Enforcement Directorate arrests businessman in multi-crore bank fraud case

The money laundering investigation was conducted on the basis of FIR/chargesheets filed by the CBI wherein it is alleged that Choudhary-controlled Zoom Developers caused loss to 5 banks.

The Enforcement Directorate (ED) arrested Vijay Madanlal Choudhary, Director and main controller of M/s Zoom Developers Pvt. Ltd. (ZPDL) on Wednesday for money laundering.

The money laundering investigation was conducted in this case on the basis of FIR/chargesheets filed by the CBI, New Delhi wherein it is alleged that Choudhary-controlled Zoom Developers caused wrongful loss to 5 banks including Punjab National Bank, Syndicate Bank, Canara Bank, United Bank of India and Union Bank to the tune of Rs 966 crore.

Further, this loss is not just limited to Rs 966 crore but the accused has cheated more than 25 banks and it involves huge public money worth over Rs 2,650 crores.

The investigation revealed that Choudhary formed 2 trusts/foundations by name of Beverin Stifung Foundation (BSF) and Windleaf Foundation (WF), incorporated in Liechtenstein of which he was the sole beneficiary. On formation of the BSF and WF, five companies were formed by these trusts/foundations in the UK and Switzerland viz. Astikor AG, Llondenium Trading Ltd., etc which were referred as "Aggregators" by the ZDPL and were projected to the Indian bankers as independent entities, who entered into contracts/sub-contracts for rendering of engineering services/procurement.

Based on the contracts entered between ZDPL and the so-called 'Aggregators', ZDPL approached various Indian banks for issuance of bank guarantees/counter-guarantees to the foreign bankers of the Aggregators, for the mobilisation advances being received by them from the 'Aggregators' against the contracts/sub-contract entered by ZDPL. On issue of the Bank Guarantees (BGs)/ Counter-Guarantees (CGs), to the foreign bankers of the Aggregators, mobilisation amounts were released by the aggregators to ZDPL. These mobilisation advances received from the aggregators, was utilised by ZDPL among their group companies, as investment in share capital/for purchase of properties/paid as advances/as Working Capital etc.

PAPER CONTRACTS

It is observed that majority of the contracts are paper-contracts only (i.e., no physical work/services/supply was ever made against them) and no work was done; ZDPL has frequently sought extension of bank guarantees/counter guarantees, issued by their Indian bankers, submitting false grounds for extension.

Since the bankers of the "Aggregators" have released mobilisation advances ranging from 30-60 per cent of the total contract value, the foreign bankers were safe as their money was secured by a BG/counter guarantee. However, on observing that these contracts are not being concluded/ closed for a long time and the money released by them as mobilisation advance to ZDPL was pending for repayment by the Aggregators/ZDPL for a long time, the foreign bankers of the "Aggregators" have enforced the BGs/counter guarantees, thereby causing irreparable loss to the Indian bankers.

According to the ED, Choudhary was the mastermind behind this and with the help of Sharad Kabra, CA and others evolved this modus operandi, and cheated the Indian bankers. He siphoned off the public funds outside the country and acquired properties/assets, by way of laundering the illegally generated money through web of companies created in India.

"Choudhary has formed almost 485 companies in his name/family members/employees. Further, as per the investigation conducted, it is seen that Choudhary has also floated 15 companies in USA, 3 in UK, 3 in Switzerland, 7 in Singapore, 4 in Germany, 9 in UAE, 2 in China and 2 in Zimbabwe. It appears that he has formed the above companies for the sole purpose of laundering the proceeds of crime," the ED added.

Based on the investigations conducted, the ED has till date, attached assets worth Rs 130 crore in this case including 1280 acres of land in California, US. During the investigation, Kabra was arrested and a prosecution complaint was filed against him.

Accordingly, Vijay Choudhary has now been arrested under section 19 of PMLA, 2002. He was arrested from Mumbai and was taken to Indore for further probe.

Further investigation is in progress.

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