Nirav Modi and associates defrauded Punjab National Bank of $4 billion through fraudulent letters of undertaking. Modi grew his diamond business significantly over the years and had stores globally before the scam was discovered in 2018. He inflated diamond prices by purchasing and reselling diamonds at higher prices and set up shell companies. The scam involved corrupt bank officials issuing LoUs without proper processes or collateral to fund Modi's international operations. When new officials asked for collateral, the scam was uncovered. Modi fled to London and is fighting extradition to India.

1. Satyam &
Nirav Modi Scam (Case
study)
.

2. Confidential Customized for Lorem Ipsum LLC Version 1.0
Nirav Modi (Diamantaire) (Biggest Scam in
History)
Generation
Asian Market
Entry
Inflating Diamond
Prices
What highlighted
the scam
Mehul Choksi
Global Luxury
Brand
The Scam
Nirav Modi in
London
Firestar Diamonds
Immense Growth
and Incoming
Funds

3. Overview
In February 2018, the Indian government's Central Bureau of Investigation (CBI) launched an
investigation of Nirav Modi, acting on a complaint from the Punjab National Bank alleging Modi and his
partners defrauded the bank of ₹28000 Crore (approximately USD 4 billion) by conspiring with bank
officials to fraudulently obtain Letters of Undertaking for making payments to overseas suppliers.
While ₹28000 Crore is the fraud that has been alleged to date, the potential loss to Punjab National
Bank is reported to be up to ₹11000 Crore. The Enforcement Directorate (ED) is looking into the case
of fraud that the CBI has registered against Nirav Modi.

4. Nirav Modi
Nirav Modi was born in Palanpur, Gujarat, and grew up in Antwerp,
Belgium. His family has been in the diamond business for several
generations.
When he was 19, he and his father Deepak Modi moved to Mumbai to
work in his uncle's business, Mehul Choksi, the head of Gitanjali Group, a
retail jewellery company with 4,000 stores in India.
Modi attended the Wharton School at the University of Pennsylvania but
eventually dropped out. While studying, he met his future wife, Ami, the
daughter of a diamond businessman Amukuraj Choksey.

5. Inflating Diamond Prices
1 Corporating Shell Companies in
Tax Havens
2 Incorporated 7+ SHell
Companies Worldwide
3 Purchasing and Selling Diamonds on
nearly doubled price helped him
inflate the diamond prices
4 Patent holder for Jasmine Cut
Diamond with US Authorities

6. Featuring on
Christie’s
Catalogue 2010
He became well known after he designed his "Golconda Lotus
Necklace" with an old, 12-carat, pear-shaped diamond as a
centerpiece in 2010. The diamond was earlier sold in the 1960s;
it was repolished.[30] It featured a lattice of white and pink
diamonds. It was included on the cover of Christie’s catalogue in
Hong Kong, and was auctioned for US$3.6 million in 2010

7. Entering the Market
The soft-spoken third generation diamantaire, who grew up
in Antwerp in Belgium, opened his first store in 2010 at New
Delhi's wealthy Defence Colony market, followed by one in
Mumbai's creative Kala Ghoda district. He now has around
17 stores across the world, in locations such as Bond Street
in London, MGM Macau and the Marina Bay Sands in
Singapore. Before all this he was sourcing and making rough
diamonds for Firestar Diamond since the 1990s.

8. On the Cloud
He came to Mumbai at the age of 19 to train under his uncle Choksi. According to the brand's website, Modi drew inspiration
from his mother, an interior designer and later an art collector, and decided to build up a brand after designing a necklace for a
friend.
In an interview with the BBC in 2016, Modi, who briefly attended the Wharton School of Business in the U.S., confirmed that his
company would open 100 shops by 2025, at an average rate of 10 per year. When the interviewer noted how ambitious the plan
was, Modi replied with a smile: "I always will have sleepless nights, but we will have to move forward."
His expertise lies in crafting jewelry from rare, exquisite diamonds such as the pink diamond, annual production of which "will
only fill a champagne flute". "We only make 100 pieces a year so there will never be a replica," he told Indian news channel
NDTV Profit.

9. Globally Recognised Brand by 2016

10. How Scam Started
Nirav modi reached out to Punjab National Bank’s
Branch of Brady House in Mumbai (2010-11). For
asking a Letter Of Undertaking to Pay Overseas
Parties easily through a foriegn bank
01 | He used corrupted people to his benefit
02 | With the help of corruption he managed to get the LOU
03 | with by passing the records
04 | Collateral was ALso not Provided
05 | Free Money Raised for Huge International Operations

11. Letter Of Undertaking
Letter of Undertaking is a bank guarantee and is issued for overseas
import payments. A bank, while issuing LoUs for a client (here Nirav
Modi), agrees to repay the principal and interest on the client's loan
unconditionally. When an LoU is issued it involves an issuing bank, a
receiving bank, an importer and a beneficiary entity overseas. PNB
officials allegedly used their access to SWIFT messaging system (used for
overseas transaction) and verified guarantees given on LoUs without
taking necessary sanctions. As a result, overseas branches of many
Indian banks gave forex credit.

12. SWIFT
When an LoU is issued, the message of credit transfer is conveyed to
overseas banks through the Society for Worldwide Interbank Financial
Telecommunication (SWIFT) system. This is a significant information as
it gives the bank's consent and guarantee. To issue SWIFT, an official has
to log in and fill up confidential information such as the account number
and SWIFT code. It generally has three layers of security - a maker, a
checker and a verifier within the core banking system before it is issued.

13. CBS (Core BAnking System)
CBS refers to Core Banking System where all branches are inter-
connected to ensure that the bank customers - regardless of their home
branch - are able to operate their account and transact in any of the
member branch located anywhere in the world. After the advent of this
system, a customer is no more customer of a branch, but s/he becomes
customer of bank. All the transactions are updated real-time. So, if you
are wondering why the PNB couldn't detect the fraud earlier, it is
because the PNB official did not rout the transactions through CBS,
which would have given real-time data on transacted business.

14. The Scam
Team Of Nirav Modi Arrives at the Brady House Branch For Another LOU
but the newly appointed officials in the bank Asked Them for Collateral, On
which the Team Told them “Why now”. Upon Investigation it was realised
that fake LOU’s were issued and in 2018 The scam was announced
Approximate Loss To PNB
₹11,356.84 crore
(US$1.4 billion)

15. As a result of the fiasco, the RBI has
stopped issuing LoUs and LoCs for
imports,which has limited the financial
flexibility of importers.

16. In April 2018, it was alleged Modi had found safe haven in Hong Kong,[50] but
in June of that year he was reported to be in the UK where he applied for
asylum, claiming he was a victim of "political persecution" and denying any
wrongdoing. In March 2019, Modi was reported have been sighted in the UK
by The Telegraph. It was said that he was living in an apartment costing £8
million. Indian authorities responded to the report by saying that an
extradition request had been made to the UK. On 20 March 2019, Modi was
arrested in London after a warrant was issued against him. Later that month,
Indian tax authorities raised $8m by auctioning some of Modi's art collection.
Modi applied for bail in the UK High Court on May 31, a day after his remand
was extended. All Nirav Modi's requests for bail have been rejected as of
October 2020.

17. On 8th June, 2020, The Prevention of Money Laundering
Act (PMLA) Court has ordered a confiscated of nearly Rs
1,400 crores worth property of Nirav Modi.

18. Nirav Modi was scheduled to
appear in his ongoing
extradition trial on November 3.
Which as of yet Rejected By
the Court

19. The Union Bank of India sued Nirav Modi in a
Hong Kong court. Union Bank claimed in a
writ filed at the High Court on 26 September
2018 that Nirav Modi guaranteed two loans
made to Firestone Trading Private on 21
October 2011 and Firestar Diamond on 15
November 2011. The bank demanded that
Nirav Modi pay more than $5.49 million plus
interest after both firms allegedly defaulted
on repayments.

20. Confidential Customized for Lorem Ipsum LLC Version 1.0
Satyam Computers ( BIggest Stock Market
Scam)
Big Operation
FAke Invoices
Accounting fraud
downfall
Merger
Immense Growth
and Incoming
Funds

21. Overview
very time we use lie as an instrument to win our way towards our goal, we fail to comprehend how it
will hurt us in the long run. The Satyam fraud case is no exception to the quote. It unveiled the potholes
that existed in the corporate governance of our country. The great stock market scandal which is
known as the Indian version of Enron shook the entire country in 2009. The then founders of Satyam
were found guilty of committing fraud worth 7000 crores. They fooled the government, markets and
customers by cooking up numbers in their financial statements. The Satyam scam shed light upon
various errors that sustained in the Indian legal system.
But how did it all start? How were they able to commit fraud of such magnitude? Who was involved?
And what was the result? Find out all the details of the great scam below.

22. The Beginning : Raju Brothers
Satyam computer services ltd was started in 1987 at Hyderabad by the Raju brothers,
Rama Raju and Ramalinga Raju. The company was quite successful. Hence, they went
forward to get it listed. The company got listed in the Bombay stock exchange in 1991.
At that time the shares of Satyam ltd were oversubscribed by 17 times. The company
proved to be a master in its field and bagged multiple awards. Ramalinga Raju became
the chairman in 2006 and got the award for the Ernest and Youngest Entrepreneur in
2007. Soon their annual revenue touched 1 billion and by the end of 2008, it crossed 2
billion. The company spread its wings to 20+ countries and the business bloomed day
by day. Or, so it was believed.
Tensions started when the brothers decided to merge with the company called Matyas.
Matyas was held and managed by Raju's family. The merger of the two companies
gave rise to various legal issues leaving Raju brothers in trouble. Suddenly Raju
resigned his position as a chairman and released a confession letter of 5 pages. In it,
he admitted committing a fraud of 7000 crores.

23. WHy and How 1/2
The Raju brothers conspired such a huge scam to increase their revenue fictitiously. An increase in revenue projected a
tremendous increase in profits. This attracted a lot of investors which in turn made the share price reach new heights. The
Satyam brothers, who were the founders and promoters of Satyam companies used this opportunity and sold their holdings
at a much higher price. They took a profit of 1200 crores through the sale.
The brothers did this by adjusting and modifying the books and bank statements to act in their favor. Most companies make
use of ERP system for accounting. But the Raju brothers used their strength and developed their ERP system for accounting
purposes. This system, unlike its counterparts, had numerous loopholes. Hence, the insertion of fictitious invoices and
fictitious bank statements became a child’s play for the brothers. The projected fake bank statements held more money than
the actual one. They simply converted this money into a fixed deposit account. The value of such fixed deposits was roughly
around 5000 crores.

24. WHy and How 2/2
The PWC who were the auditors of the Satyam companies failed in their job terribly. They did not verify the invoices or bank
statements. Physical verification wasn’t conducted as well. Nearly 7,561 fake bills were created and the auditors couldn’t
spot it for about 7-8 years.
The board of directors demanded to get those FD’s invested in some profitable avenues. That is when the brothers decided
to invest it in Matyas. However, the board did not like the decision. This gave rise to a lot of problems which made the share
prices fall drastically. The company was subjected to answer numerous questions. The pressure started building up. Unable
to find a new escape plan the brothers decided to confess the truth.

25. After SHock
“It was like riding a tiger without knowing how to get down without being eaten”, Raju said in one of his confession
letters. The CBI took charge of the case and started the investigation. The Raju brothers and the auditors were
sentenced to prison and were charged a huge sum as a penalty. The company was taken over by Tech Mahindra.
Following the scam, the Government and SEBI took various steps to tighten the grip on such perpetrators in the
future. They brought several new regulations under the Companies Act of 2013. SEBI amended the "clause 49". Now
companies are obliged to change their auditors every 10 years. Several safeguards and protective measures are
brought into the picture.
India learned a lot from the Satyam fraud case. Indian laws are still developing. A fraud like that has a little probability
to take place again. Now the big stock market scam is nothing but a story of what not to do.

27. Thank you.