Sundar at Business Standard reports that just four years ago, an exchange called SNX (SAFAL National Exchange of India Ltd) was shut down. It was co-promoted by Financial Technologies and MCX, along with Mother Dairy. A group of members filed a complaint with the Economic Offences Wing claiming they had been frauded of Rs. 5 crore (in total, which in comparison with the 5,600 cr. in NSEL, is tiny)
According to the investors, Rs 2.6 lakh each deposited with SNX for membership was not returned after the exchange was closed.
"All of sudden the trading was suspended on the portal without any information being given to the members. Further, the information about the members, directors and contact details were removed from the website. SMS enquiry facility was stopped, all the business development officers and supply chain people were removed," said the members in their petition.
This was also reported in Economic Times in 2010, which further says that the complaints allege FT had created SAFAL only to build NSEL membership.
The way FT and MCX seem to have is that they have no more ownership in SAFAL and that 100% of it is now owned by Mother Dairy.
However it goes to tell you one thing. Sometimes, people will not learn. While there may not have been a default, FT and MCX had abruptly shut an exchange down and still, there were enough participants in NSEL. It doesn’t look like brokers warned their customers of this past (or were unaware) – and investors in NSEL didn’t bother to check.
While I have said that the future growth of FT will be hit if NSEL’s setllement fails to go through even a delayed process, I now don’t know what to say if people had forgotten their behaviour just four years ago. If we’ll forgive and forget that easily, then nothing will change. Or, is this the tipping point?