On August 23, 2023, the Directorate of Enforcement (ED) searched five locations in Hyderabad in accordance with the provisions of the Foreign Exchange Management Act (FEMA), 1999, including the office of M/s Brightcom Group Ltd., the homes of the company’s CEO and CFO, M Suresh Reddy and SLN Raju, and the home and office of the company’s auditor, P. Murali Mohana Rao.
The Securities and Exchange Board of India (SEBI) inquiry into the impairment of assets valued at Rs. 868.30 crore by Brightcom Group through its companies overseas served as the foundation for the ED’s decision to launch the FEMA probe.
Following an investigation by the ED, it was discovered that Brightcom Group Limited had broken multiple FEMA, 1999 rules. Brightcom illegally claimed to have received full payment for preferential shares/warrants by sending “forged and fabricated bank statements” to SEBI. It was later discovered that Brightcom itself funded the preferential offerings by roundtripping funds through subsidiaries and conduit firms.
The fact that more than 300 crore rupees granted as loans to subsidiaries were partially syphoned off or left unaccounted for was also discovered. Apart from neglecting to disclose outright fraud, the statutory auditors, M/s P Murali & Co. and M/s PCN & Associates (an associated entity of P Murali & Co.), also conspired with the management and promoters of the business.
Various incriminating papers and digital devices, including unaccounted cash worth Rs. 3.30 crore and gold jewellery and bullion worth Rs. 9.30 crore, were found and confiscated during search operations by the ED at the home of auditor P. Murali Mohana Rao (M/s P. Murali & Co.). There was a seal placed over M Suresh Reddy’s residence. Further research is now being conducted.
