'ED has not seized any property from Dentsu's premises,' agency clarifies

ED's visit to Dentsu's Mumbai office was in connection with a third-party fraud investigation, said the agency

by e4m Staff
Published: Dec 13, 2024 5:45 PM | 3 min read

The Directorate of Enforcement (ED) has launched a probe into Suumaya Industries Ltd. and Dentsu Communications India Private Limited, for allegedly embezzling Rs 137 crore by forging documents for a fake Haryana government scheme. According to the ED, the companies created fake invoices and lorry receipts to obtain trade financing for a non-existent program.

As part of its investigation, the ED reportedly conducted raids on Thursday across 19 locations in Mumbai, Delhi, and Gurgaon. The searches carried out under the Prevention of Money Laundering Act (PMLA), 2002, led to the seizure of Rs 46 lakh in Indian currency, foreign currency worth Rs 4 lakh, and gold bars valued at Rs 3.4 crore. Officials also reportedly recovered incriminating documents, digital devices, and records related to immovable property transactions.

The investigation revealed that Suumaya Industries’ turnover skyrocketed from Rs 210 crore in FY 2019-20 to Rs 6700 crore in FY 2021-22. During the same period, its stock price surged from Rs 19 to Rs 736, misleading investors and inflating valuations.

“These accused entities created fake records to falsely portray the supply of agro products for a scheme that never existed,” the ED stated. No contracts were issued by the Haryana government and no supplies were ever made, according to the officials.

The ED uncovered that the accused entities engaged in circular transactions worth Rs 5,000 crore, of which only 10% were genuine. These fraudulent dealings were used to inflate turnover, create artificial market confidence, and mislead investors.

Investigators said that have also found evidence of collusion between the companies and stock brokers, as well as merchant bankers, to manipulate share prices. Cash payments were allegedly made for commodities contracts and company acquisitions on the NCDEX, further distorting the financial ecosystem.

“These activities have not only defrauded investors but have also distorted the market ecosystem,” an ED official remarked, emphasising the systemic vulnerabilities exposed by the case.

Officials believe the circular transactions also inflated valuations for startups and enabled entities to bid for government contracts fraudulently.

The ED report noted, “Only 10% of the Rs 5000 crore transactions were genuine, while the rest were designed to misrepresent financial health and profitability.”

ED is expecting further arrests and recoveries as investigation is under progress.

In response to the ED raid, a spokesperson from Dentsu India told exchange4media, "We would like to clarify that the ED has not found or seized any properties from Dentsu's premises. Dentsu has a zero-tolerance policy towards fraud and wrongdoing, and we take such matters very seriously. We will continue to cooperate with the authorities in their ongoing investigation."

"In 2021, we identified suspected fraudulent activity conducted by third parties and certain former employees of InDeed, against whom criminal complaints have been filed. This activity was confined solely to the InDeed business. Three years ago, we proactively reported the matter to the relevant authorities and have been fully cooperating with them since. It is in connection with this matter that the Enforcement Directorate (ED) visited Dentsu India's office in Mumbai on December 10, 2024," the spokesperson said.