Harshad Mehta & Ketan Parekh Stock Market Scam

These are two stock-market scams, like identical twins separated by 9 years. In 1992, it was Harshad Mehta, and in 2001, Ketan Parekh.

Mr. Harshad Mehta started his career as an employee of New India Assurance Company but later quit the job to play the stock market. By 1991, Mr. Mehta had become the most recognizable and revered icon of the stock market. Considered a financial genius by many, he was nicknamed the Big Bull who single-handedly decided the course the markets would ply.

He played broker between banks in a ready forward deal, the seller bank of securities gave the buyer bank of securities a bank receipt.Hashad managed to find two such banks and produced fake bank receipts

Once he managed to produce fake bank receipts, they were passed on to the other banks and in turn the banks gave him money assuming that they were lending against government securities, where as the case was different here. He did this on a long run and maintained a cash balance for himself, which he used in driving up the stock market prices. When ever he needed money to return back to the banks, he sold his shares.

Mr. Mehta’s fall from grace was as fast as his meteoric rise. Investigations revealed that his “unending resources” were actually siphoned off from the banking system. According to investigators, he had devised an ingenious way of using bank receipts to feed the stock market.

He was arrested and banished from the stock market with investigators holding him responsible for causing a loss of more than Rs 4,000Cr to various entities.

Harshad Mehta died in 2002, without paying back money to the banks which he owed.

Ketan Parekh is a charted accountant and a down to earth man with an extremely sharp mind. He came into prominence since two year, and has since built a solid reputation and substantial wealth. He made pretty good predictions about how the stock markets fluctuated. His killings in Zee Telefilms, Pentafour Software and Ranbaxy were legendary.

Ketan Parekh was arrested, on March 30, 2001, by the Central Bureau of Investigation. Soon, reports abounded as to how Ketan Parekh had single handedly caused one of the biggest scams in the history of Indian financial markets. He was charged with defrauding Bank of India (BoI) of about $30 million among other charges.Ketan’s arrest was followed by yet another panic run on the bourses and the Sensex fell by 147 points. By this time, the scam had become the ‘talk of the nation,’ with intensive media coverage and unprecedented public outcry.