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Jatin Mehta scam explained। Detail analysis of jatin mehta scam।

            We know well that vijay mallya did a big fraud that was about 9000 crore rupees. Do you know there is also a person who did a same size fraud like this? But many people do not know about the person. And the article is the detail analysis of him and his scam. Vijay mallya's fraud size was about 9000 crore rupees and nirav modi did the fraud of 14,000 crore rupees. But there was also a person who did a big fraud in the time gap amid these two frauds. And the person is Jatin mehta who did the fraud that was about 7,000 crore. Jatin's fraud was then the second largest fraud in india. Because then the fraud of nirav modi didn't happen.  One interesting fact is that both of jatin mehta and nirav modi belonged from same city, palanpur in gujrat. 

Jatin Mehta scam explained। Detail analysis of jatin mehta scam।
        Jatin mehta established Suraj Diamond India ltd in 1985. Then he started many other companies in the field of diamond and jewellery. Basically he imported gold and diamonds from foreign countries. And then he exported the jewellery after finishing gold and diamonds. Jatin mehta ran the winsome group and its company did the work of jewelry. For this different companies of winsome group bought gold,diamonds etc from bullion banks. Bullion banks are the banks that trade in gold,silver etc and also supply all these. Companies of winsome group bought gold and other materials on the basis of loan from bullion banks of different countries such as the bank of nova scotia, standard bank plc london, standard chartered bank.

           If you don't know the import,export business then you are informed that sometimes importer got the products but didn't pay to exporter before or importer paid to the exporter but he didn't get the products before. In international trade importers and exporters belong from different countries. So if any problem created before then all the trade became unsuccessful. For this different systems are used or banking system are brought into the trade so that the trade happens in transparent way. 

             Jatin mehta's company took the gold and others on the basis of loan. In simple word jatin mehta's system was that his company took gold from bullion banks on the basis of loan. Then after making the jewelry from them he exported the jewels to sellers and distributors. And the loan was repaid from the money that came after export the jewels. In this case jatin's companies were located in india and bullion banks were located in foreign countries. Then any bullions banks didn't give loan directly to the companies of different countries. The banks told the companies to give them the stand by letter of credit from any bank of their(company) own country. Let's understand the stand by letter of credit.

            If any company take loan from bullion banks and if they don't repay the loan then what will happen? So in this case the bullion banks have to face huge problems. Because already they belonged from different country and it is quite difficult to find the defaulter in their country. And in some countries it is impossible for them to recover their loan. So to reduce the risk they want stand by letter of credit from companies. So here bullion banks told winsome group to take stand by letter of credit from any indian bank and give it to them. And on the basis of letter they would give gold to winsome group. According to stand by letter of credit if any company whom the bank issues the letter was unable to repay the loan then the bank that issued the letter for the trade would repay the loan. So it is guarantee for bullion banks that they must get the repayment of loan. Here if winsome group was unable to do the repayment of loan then the bank that issued standby letter of credit would repay the loan. 

            When jatin mehta wanted to buy gold on the basis of loan from bullion banks then he started to approach the indian bank for stand by letter of credit. In return of standby letter of credit bank charges commission. They do detail analysis of company and check the due diligence. And then any bank decides to give the stand by letter of credit of how much amount to the company. In this case indian banks did jatin's company's detail analysis and also checked due diligence and also told the companies to deposit some collateral. Because if winsome group didn't repay then indian bank had to repay the loan directly. For this bank wants to work with them who are working the import and export business from some years and whose credit history is strong. 

              Winsome group worked the import and export business from several years and their credit history was also strong. So he easily took the standby letter of credit from different indian banks and then he submitted the letter to bullion banks. Bank of maharashtra, canara bank, union bank etc were working with winsome group from many years. Companies of winsome group repaid the loan in time. For this they never became default. And till then  the banks didn't have to pay the bullion banks. For this the business of banks continued well because they earned commission for providing standby letter of credit to winsome group. 

              Watching the good tracking record indian banks started to increade their credit limit. Initially where the credit limit was 500 crore rupees gradually the credit limit became 2000,3000,4000 crore rupees. In the time of taking the letter jatin told indian banks that he imported gold from bullion banks and then after making jewels he exported them. He also told that he had 13 customers who bought his products in UAE. All the things were going very well since some years. His company continuously did the import and export business and watching the performance bank increased his credit limit. Then in 2013 there happened something that snatch the sleep of banks. 

          In 2013 scotia bank, standard chartered bank, chartered bank didn't get the payment of gold that they gave to winsome group. It means they became default. As you know if company that get loan on the basis of standby letter of credit become default then the bank that issues the letter have to pay the loan amount. So here indian banks that issued the letter did the repayment of loan as companies of winsome group was declared defaulters. In response winsome group said that the buyers in uae faced huge loss in derivative trades. So they couldn't do payment and for this winsome group was unable to repay the loan. After this indian banks started to investigate on the case.

            Bank sent some bank officials to uae to know about the buyers. After going there they became wonder. Such as jatin told that in uae he had 13 buyers. There was 13 buyers but all of them was controlled by one person and he was Haithaim Sulaiman Abu Obaida. According to some report he worked with winsome group from last 8-9 years. And the interesting fact is that 10 of 13 companies was incorporated in 2012. 5 companies amid them was incorporated in 25th june,2012. Then banks understood that they were fallen in trap and all the buyers were fake. 

          Banks complained upon jatin mehta that he formed his own companies in uae and showed them that they were the buyers of them. Thus he took the standby letter of credit from banks. And on the basis of it he took gold from bullion banks. When banks came to know about the case fully then it became quite late. Because then jatin escaped from india. Before knowing the case jatin escaped in saint kitts & nevis country. Similiarly nirav modi did the fraud. Before know about the fraud he escaped from india to london. So after diclosing the case bank of maharashtra, union bank etc filed complain against jatin mehta. And on the basis of it CBI filed FIR against winsome diamonds & jewellery limited and other companies and directories such as ranesh parekh, ravichandran ramaswami etc. Banks declared jatin mehta willful defaulter. Willful defaulter was the person or companies that don't pay the loan in spite of having money. In this case jatin mehta and his companies did fraud with indian banks. 

               And when banks and cbi started to search his home and office then they didn't get anything more. For example in nirav modi case bank recovered a good amount. It means bank recovered about 5000-6000 crore rupees in nirav modi case. But in jatin mehta case something didn't happen like this. Most of offices were taken in lease and banks didn't get more jewels. Two-three flats were on the name of jatin's mother. Banks recovered little from this. In return of providing standby letter of credit bank wanted to deposited some money. In this case 250 crore rupees was deposited as collateral. From here cbi came to know that bank officials must be linked with the fraud. Then they started to file fir against bank officials. In 2018 cbi filed new chart sheet where the names like jatin mehta, sonia( his wife ), bank's former MDs, executive directors were included. 

            After going to saint kitts & nevis he comfortably runs his business. For example he started two companies in montenegro( one is in his name and other is in his wife name ). He also formed companies named Diamond Distribution Company Limited in uk. You may have a question why fraudsters escape to london from india and how they run their business in uk comfortably?  CHECK HERE the article. Central bank of india, idbi, union bank, canara bank, bank of maharashtra, vihaya bank etc lost their money. All the bank are under government. 

          If you have any query related to jatin mehta scam please comment below so that the topic can be covered.

Best wishes to invest.


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