ED Arrests Ex-Axis MF Fund Manager in 'Front-Running' Case, Seizes ₹200 Crore.

The Enforcement Directorate (ED) has arrested Viresh Joshi, a former chief trader and fund manager of Axis Mutual Fund, in a case linked to alleged cheating of investors to the tune of ₹200 crore by 'front-running' in trade activities. Joshi was taken into custody on Saturday and was sent to ED custody till August 8. The ED has been investigating the matter under the civil provisions of the Foreign Exchange Management Act (FEMA).

The Enforcement Directorate (ED) has arrested Viresh Joshi, a former chief trader and fund manager of Axis Mutual Fund, in a case linked to alleged cheating of investors to the tune of ₹200 crore by 'front-running' in trade activities. Joshi was taken into custody on Saturday and has been sent to ED custody till August 8. The ED has been investigating the matter under the civil provisions of the Foreign Exchange Management Act (FEMA).

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 [1].

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 ₹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” [1].

The ED 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 alleged illicit funds generated by various traders/brokers, identified till date, amount to more than ₹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 balances worth ₹17.4 crore during the searches [1].

This development underscores the importance of robust regulatory frameworks and vigilant oversight in the financial sector to protect investors and maintain market integrity.

References:
[1] https://www.thehindu.com/news/national/ed-arrests-ex-axis-mf-fund-manager-in-front-running-case/article69889867.ece
[2] https://economictimes.indiatimes.com/news/india/ed-arrests-ex-axis-mf-fund-manager-in-front-running-case/articleshow/123074454.cms