The Central Investigation Bureau (CIB) of Nepal Police has arrested Subash Khatri for his alleged involvement in the multi-million-rupee fraud linked to Miteri Savings and Credit Cooperative, Lalitpur.

Khatri was apprehended following leads from Jyoti Bahadur Bhandari, a key accused recently extradited from Cambodia.

As the investigation deepens, authorities are also pursuing Jyoti Gurung, former wife of Nepali Congress leader Dhanraj Gurung, for her alleged role in misappropriating over Rs140.81 million in cooperative funds, in which Bhandari is also linked.

The CIB arrested Khatri on June 29.

The CIB has kept Bhandari and Khatri in custody and is conducting further investigation into the case.

Bhandari fled allegedly after committing cooperative fraud and travelled through Thailand, Malaysia, and Vietnam before reaching Cambodia.

According to the CIB investigation, while abroad, he contacted the officials at Miteri Cooperative online and lured them through phishing tactics to commit fraud.

“Claiming that he would need extra money to send the misappropriated money of the cooperative to Nepal from abroad, since he would need to pay tax to the local government, Bhandari was again found guilty of further fraud,” said CIB spokesman Yubaraj Khadka.

Despite not being directly connected to Bhandari, Khatri, however, was assisting him in collecting the money as asked by Bhandari from abroad, he added.

From overseas, Bhandari defrauded around Rs34 million from the cooperative officials, claiming he needed it to pay taxes to repay the embezzled amount.

The CIB has stated that Khatri is also linked to over Rs34 million in fraud. Khadka said Khatri was facilitating the collection of money for Bhandari from Nepal, which Bhandari was collecting purportedly to pay the tax to the local government to return the embezzled money.

Jyoti Gurung, former wife of Nepali Congress Vice-president Dhanraj Gurung, currently at large following the cooperative irregularities, is also accused of misappropriating the money from this cooperative.

A CIB spokesman claims that after the virtual conversation between Gurung and Bhandari, Gurung facilitated the connection between Bhandari and the cooperative officials to collect the tax money.

Retired servicemen from the British and Indian armies started the Miteri Cooperative. Congress leader Gurung's former wife, Jyoti, joined this cooperative as a clerk on May 25, 2000. Within two months, she was promoted to accountant and became the general manager in 2018.

After becoming the general manager, Jyoti transferred the cooperative’s funds to Jyoti Bahadur Bhandari. Initially, Jyoti withdrew Rs3 million from the cooperative and provided Bhandari with a loan for a week, but Bhandari returned the loan by adding half a million rupees.

Then Bhandari took out a second loan tranche, worth Rs4 million. This time, Bhandari returned the money in a week by adding Rs1 million. Jyoti profited by misusing the co-operative’s funds to lend at exorbitant rates. Interest is calculated weekly in this practice of loan sharking colloquially known as ‘meter byaj’.

Later, when Bhandari ran away with the money given by Jyoti Gurung, Congress leader Dhanraj Gurung was accused of suspiciously divorcing his wife. They are charged with misusing more than 140.81 million rupees of the cooperative.

Nepal Police issued a ‘Red Corner’ notice against Jyoti Gurung and Jyoti Bahadur Bhandari in October last year. When the police arrested Bhandari from Cambodia two weeks earlier, they claimed they were unaware of Gurung’s whereabouts.

With the assistance of Interpol, Bhandari was apprehended and flown to Kathmandu.

Initially, police believed that Bhandari had travelled via Cambodia from Thailand to Sri Lanka. However, Cambodian authorities apprehended him and repatriated him to Nepal, according to the CIB.

“We are looking for Jyoti Gurung, but have not been able to locate her,” the CIB officer said.

In its report, the parliamentary special committee formed to investigate scams in cooperatives last year recommended investigating Congress Vice-chair Gurung and his former wife for misusing the cooperative’s funds.

After mounting pressure from the opposition parties, the CIB interrogated Congress leader Gurung for about four and a half hours on November 13 last year on suspicion of his involvement in the cooperative scam.

However, after that interrogation, the police did not establish any further connection with Gurung, which CIB spokesman Khadka acknowledged.