi scam