SFIO makes arrests in Rs 6,500 cr worth accounting fraud at two cos
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 Rotomac group of companies and Frost International. Both have significant liabilities towards various public sector banks.
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 around Rs 3,000 crore and Rs 3,500 crore in the case of Rotomac group of companies and Frost International, respectively, as per the sources.Further, the sources said Rotomac group of companies and Frost International have total outstanding liability of Rs 4,000 crore and Rs 3,500 crore towards 14 public sector banks against which they have defaulted. RAM ABMABM