Mumbai: India’s capital markets regulator, the Securities and Exchange Board of India (SEBI), has barred 221 entities from the securities market after uncovering what it described as an “industrial-scale” stock manipulation scheme involving five listed companies.
The regulator has also ordered the recovery of nearly Rs 144 crore in illegal gains, along with interest, following a years-long investigation into an alleged pump-and-dump operation.
In a 394-page final order, SEBI identified individual investor Hanif Shekh as the mastermind behind the operation, which ran between 2017 and 2020.
According to the regulator, the network manipulated the share prices and trading volumes of Mauria Udyog, 7NR Retail, Darjeeling Ropeway Company, GBL Industries and Vishal Fabrics before offloading shares at artificially inflated prices to unsuspecting retail investors.
SEBI said the operation involved more than 200 entities, each playing a specific role in executing the scheme. The manipulation allegedly began with connected traders carrying out synchronised and circular trades to create artificial demand, boosting both prices and trading activity in the targeted stocks.
Once prices and liquidity had been inflated, the network allegedly launched large-scale SMS campaigns urging retail investors to buy the shares. SEBI said the messages were sent to tens of thousands of investors using sender IDs designed to resemble those of well-known brokerages, lending credibility to the recommendations and encouraging investor participation.
As retail buying increased, another group of connected entities allegedly sold their holdings at elevated prices, booking significant profits. The regulator said the proceeds were then routed through multiple layers of conduit companies, financiers and foreign exchange firms before eventually reaching company promoters or entities controlled by Shekh, making it difficult to trace the ultimate beneficiaries.
According to SEBI, the same network of intermediary entities repeatedly appeared across all five manipulated stocks, pointing to a coordinated and organised operation rather than isolated instances of market abuse.
The regulator estimated the unlawful gains from the scheme at Rs 143.79 crore and directed the entities involved to disgorge the amount along with interest at 12 per cent per annum from October 2020 until payment.
As part of its enforcement action, SEBI barred Hanif Shekh from the securities market for seven years and imposed a monetary penalty of Rs 10 crore. Five entities linked to him have been prohibited from accessing the securities market for six years and fined Rs 2 crore each. Other participants in the scheme have been barred for periods of up to five years, with penalties ranging from Rs 5 lakh to Rs 1 crore.
SEBI said its investigation relied on a wide range of evidence, including trading records, bank transactions, mobile phone data, WhatsApp conversations, website registration details and information obtained from telecom operators, travel companies and financial institutions. The regulator said the evidence established Shekh’s role in running the SMS campaigns and coordinating the wider manipulation network.
(IANS)
