Markets regulator Sebi has barred 221 entities, including individual investor Hanif Shekh, from the securities market for up to seven years and levied a fine of Rs 10 crore for orchestrating a large-scale pump-and-dump operation in five stocks between 2017 and 2020.
Mauria Udyog Ltd, 7NR Retail, Darjeeling Ropeway Company, GBL Industries, and Vishal Fabrics Ltd were the scrips manipulated by Shekh — the alleged mastermind in the case — and his conduit entities, the Securities and Exchange Board of India (Sebi) said in the order passed on Tuesday.
In its 394-page final order, Sebi found that Shekh hatched a fraudulent scheme which entailed participation by over 200 seemingly disparate but intricately connected entities as ‘PV Influencers,’ ‘Collaborators’ or ‘Offloaders’ for transferring the unlawful gains to the promoters of the companies or entities controlled by him.
According to Sebi, the entities artificially inflated prices and trading volumes through synchronised trades, circulated bulk SMS recommendations to lure unaware investors and later offloaded at elevated prices.
These proceeds were routed through multiple conduit entities to conceal the ultimate beneficiaries, the regulator said.
“The fraudulent scheme unravelled in this matter, though not novel or unprecedented in its conception, was executed meticulously and on an almost industrial scale, involving 226 entities coming together to play their designated roles across five different scripts,” Sebi’s Whole Time Member Amarjeet Singh said in the order.
Singh added that the labyrinthine structure of fund transfers unearthed in the investigation, evidently designed to obscure the identity of the ultimate beneficiaries.
“These characteristics lend the scheme a distinctly aggravated dimension, taking it beyond the realm of routine market misconduct and into the territory that shakes investor confidence in the integrity of the securities market,” he said.
Sebi noted that the entities made unlawful gains totalled around Rs 143.79 crore through the scheme.
Accordingly, the markets watchdog restrained Hanif Shekh from accessing the securities market for seven years and imposed a penalty of Rs 10 crore. Five entities associated with Shekh have been debarred for six years and fined Rs 2 crore each.
The regulator also prohibited other noticees for a period of up to five years and levied a fine ranging from Rs 5 lakh to Rs 1 crore.
Besides, Sebi ordered disgorgement of unlawful gains worth Rs 143.79 crore along with 12 per cent interest per annum calculated from October 21, 2020 till the date of payment of such disgorgement was made by the noticees (entities).
Sebi, through an interim order-cum show cause notice passed in June 2023, had prohibited Hanif Shekh and 225 other entities.
They were also directed by the markets watchdog to impound alleged unlawful gains worth Rs 143.79 crore for involvement in a scheme of price and volume manipulation of scrips of five companies.