On Valentine’s Day, one of India’s biggest banks disclosed an almost $2 billion fraud allegedly by one of the country’s richest men, who deals in pearls and diamonds.
Shares of the lender, Punjab National Bank, plunged on the news, dragging down other lenders when it said the scam may extend to multiple banks.
With several questions still unanswered, here’s what we know about the case:
Who are the key people named in PNB’s complaint?
In its complaint to the federal investigation agency -- the Central Bureau of Investigation -- PNB alleged that the fraud was led by Nirav Modi, a jeweler who’s dressed Hollywood and Bollywood actors including Kate Winslet and Priyanka Chopra. Modi’s No. 85 on Forbes’s 2017 list of India’s richest people and, at 47, is one of the youngest.
PNB on Friday told the exchanges it has also filed complaints against Mehul Choksi’s Gitanjali Group of companies. These include Gitanjali Gems Ltd. and PNB alleges a 49 billion rupee loss from Choksi’s companies, CBI spokesman Abhishek Dayal said in a text message.
PNB alleges that Modi and Choksi worked with a former PNB employee, Gokulnath Shetty, who was posted at a PNB branch in Mumbai from where the fraud originated. Shetty was a deputy general manager in the foreign-exchange department looking after import payments.
The CBI has posted a copy of an initial complaint on its website. Modi’s office didn’t reply to calls and emails seeking comment on PNB’s complaint. Gitanjali’s external media contact wasn’t available for comment. Shetty couldn’t be reached for comment and PNB didn’t reply to a request seeking assistance in contacting Shetty.
What is this fraud about?
PNB has alleged that the Modis and companies linked with them colluded with Shetty to pull off the heist. The bank claims they used fake PNB guarantees worth $1.8 billion to obtain loans from the overseas branches of Indian banks, claiming to need the cash to import pearls, according to documents made public or seen by Bloomberg.
How did it allegedly start?
The fraud allegedly dates back to 2011, said Rajiv Kumar, India’s top bureaucrat for the bank sector. Between then and January 2017, Shetty issued several fake PNB letters of undertaking -- without any collateral -- for Modi, PNB said.
The bank claims they then bypassed the lender’s internal messaging system in order to avoid detection, and placed instructions via the Swift global payment system asking overseas branches of Indian banks to fork out the cash as loans, according to a document from PNB seen by Bloomberg. PNB is still investigating how this played out.