JPMorgan has one week to explain an alleged $12 million ‘serious fraud’ in India

Headquarters of JP Morgan Chase & Co in New York, U.S.Reuters

  • An Indian forensic auditor accuses JPMorgan of indulging in a real estate fraud
  • The investment firm allegedly invested $12 million in a tainted real estate company
  • Later, it sold the same shares for $20 million
  • India’s Supreme Court has sought explanation from JPMorgan’s India in-charge
Global investment bank JPMorgan has been accused of helping a tainted builder in India, in round-tripping $12 million. The court has asked the India in-charge of the multinational firm to reply within a week, according to a news agency report.

This is more bad news for JPMorgan on the same day that it reported fourth-quarter earnings, which were less than market expectations.

The counsel for JP Morgan has reportedly said that the firm would explain everything to the court and has urged the bench to not get prejudiced with the findings of the forensic audit.

In an ongoing case between Amrapali Group and its buyers at the Supreme Court of India, a forensic auditor told the judges on Tuesday that an agreement between JPMorgan and the real estate developer was in violation of the law.

“After investing Rs 85 crore in purchasing shares of Amrapali Zodiac with an agreement which was impermissible in law, they again sold those shares for Rs 140 crore to little known companies Neelkanth and Rudraksh which were owned by Chandan Mittal and Vivek Mittal who worked in the office of Amrapali as statutory auditors.

These two companies were sister companies of the Amrapali Group according to the forensic auditors. “You have to explain within a week when did this transaction took place, what documents had you seen, when did you appointed your Chief Financial Officer, who took the decision to sell those shares to companies like Neelkanth and Rudraksh, whether any study was conducted to see the standing of these companies in market, who signed the documents and lastly who signed the cheques. We want each and every details in one week,” the judges’ bench said.

It also warned that if they did not get a satisfactory reply to the questions, then the court may direct the Serious Fraud Investigation Office (SFIO) to look into the matter, the news agency report said.

The said controversy is around JPMorgan Real Estate fund in India and the Amrapali Group, which has been the target of litigation by hundreds of home buyers in the National Capital Region of India, in the areas around New Delhi.

Amrapali Group was a real estate juggernaut around Delhi a decade ago. However, over time, it failed to deliver 46,000 homes at 28 property sites and has an estimated debt that runs into millions, according to a report.

Since 2015, hundreds of home buyers have hit the streets alleging that they were cheated by the builder and the legal cases have been piling up.

(This story will be updated with comments from JPMorgan as and when they arrive.)