Harshad Mehta, a prominent stockbroker in India during the 1990s, was involved in a massive financial fraud that shook the country’s stock market. The scam, famously known as the “Harshad Mehta scam” or the “securities scam,” involved Mehta manipulating stock prices to make substantial profits for himself and his associates.
One of the key aspects of the scam was Mehta’s utilization of a technique called “stock price manipulation.” He took advantage of the loopholes in the banking system, particularly in the interbank transactions, to orchestrate a massive fraud. Mehta used funds from banks to buy stocks in bulk, thereby inflating their prices artificially.
To execute this scheme, Mehta took advantage of a banking practice called “ready forward” deals. In these deals, banks provide funds against government securities to other banks for a short period, typically 15 days. Mehta exploited this mechanism by colluding with bank officials and obtaining funds against fake or forged securities.
With the funds obtained through these fraudulent means, Mehta engaged in massive buying of shares, particularly those from the banking and financial sector. This created an artificial demand for these stocks and subsequently inflated their prices to astronomical levels. The share prices of some companies increased by as much as 4,400 percent during this period.
Once the share prices reached their peak, Mehta started selling off the shares at significant profits. This led to a sudden decline in the stock prices, causing widespread panic in the market. The scam eventually came to light when one of the banks involved in the fraudulent transactions started facing liquidity issues and reported the irregularities to the authorities.
Now, to answer the question of whether Harshad Mehta returned all the money, it is important to understand the nature of his fraudulent activities. Mehta did not actually return the entire principal amount to the banks involved. Instead, he used the profits generated from the sale of inflated shares to repay the initial amount borrowed from the banks.
The profits made by Mehta and his associates were massive, estimated to be around billions of rupees. However, it is important to note that this money was not returned to the banks directly. Mehta used these profits to maintain his lavish lifestyle, including buying properties, luxury cars, and other assets.
The scam had a severe impact on the Indian economy and the stock market. It led to a significant erosion of investor confidence and resulted in a major market crash. The government and regulatory authorities took several measures to investigate the scam and recover the funds involved. Legal proceedings were initiated against Mehta and his accomplices.
Despite the efforts to recover the money, the process was complex and time-consuming. Mehta’s assets were seized, and the legal battle continued for years. However, it is unlikely that the entire principal amount was recovered from Mehta. The complexity of the scam and the extent of Mehta’s fraudulent activities made it difficult to trace and recover all the funds involved.
Harshad Mehta, during the infamous securities scam, manipulated stock prices and generated massive profits by inflating share prices through fraudulent means. While the profits were not directly returned to the banks, Mehta used them for personal gains. The recovery of the principal amount and the total extent of the financial loss suffered by the banks remains a complex and ongoing process.