The Enforcement Directorate (ED) has launched a major crackdown in an ongoing probe into the Axis Mutual Fund (MF) insider trading scam, conducting searches across five States—Delhi, Gujarat, Haryana, West Bengal, and Punjab—on Thursday. The central agency is investigating allegations that a former fund manager at Axis Mutual Fund engaged in front-running and insider trading, generating illicit profits of approximately ₹200 crore.

The searches, carried out under provisions of the Prevention of Money Laundering Act (PMLA), 2002, come months after market regulator SEBI (Securities and Exchange Board of India) concluded that a fund manager and his associates misused confidential trading data for personal gain.

Background: What is the Axis MF scam?

The Axis Mutual Fund scam revolves around front-running, a serious offence in capital markets. It involves the use of unpublished price-sensitive information (UPSI) by a fund manager to place personal trades in anticipation of large orders placed by the fund, thereby reaping gains before the market reacts to Axis MF’s large-scale trades.

According to the SEBI report, the accused—Viresh Joshi, who served as a fund manager and chief dealer at Axis Mutual Fund—shared confidential trade plans with a group of individuals who would pre-emptively purchase or sell stocks, and later reverse the trades for profit once Axis MF’s actual transactions moved stock prices.

SEBI’s investigation had earlier revealed that Joshi and his co-accused generated unauthorised gains exceeding ₹200 crore between 2021 and 2022.

ED’s multi-State operation

In its current action, the ED conducted simultaneous raids on more than a dozen premises, including residences, offices, and brokerage firms across Delhi, Ahmedabad, Gurugram, Kolkata, and Ludhiana. The ED said in a press statement that the operation was aimed at uncovering the trail of proceeds of crime, identifying beneficiaries, and verifying whether the scam proceeds were laundered or used for asset purchases.

ED officials confirmed that digital devices, documents, account books, and high-end gadgets were seized during the raids. Investigators are also examining the flow of money through shell companies, offshore accounts, and related entities.

An official from the ED told reporters, We are in the process of analysing voluminous data and financial records. Preliminary findings suggest layers of transactions routed through multiple accounts to disguise the origin of illicit funds.

How the front-running worked

According to SEBI’s findings and now under ED scrutiny, the modus operandi of the accused was sophisticated. The process allegedly involved:

1. Sharing UPSI (unpublished price-sensitive information) about upcoming large orders of Axis MF portfolios.

2. Trading in the same stocks via personal or associate accounts ahead of Axis MF’s transactions.

3. Selling the stocks after Axis MF’s bulk purchase or sale caused a price change, thereby making quick profits.

4. Routing the profits via shell companies and multiple bank accounts to avoid detection.

One of the most concerning aspects for investigators is the possible existence of a wider nexus, including brokers, compliance officials, and third-party beneficiaries.

SEBI’s role and earlier action

In May 2022, Axis Mutual Fund suspended Viresh Joshi and several other fund managers, launching an internal investigation. SEBI took note and began a full-fledged inquiry into possible violations of insider trading norms, front-running, and breach of fiduciary duty.

By late 2023, SEBI had passed interim orders barring Joshi and a few others from accessing the securities market, attaching assets and bank accounts. The watchdog also passed show-cause notices to several intermediaries and traders believed to be part of the scam.

The ED’s current investigation stems from the money laundering angle that may not have been fully explored in SEBI’s market-focused probe.

₹200 crore and counting: Where is the money?

Sources within the ED suggest that the illegally generated ₹200 crore might be an underestimate, and the actual volume of illegal profit may be higher once all layers of financial flows are traced. Officials are also looking into:

• Luxury real estate purchases in Mumbai, Delhi NCR, and Dubai

• Investments in offshore accounts

• Use of cryptocurrency wallets to obscure fund trails

• High-end vehicles and jewellery bought with alleged scam proceeds

The ED has already summoned several individuals associated with brokerage firms, a few chartered accountants, and relatives of Viresh Joshi, seeking details on property acquisitions and unexplained financial inflows.

A senior official said, We are focusing on money laundering channels, especially those involving hawala, offshore entities, and opaque financial structures.

Mutual Fund industry shaken

The Axis Mutual Fund scam has shaken investor confidence in India’s ₹50-lakh crore mutual fund industry. MF investors, especially retail ones, place trust in fund managers’ fiduciary responsibilities, which include acting in the best interest of investors and maintaining strict compliance with insider trading regulations.

This case highlights systemic vulnerabilities in compliance mechanisms, audit trails, and surveillance systems used by AMCs (Asset Management Companies).

Industry leaders like Nilesh Shah of Kotak AMC and Saurabh Mukherjea of Marcellus have previously said that stronger internal controls, real-time surveillance, and ethical training are the need of the hour.

Axis Mutual Fund’s response

Axis Mutual Fund has reiterated that it is fully cooperating with all investigative agencies. In an official statement, the AMC said:

We maintain the highest standards of compliance and governance. The individuals under investigation were immediately removed once we became aware of the issue. We are extending full support to ED and SEBI and are committed to regaining investor trust.

The AMC has also appointed a third-party forensic auditor to review its internal dealing protocols, and said that corrective measures, including staff reshuffling and surveillance upgrades, have been undertaken.

Legal and regulatory implications

Legal experts say that insider trading and front-running are punishable under SEBI regulations with fines up to ₹25 crore or three times the profit made, and under PMLA with rigorous imprisonment of up to seven years and attachment of proceeds of crime.

Senior counsel Rohit Jain says, If ED can prove the profits were laundered or used to create benami assets, the accused may face long-term consequences including jail, property forfeiture, and blacklisting from financial markets.

There is also a possibility that the ED may request the Ministry of Corporate Affairs (MCA) and Income Tax Department to initiate parallel investigations.

What investors should know

For now, investor funds at Axis Mutual Fund are not under threat, and the AMC continues to function under the supervision of SEBI. However, financial advisors have cautioned that transparency, ethics, and compliance are becoming as important as returns and performance when evaluating an AMC.

The Association of Mutual Funds in India (AMFI) is expected to review and strengthen its code of conduct, particularly on front-running and information barriers between dealers and fund managers.

Conclusion

The Enforcement Directorate’s widespread raids mark a serious escalation in the probe into the Axis Mutual Fund insider trading scandal, which has already rocked investor confidence and drawn regulatory attention. With the scam allegedly generating over ₹200 crore in illegal profits, the ED is now zeroing in on the money laundering trail—a critical piece of the puzzle that SEBI’s probe had only partially uncovered.

As investigations unfold, this case could become a landmark precedent in Indian financial regulation, forcing AMCs, brokers, and investors alike to re-evaluate their risk and trust frameworks. Whether the ED’s findings lead to swift convictions and systemic reforms will be closely watched across the financial world.

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