Former worker seeks damages from GBOT, says trades violated Mauritius’s money laundering laws – A former employee of Global Board of Trade Ltd (GBOT), Mauritius, promoted by embattled Financial Technologies (India) Ltd (FTIL), has alleged in a case filed with the Mauritius Supreme Court that 85% of the trades conducted at the exchange were fictitious and that the bourse violated local money laundering laws.
The case will come up for hearing on 10 October.
GBOT is the first international multi-asset class exchange from Mauritius to offer a basket of commodity derivatives, currency derivatives, equity cash and equity derivatives products on its trading platform.
FTIL owns 100% of GBOT and FTIL chairman and group chief executive Jignesh Shah is its vice-chairman.
The company is already battling a Rs.5,600-crore payments crisis at its Indian subsidiary National Spot Exchange Ltd (NSEL), which is threatening to spill over to the rest of the group.
The employee, Sudeep Rawool, blew the whistle in December 2011, but the local regulator did not take cognizance of his allegations earlier.
He eventually dragged his former employer to the Mauritius Supreme Court for the alleged harassment meted out to him for informing the management and the country’s market regulator about irregularities at the exchange. Rawool had reported suspicious transactions to Mauritius’ regulatory body Financial Services Commission (FSC).
He is seeking damages worth 100 million Mauritian rupees, or mur (about Rs.20.05 crore in India).
Rawool worked as a senior manager, trading and surveillance, in market operations at GBOT between September 2008 and November 2011.
As per his employment contract he was required to bring any irregularity found in the exchange’s operations to the notice of his bosses.
He reported to the head of operations at GBOT a series of 16 suspicious trades by a trading member, One Financial Ltd, that took place on 27 October 2010, and reversal of profits made by that member the next day.
Mint has reviewed a copy of his report filed with the local regulator.
Rawool declined to be quoted for this story as the matter is in the court.
In response to Mint’s query, FSC said that the trading member was one of two market makers for the exchange at that time, and it was, therefore, obvious that they did contribute to a large percentage of the trades.
But as no change in beneficial ownership took place, these trades violated Section 113 of the Securities Act 2005 in Mauritius, which deals with false trading in securities, Rawool alleged in his report.
Also, these trades were executed at the same price of mur 29.50 per US dollar. This was done to maintain an artificial price level.
These deals were executed between the market maker quotes and the buy and sell orders and were executed in quick succession to match each other by the same trading member, Rawool alleged.
As this was an attempt by the member to fix the price in his own favour, this violated Section 114 of the Securities Act, which deals with market rigging, Rawool said in his report.
FSC said the perception about violation of securities law is mere speculation. “FSC had conducted enquiries on same and requested for trade details. The markets are being monitored closely. Since this matter is sub-judice, we are not in a position to comment further.”
It did not say what conclusion it arrived at after inspecting the trade details or whether it had given a clean chit to GBOT.
“This matter is sub-judice. We are not in a position to elaborate further. As a regulator and as indicated above, we will continue to monitor closely the markets,” it said.
GBOT spokesman Amit Ramjeet said both points raised by the company’s former employee Rawool are false and baseless.
“We strongly deny any such mismanagement of activities at the exchange. As part of the licensing process, FSC inspected GBOT in March 2013, and did not find the exchange violating any of the licensing conditions. Moreover, as a compliance mandate, GBOT submits monthly reports on the activities of the exchange to FSC,” Ramjeet said.
Rawool also said in his report that he informed his bosses Joseph Bosco and Stanley Verghese in July 2011 of the trading pattern of another GBOT member GRRANS Commodities, that showed a large number of synchronized transactions between clients of the member on the buy/sell side that did not change beneficial ownership, violating Section 113 of the Securities Act.
Such transactions also get classified as suspicious transactions by the Financial Intelligence and Anti-Money Laundering Act 2002 of Mauritius.
Rawool alleged that 85% of the trades conducted on the exchange from the start of its operations till the time he resigned had been fictitious. He also claimed in his report that the exchange’s head of operations Verghese had misused his access to vital information to benefit one trading member over the other. This was not only unethical but also breached Section 116(2) of the Securities Act, which deals with false or misleading conduct in relation to securities, he alleged.
While the enquiry which Rawool had initiated did not go anywhere, he was forced to resign by Bosco and Siddick Bundhun after being threatened, he alleged.
They also allegedly denied him any chance to move on to a new career by providing negative comments about his employment to his subsequent prospective employer, a software service provider, Rawool alleged.
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