Mumbai: The Enforcement Directorate (ED) conducted searches at 19 locations in Mumbai, Delhi, and Gurgaon on December 10 as a part of its investigation into a massive Rs 137-crore alleged financial fraud involving Suumaya Industries Ltd and Dentsu Communications India Pvt Ltd.

The agency stated on Thursday that the raids were carried out under the Prevention of Money Laundering Act (PMLA), 2002 and resulted in the seizure of Rs 46 lakh in cash, foreign currency worth Rs 4 lakh, and gold bars valued at Rs 3.4 crore.

The officials also confiscated documents related to property transactions and digital devices during the search operations, which form part of an ongoing probe into alleged money laundering and financial embezzlement.

The investigation stems from an FIR filed by Worli Police, alleging that M/s Dentsu Communications India Pvt Ltd, M/s Suumaya Industries Ltd, and its promoters, siphoned Rs 137 crore. The funds were allegedly misappropriated under the guise of promoting a fictitious “Need to Feed” program, purportedly linked to the Government of Haryana.

According to the ED investigation, trade financing was fraudulently secured from NBFCs under the pretext of supplying agro products for the “Need to Feed” program of the Haryana government to supply agro products. The accused did not secure any contract from the government, and no such program ever existed.

Furthermore, the accused entities never supplied any agro products for any such initiative. To create a false impression of supplying agro products, the accused allegedly colluded to fabricate records, including fake lorry receipts and invoices.

According to an ED statement, the search operations revealed that Suumaya Group's listed entities entered into transactions worth Rs 5,000 crore, with only 10 percent of these transactions being legitimate. These transactions followed a circular pattern, artificially inflating the turnover of the involved entities, including Dentsu India.

Investors were misled by these inflated transactions, which led to a dramatic rise in share prices. Over a two-year period from FY 2019-20 to FY 2021-22, the turnover of Suumaya Industries Ltd surged from Rs 210 crore to Rs 6700 crore, causing its share price to skyrocket from Rs 19 to Rs 736.

Further investigations revealed that these circular transactions also contributed to the inflated turnovers of entities bidding for government contracts and startups seeking inflated valuations. The transactions were allegedly carried out in collaboration with stock brokers and merchant bankers, involving cash payments for commodity contracts on NCDEX and the acquisition of companies, which were later listed on the stock exchange.