 "'NSEL client money used for defaulters'")
This was revealed by Grant Thornton, the forensic auditor of the NSEL, which submitted its report to the exchange on September, forwarded to the Forward Markets Commission (FMC) on Wednesday, the regulator overseeing Rs 5,600 crore payment crisis of the Financial Technologies group spot exchange.
According to the source, the NSEL was aware of borrowers continuously getting defaulted about 18 months ahead of the actual default of the exchange.
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But, the exchange continued to service the borrowers without any hesitation by allowing them to borrow fresh funds to service past borrowings. Importantly, NSEL repeatedly exempted margin requirements for defaulters just to continue the business going.
In yet another finding, the auditor discovered evidence of client money used to fulfill obligations of defaulters.
Between 2009 and 2013, NSEL extended margins limits on more than 1800 occasions without questioning the integrity of borrowers.
Sources close to the development said that the FMC is currently studying the report. Efforts to reach FMC officials did not elicit any response. When contacted, NSEL preferred not to comment. Grant Thornton also said they can not discuss about the report.