New Delhi: Viresh Joshi, a former chief trader and fund manager of Axis Mutual Fund, has been arrested under the anti-money laundering law in a case linked to alleged cheating of investors to the tune of Rs 200 crore by ‘front-running’ in trade activities, the Enforcement Directorate (ED) said on Sunday.
A special Prevention of Money Laundering Act (PMLA) court has sent Joshi, who was taken into custody on Saturday, to ED custody till August 8, the agency said.
Front-running refers to an unethical and illegal practice in the securities market in which brokers or traders execute orders for their own benefit using advance knowledge of pending client orders. This malpractice compromises market integrity and disadvantages other investors.
The federal probe agency launched searches in the case on August 1, covering multiple premises in Delhi, Mumbai, Gurugram, Ludhiana, Ahmedabad, Bhavnagar, Bhuj and Kolkata.
The ED has been investigating the matter under the civil provisions of the Foreign Exchange Management Act (FEMA). The Income Tax Department had conducted searches in this case in 2022.
“The search operations were part of an ongoing investigation into the illegal profits made by certain entities/persons by indulging in front-running trade activities in scrips traded by Axis Mutual Fund from 2018 to 2021,” the ED said.
The money laundering case stems from an FIR registered by the Mumbai Police in December 2024, alleging that Joshi, the then-fund manager of Axis Mutual Fund, “exploited” confidential information on the trades to be executed on behalf of Axis Mutual Fund to pre-emptively trade stocks, generating substantial “illicit” gains.
Joshi, hence, “cheated” the investors of Axis Mutual Fund, which holds assets under management of more than Rs 2 lakh crore, the ED said.
“The accused had utilised a terminal in Dubai to punch the front-running trade orders through mule trading accounts obtained from various brokers.
“In addition to Joshi, the investigation has revealed that many other traders/brokers also misused the advance inputs on Axis Mutual Fund trades and indulged in front-running to generate illicit trade profits, which are nothing but proceeds of crime,” the agency alleged.
The alleged illicit funds generated by various traders/brokers, identified till date, amount to more than Rs 200 crore and this sum could be much higher, the ED said.
The agency claimed that the proceeds of the fraud were funnelled through multiple shell entities and bank accounts beneficially owned by the accused persons/entities and their family members.
The ED said it froze shares, mutual funds and bank balance worth Rs 17.4 crore during the searches.
