Sebi Offers Brokers Chance To Settle In NSEL Case - Here's What Rs 5,600 Crore Scam Was About

More than a decade after the National Spot Exchange Ltd (NSEL) scam shook India's commodity markets, the Securities Exchange Board of India (Sebi) has once again opened a limited-time settlement scheme for brokers involved in the Rs 5,600 crore crisis.

The NSEL Settlement Scheme 2025, proposed via a public notice dated July 9, 2025, will allow brokers against whom Sebi has already passed orders for trading or facilitating trades on the now-defunct exchange to settle the matter under securities law if they have appealed the order. The case is pending before the courts or the Securities Appellate Tribunal (SAT).

The market regulator said in the notice that the settlement window will open on August 25, 2025, and end on February 25, 2026.

However, the window is available only to brokers who have not been named in any chargesheet filed by enforcement agencies such as the Economic Offences Wing (EOW), Enforcement Directorate (ED), Serious Fraud Investigation Office (SFIO), or the Ministry of Corporate Affairs (MCA).

Sebi clarified that the settlement window is only to securities law violations, and will not affect any ongoing investigations or criminal proceedings. If any fresh charges are filed against a broker later, the settlement would stand null and void.

NSEL Scam Explained

The NSEL scam is one of the biggest financial crises in India's commodity market history, involving a payment default of over Rs 5,600 crore. More than a decade later, its aftershocks are still being felt by investors, brokers, regulators, and courts. But what exactly happened, and why was it such a big deal?

The NSEL was set up in 2008 as a government-backed platform to modernise agri-commodity trading in India. In other words, it functioned as an online mandi for farmers to sell their produce like rice, sugar, cotton, and other commodities directly to traders and exporters. It was supposed to cut out middlemen and make prices of the commodities more transparent.

However, it turned out to be yet another Ponzi-like scheme. The scam came to light when the exchange failed to settle trades, as many of the trades were based on commodities that did not even exist. Several brokers had aggressively pushed these contracts to clients, promising safe returns, but it turned out there was no real commodity stock backing those trades.

According to several media reports, there were 24 borrowers behind the entire operation who received investor funds without delivering actual commodities. Fake warehouse receipts often backed these contracts. For example, at one warehouse in Gujarat, NK Proteins claimed to hold castor seeds, but physical verification later revealed no actual stock.

By July 29, 2013, the exchange defaulted on payments of Rs 5,600 crore.

How Trades Used To Happen

NSEL offered long-term "paired contracts" of these commodities under the guise of spot trading. These contracts violated the Forward Contracts (Regulation) Act, 1952, which allowed spot trades to be settled only within 11 days (T+11).

However, NSEL allowed settlements over 25 to 35 days, which effectively turned spot contracts into forward contracts. NSEL had no prior permission from regulatory authorities to issue forward contracts. This violated the Forward Contracts (Regulation) Act (FCRA), 1952, which made these contracts illegal.

No real commodities backed many of these contracts; it was all on paper.

Initially, trades used to happen among large institutional players. However, some brokers aggressively mis-sell these contracts to high-net-worth individuals (HNIs) and retail investors with the promise of assured returns without properly explaining the risks. This blew the whole crisis out of proportion.

The End Result

NSEL was accused of allowing these trades to occur without verifying if these commodities actually existed, brokers were accused of mis-selling contracts, regulators were blamed for not keeping a track of a crisis of such magnitude, and thousands of investors lost their money.

Sebi eventually declared NSEL as "not a recognised exchange" and banned several brokers. Enforcement agencies like EOW and ED also launched criminal probes into the matter.

63 Moons Share Price

NSEL was primarily promoted and run by 63 Moons Technologies (formerly Financial Technologies India), a company founded by Jignesh Shah. Shah is also the founder of the Multi Commodity Exchange of India (MCX), the country's first commodity derivatives exchange.

63 Moons is a listed entity and it has surged nearly 11 per cent since Sebi's public notice came out on July 9. As of 2:30 PM, July 10, 63 Moons share price traded at Rs 1,095 apiece on the National Stock Exchange (NSE), with an intra-day gain of nearly 1 per cent.