Gold, Diamonds Used To Bribe Banker In Sprawling $2 Billion Indian Fraud Scandal

It has been more than two weeks since Punjab National Bank – one of India’s largest state-owned financial institutions – informed the public about a nearly $2 billion lending fraud allegedly masterminded by Nirav Modi, a famous celebrity jeweler and one of India’s richest men.  And still, investigators are just beginning to piece together the exact mechanics that allowed a celebrity jeweler, working with a handful of rogue bank employees at PNB’s Mumbai branch (the bank is based in New Delhi) to pull off the largest financial fraud in modern Indian history.

In their latest update, federal investigators told Reuters and a host of other media organizations that Modi and his uncle Mehul Choksi – who played an integral role in the fraud – successfully bribed bank employee with gold coins and diamonds to help coax them to look the other way when signing off on fraudulent letters vouching for the shell companies receiving the loans.

Authorities have apprehended a retired PNB manager named Gokulnath Shetty, pictured below, who was essentially Modi and Choksi’s inside man at the bank.


Last week, we pointed out a disturbing trend whereby large multinational financial institutions were backing away from Indian banks, setting the stage for a painful credit crunch that could potentially destabilize the Indian economy.

The Central Bureau of Investigation (CBI), which has arrested 14 people in the case, on Saturday for the first time said bribes were paid to at least one Punjab National Bank (PNB)official by Modi.

The agency told the court that Yashwant Joshi, who worked as a manager in the forex department of the Mumbai branch that is at the center of the fraud, admitted to having received two gold coins weighing 60 grams and a pair of gold and diamond earrings from Modi.

The articles have been recovered from Joshi’s house in the presence of independent witnesses, the CBI said.

Police have also arrested two low level employees from the Brady House branch of PNB for helping ferry the fraudulent guarantee letters past the bank’s internal controls. The two men allegedly helped produce some of the letters of understanding, then recorded them in the bank’s internal system, effectively leaving its stewards in the dark. As any expert on India’s state-run banks would tell you, the fact that most Indian banks haven’t integrated their internal controls with the Society for Woldwide Interbank Telecommunication (SWIFT) leaves them incredibly vulnerable to fraud, particularly when bank employees who have nearly unfettered access decide to take advantage of their position.

In its latest story, Reuters provided a detailed graphic explaining exactly how Modi and his crew managed to secure the fraudulent loans. The fake letters of undertaking that were so vital to the scheme allowed shell companies controlled by the fraudsters to receive loans mostly from foreign branches of Indian banks.


Over the weekend, an Indian federal judge issued a warrant for Choksi’s arrest. Both Choksi and his nephew Modi have fled the country, and are believed to be in Hong Kong. Prosecutors are also zeroing in on Modi, who is believed to be the ringleader of the whole scheme.

“Modi appears to be the prima donna in the whole saga of the fraud perpetrated on the PNB,” the directorate said in a filing to the court seen by Reuters.

But perhaps even more embarrassing – and ultimately more problematic – than the authorities’ inability to apprehend the ringleaders of the fraud (though they have arrested a total of 14 people over their suspected involvement in aiding or abetting it) is the fact that nothing is being done to strengthen oversight of Indian banks.

Without that, the damage to the credibility to the state-run banking system may never be repaired – and if that happens, it’s the small business owners of India who will suffer as credit conditions are rapidly tightened.

An Anarchist Explains How Hackers Could Cause Global Chaos

Authored by Laura Sydell via,

Artists and criminals are often the first to push the boundaries of technology. Barrett Brown is a criminal who has actually helped inspire art – the TV show Mr. Robot. Its protagonist is a hacktivist – a hacker who breaks into computer systems to promote a cause.

Brown was connected to Anonymous, a group that hacked a private security firm to reveal secrets. He is now out and living in a halfway house in Dallas.

He had spent years in a prison cell thinking about what he might do when he got out. And he says he is ready to change, so next time he gets involved in hacking a corporation he is able to inflict maximum damage.

“Certainly, I haven’t gotten any less militant in the course of having these things done to me,” Brown says.

Barrett Brown served time for being part of Anonymous, a group that hacked a private security firm to reveal secrets.

Courtesy of Barrett Brown

Since most hacktivists operate in the shadows, Brown offers the best look at these cyber-revolutionaries and their motivations.

The 36-year-old Brown was born in Dallas. His father was a wealthy real estate investor, until he was investigated by the FBI for fraud. Brown’s father was never charged, but the family lost all its money and his parents divorced.

“It was something that I’m sure instilled in me the idea that there was a degree of arbitrary power out there that could come down at any time and disrupt your life, as it did to me when I was a child,” Brown says.

He hates arbitrary power and always has. He is an anarchist who believes the U.S. government is fundamentally corrupt. And he says most Americans are too complacent to do anything about it.

“That’s what … in part brings me to contempt for the American citizenry,” he says. “Obviously, I have no respect for the laws, for the government or for the voters.”

Instead, he says, his own code of values drives him.

He became a radical intellectual — more interested in spreading revolutionary ideas than in protesting in the streets. But in 2006, Brown saw a potential outlet for his anarchist dreams — the hacktivist group Anonymous. It was leaderless, crowdsourced and militant.

Anonymous managed to organize a massive attack on Scientology, even taking down its website. Brown started covering Anonymous as a journalist but soon became deeply involved.

“I saw this as the very first ripples in something that would grow to be one of the great dynamics of the 21st century, that we would see more of this emergence [of] online warfare essentially against institutions including nation-states,” he says.

For many years, Brown was a sort of unofficial spokesman for Anonymous, appearing in interviews dressed in a beige corduroy or navy blue jacket and dress shirt, a cigarette dangling from his hand. He looked more like a preppy than a revolutionary.

In 2011, the group began targeting companies that contracted with the U.S. government. One of them was Stratfor — a global intelligence firm. Emails released after an Anonymous hack included sensitive information on top-secret government missions like the killing of Osama bin Laden. The emails also show Dow Chemical hired Stratfor to spy on activists trying to get money for families who suffered during the Bhopal disaster.

Brown viewed this as a private corporate version of COINTELPRO — the FBI’s effort in the 1960s to discredit activists like Martin Luther King Jr.

Brown created Project PM, an online chatroom where participants looked through thousands of hacked emails to find the most incriminating. One email contained thousands of credit card numbers — and stealing credit cards is a crime.

In September 2012, Brown was at home talking online with members of Project PM. “I heard a rustling at my door and I walked over to the door. I was holding a beer in my hand,” he says. “[I] thought it was another friend of mine.”

But when he opened the door there was a SWAT team equipped with shields and helmets. Brown says they were yelling, “Put your hands up buddy.” Brown says they had him on the floor and put a boot on his back. The audio of the arrest was recorded by someone in the Project PM chatroom.

Brown faced up to 100 years in prison. His mother was charged with hiding his laptops.

Brown admits he went a bit off the rails. He posted a video on YouTube attacking an FBI agent.

“I was a former heroin addict,” Brown says. “I was getting off Suboxone at the time, which is a synthetic opiate. And I was sort of suddenly feeling emotions again that have been kind of bottled, kept down a few months. I was very upset about my mother being threatened with indictment.”

Still, Brown was a cause célèbre among certain activists and journalists. Many felt he was being put away for simply looking through hacked emails — something any journalist would do.

Brown eventually pleaded guilty to threatening a federal officer and to two other charges. The government imprisoned other members of Anonymous. The group kind of faded away, but its tactics did not.

During the 2016 election, Russian state-supported hackers used some of the same tools as Anonymous — hacking emails from the Democratic National Committee and posting them on WikiLeaks to embarrass Hillary Clinton.

I wondered, is there really any difference between a foreign agent trying to undermine our democracy and hacktivists like Anonymous? Is Brown a hero or a villain?

I turned to an unlikely expert to help me figure that out — Sam Esmail, the creator of the TV show Mr. Robot. “Their spirit is in activism,” Esmail says. “Their spirit is in exposing these frauds and abuses by people in power. And that’s just something on a human level I respect.”

But Mr. Robot is hardly a glowing portrait of hacktivists. Its hero, Elliot, is a drug addict who can’t access his own emotions. Sound familiar? Elliot leads a group called fsociety that takes down the world’s largest corporation — erasing everyone’s debt. Chaos erupts.

Mr. Robot actor Rami Malek (from left), writer/producer Sam Esmail and actor Christian Slater, at the Critics’ Choice Awards in Santa Monica, Calif., in 2016. “Their spirit’s in exposing these frauds and abuses by people in power,” Esmail says of hacktivists. “And that’s just something on a human level I respect.”

Jason Merritt/Getty Images

Esmail says he is looking at an age-old dilemma. “Do we commit a criminal act for something that we feel is just, even though the consequences could be great?” he says. “That’s such a kind of loaded, huge, but very relevant question today.”

Brown doesn’t seem interested in examining the moral ambiguity of hacktivist crimes. But he says he is learning from past mistakes. Ultimately, Brown feels that Anonymous was disorganized and lacked leadership.

So he is designing a software program called Pursuance, which he says will take hacktivism into the future. It will be fully encrypted, anyone could use it to sort through a trove of hacked documents, and it could even be used to recruit a team of hackers.

Brown says when people tweet and post their opinions on social media it’s just “slactivism.” “The next great act of hacktivism, if it really is going to be great, it has to be an act of reaffirming the idea of civic duty,” he says. He says he wants to provide a mechanism for people who do feel that sense of civic duty to really have impact.

Brown is ready to be a martyr for the cause if he has to be. He would even go back to prison.

“I want to be in a position to defeat my powerful adversaries in public,” he says, “where everyone could admire the pluck in which I did it.”

Brown is casting himself in a starring role in the new world. And in his mind Mr. Robot is no fantasy. It’s what the future really looks like.