Fugitive diamond trader named Mehul Choksi was raided by SEBI and sent a demand notice for Rs 2.1 crore

Market regulator SEBI has issued a notice of Rs 2.1 crore to absconding diamond merchant Mehul Choksi for insider trading violation in Gitanjali Gems Ltd's shares. SEBI also issued a warning to Choksi that his assets and bank accounts will be seized if he does not pay within 15 days.

The demand notice came after Choksi defaulted on paying the fine that the Securities and Exchange Board of India (SEBI) ordered him to pay in January 2022.

Choksi is a promoter group member and former chairman and managing director at Gitanjali Gems. He is Nirav Modi's maternal uncle. They are charged with defrauding PSU Punjab National Bank (PNB) by more than Rs 14,000 crore. Choksi and Modi left India as soon as the Punjab National Bank scam came into existence in early 2018.

Last month, Choksi was arrested in Belgium following an extradition request by Indian investigative agencies. He was found in Belgium last year when he went to Belgium for treatment. He has been living in Antigua since 2018 after leaving India.

Modi was arrested by Scotland Yard police in March 2019 and is currently lodged in a jail in the same country. In a fresh recovery notice issued on May 15, the Securities and Exchange Board of India (SEBI) directed Choksi to pay Rs 2.1 crore within 15 days. This includes a penalty of Rs 1.5 crore and interest of Rs 60 lakh. In case of non-payment of dues, the market regulator said it will recover the amount by attaching and selling his movable and immovable properties. In addition, Choksi may face attachment of his bank accounts and arrest.

In its order passed in January 2022, the regulator had imposed a fine of Rs 1.5 crore on Choksi and barred him from the securities market for a year.

Sebi found that Choksi communicated the UPSI to Rakesh Girdharlal Gajera, who sold his entire 5.75 per cent stake in Gitanjali Gems in December 2017, in order to avoid losses before any eventuality that could have led to the disclosure of fraudulent issuance of LoUs (Letters of Undertaking) to Gitanjali Group and a substantial portion of the same becoming public. According to Sebi, fraudulent LoUs were issued on behalf of entities related to Gitanjali Group, including GGL.

"Noticee No. 1 (Choksi) communicated the UPSI (unpublished price sensitive information) to Noticee No. 2 (Gajera) without any underlying legal obligation or legitimate purpose," Sebi had said in its final order.

Through such actions, both individuals had violated the provisions of the PIT (Prohibition of Insider Trading) Regulations. In May 2023, SEBI had sent a notice to Choksi directing him to pay Rs 5.35 crore in a case related to fraud in the shares of Gitanjali Gems.