SFIO makes arrests in Rs 6,500 cr worth accounting fraud at Rotomac, Frost International
The Serious Fraud Investigation Office (SFIO) has arrested at least three individuals in connection with alleged accounting fraud worth Rs 6,500 crore at Rotomac group of companies and Frost International Ltd, according to official sources
New Delhi: The Serious Fraud Investigation Office (SFIO) has arrested at least three individuals in connection with alleged accounting fraud worth Rs 6,500 crore at Rotomac group of companies and Frost International Ltd, according to official sources.
These individuals were remanded to SFIO custody by the Magistrate Court on Thursday, they said.
The SFIO, which comes under the corporate affairs ministry, is conducting probes into the affairs of the Rotomac group of companies and Frost International. Both have significant liabilities towards various public sector banks.
Sources to @CNBCTV18Live @CNBCTV18News
Rotomac Group of Companies and Frost International Limited have total outstanding liability of Rs 4000 Cr & Rs3500 Cr towards 14 public sector banks against which they have defaulted pic.twitter.com/C3PMNamiaj
— Timsy (@TimsyJaipuria) March 19, 2020
The sources said it was revealed that the companies were indulging in round-tripping of funds by abusing the merchanting trade scheme.
According to them, in order to obtain bank funds required for the same, they manipulated their financial statements and issued fictitious debit notes to many foreign entities, which were under their control.
This was done to fraudulently transfer the foreign exchange losses incurred during the fraudulent merchanting trade to trade receivables. As a result, they showed a healthy balance sheet, the sources said.
The total amount of manipulation of books in the form of trade receivables is around Rs 3,000 crore and Rs 3,500 crore in the case of the Rotomac group of companies and Frost International, respectively, as per the sources.
Further, the sources said the Rotomac group of companies and Frost International have the total outstanding liability of Rs 4,000 crore and Rs 3,500 crore towards 14 public sector banks against which they have defaulted.
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The SFIO, which also has powers to arrest people, mainly investigates violations under the Companies Act.