The CBI investigation into the NSE colocation scam found that one of the main defendants, OPG Securities Private Ltd, owned by Sanjay Gupta, intentionally logged into the exchange’s secondary server 670 times in five years from 2010, for illegal profit. .
Over a five-year period, CBI sources said, OPG Securities only encountered connectivity issues five times and notified the NSE. In 2012, NSE reprimanded OPG and ordered it to return to the main exchange server. But the company continued to trade through the secondary server.
CBI relied on multi-agency forensic audits and expert panel reports to unearth wrongdoing by traders colluding with NSE officials in the roommate scam, in which the former CEO Chitra Ramkrishna and Group Chief Operating Officer (GOO) Anand Subramaniam, have been behind bars since the beginning of this year.
In their separate reports, Deloitte and Ernst and Young (E&Y) shared specific details about the rigging of the colocation architecture that ensured that OPG was consistently the first or among the first three members to connect to servers.
Deloitte conducted a forensic review of NSE’s futures and options segment, while E&Y audited other segments and the Indian School of Business calculated the illegal gains made by gaining first access to the server secondary and selling software to merchants.
According to agency sources, OPG mapped multiple IP addresses to a single server so it would often get the first 2 or 3 connections to that server tick-by-tick (TBT). In 2014, NSE had moved to the OTC data delivery system for co-located trade members, to overcome latency and enable faster access to data.
The CBI is further investigating allegations of collusion by NSE and SEBI officials, which include providing NSE business data to Ajay Narottam Shah. The data was used to make “Chanakya” software which was sold to brokers like OPG for financial exploitation. Gupta is also accused of bribing some SEBI officials to influence the investigation. Their illegal trade in Dubai, Ghana, Singapore, Hong Kong and China is also under investigation.
September 19, 2022