Troubles continue to chase Jignesh Shah. On April 4, the Maharashtra government attached operational accounts of Shah-promoted 63 moons.
In March, the Central Bureau of Investigation searched his office and residence, in connection with alleged irregularities in granting recognition to the Multi Commodity Exchange (MCX) as a national commodity exchange. He is also facing a barrage of court cases.
But Shah, once seen as a rising commodity czar, is attempting what he hopes will be a makeover — and that too as a mentor for startups. The move seems audacious, given the many challenges he faces.
While freezing the accounts, the state government also asked a sessions court to ensure that 63 moons, the erstwhile Financial Technologies of India Ltd (FTIL), deposit revenue generated from its trading software ODIN into an escrow account.
Freezing the accounts impedes 63 moons’ ability to keep paying statutory dues and salaries. The action also makes it potentially difficult for the company to sell ODIN’s technology to a third party.
A few days before the accounts were attached, Shah told ET Magazine: “Whenever you are on the path of disruption, or taking on a monopoly or an establishment, you are bound to be attacked.”
Sitting on his ninth-floor office in Mumbai’s, he says: “They will do everything possible to eliminate you. I got that treatment.” The reference is to last month’s searches by the Central Bureau of Investigation. “Now they are questioning us why we created MCX.” Shah was managing director of MCX when the alleged irregularities took place.
For someone once hailed for setting up and running the country’s first and biggest commodity exchange, Shah had a modest beginning as a software engineer.
He launched MCX in 2003 and followed it up by rolling out India’s first electronic spot exchange for commodities in 2008 — the National Spot Exchange Limited (NSEL). The same year, the first generation entrepreneur from a middle-class family of Kandivli, a suburb of Mumbai, made it to the Forbes billionaire list. Emboldened by his domestic successes, he launched trading exchanges in six countries, including a gold exchange in Dubai. But then came notoriety.
In 2013, Shah was implicated in a payments scam at NSEL involving Rs 5,574 crore. It marked the beginning of the end of his empire. Jailed for more than 100 days, Shah had to give up everything he had built over the last decade or so.
For someone battling a barrage of court cases and investigations, Shah seems unfazed. “When the truth is on your side, you have to withstand all pressure. I have full faith in the judiciary, and I am convinced of getting justice,” he says. “Did I run away from the country? No. I am not a quitter. I am not saying that my ordeal is over. But I am here, available 24X7, and have answered all summons.”
Suits to Khadi
The casualness is more apparent in his choice of wardrobe. The entrepreneur has shed his crisp suit and polished shoes for a khadi shirt and sandals. “Khadi lets me breathe more easily but am still an innovator,” says Shah, referring to his new business focus. All talks of ambitious business targets are now a thing of the past.
The website of JS Innovation Lab says it plans to enable ‘digital IP (Intellectual Property) routes’ by setting up 36 innovation labs in partnership with leading educational institutes, connecting global innovation hubs from Silicon Valley to Bengaluru and Tel Aviv to Tianjin.” Startup Networkz organises conferences for entrepreneurs. But will his comeback attempt be successful? Not likely, say some financial analysts.
“Though Shah was innovative and brilliant, the NSEL crisis hit his credibility hard, and his reputation went for a toss. It will be hard for him to come back,” says Ashish Kapur, CEO of Invest Shoppe. What might have been his undoing could be his temptation to make money fast. “If you innovate and grow, you grow rapidly. But at times, this pace overtakes caution,” he says, adding that unless the cases are resolved, it would be difficult for Shah to succeed in whatever he does.
But Shah has some backers, too. “All the cases against him are orchestrated,” claims Sanjay Asher, senior partner at law firm Crawford Bayley & Co. “I don’t understand why he is being hounded. Let the trial get over, he will come out clean.”
Those who allegedly lost money because of the NSEL scam have not been paid back yet, points out Anil Singhvi, chairman of Ican Investment Advisors. He says the case is quite simple: a set of buyers paid money for goods but never got delivery as sellers didn’t honour their commitment. After seizing the relevant assets, these should have been auctioned long ago to pay back the buyers.
“But the whole process has got into legal rigmarole,” says Singhvi. Cases have been going on for five years, agencies have investigated the matter in depth, but still there is no conclusion. “Traders who lost their money are unhappy, so are FTIL shareholders and Jignesh Shah.”
Of the Past and Galt
Back at his expansive office, Shah takes a philosophical tone: “No point in looking back. What has gone is gone.” But he does not miss the opportunity to point out that investigators have not been able to find a money trail to him. And this, he says, proves he is innocent.
Shah intends to turn a new leaf with his new venture. But he has been under severe legal scrutiny for a while and that status is unlikely to change anytime soon. Under the circumstances, would it be possible for him to make a clean break? It is anyone’s guess.
Unending Twists and Turns
Jan 2018: Reprieve for Jignesh Shah. Sebi revokes its directions against seven former officials of MCX as an alleged violation of insider trading rules could not be established. (In August 2017, Sebi had alleged insider trading in shares of MCX and its erstwhile promoter FTIL by 13 persons, including relatives of Jignesh Shah)
March 2018: CBI raids Mumbai headquarters of FTIL, and residences of Jignesh Shah in connection with alleged irregularities in granting recognition to MCX as a national commodity exchange. This is the third CBI case against FTIL and Shah. Earlier, CBI had registered a chargesheet against the two in an NSEL scam. CBI is also probing a case of alleged irregularities in giving recognition to MCX-SX
April 2018: The Economic Offences Wing of Mumbai Police attaches operational accounts of FTIL; approaches sessions court for depositing revenue generated from its trading software ODIN into an escrow account. Shah-owned 63 Moons, formerly known as FTIL, plans to move Bombay High Court against the move
Rise and Fall of Shah…
1995: Jignesh Shah sets up Financial Technologies (India) Limited or FTIL, a tech products company
1998: Launches trading software ODIN
2003: Multi Commodity Exchange (MCX) starts operations
2005: Shah launches Dubai Gold and Commodity Exchange
2007: Govt exempts FTILpromoted NSEL from one-day forward contracts
2012: MCX, India’s largest commodity bourse, is listed on NSE and BSE
Feb 2012: Forward Markets Commission seeks clarification from NSEL on its contracts
Apr 2012: Ministry issues show-cause notice to NSEL
July 2013: NSEL suspends trading on July 31 after a major payment crisis breaks out at the bourse
Oct 2013: Shah resigns from MCX board
Nov 2013: FTIL sells Singapore Mercantile Exchange to Intercontinental Exchange Group Inc
Mar 2014: Sebi declares FTIL not a “fit and proper person” to acquire or hold any equity share or any convertible instrument in a recognised stock exchange or clearing corporation
Sept 2014: FTIL sells 26% stake in MCX; exits the bourse
Nov 2015: FTIL exits Indian Energy Exchange
Jan 2016: FTIL sells its 14.3% stake in Dubai Gold and Commodities Exchange to Dubai Multi Commodities Centre
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