Security and Exchange Board of India
The Securities and Exchange Board of India (SEBI) has banned 221 entities from the securities market for up to seven years in the pump-and-dump operation i.e. securities fraud case. Also, a fine of Rs 10 crore has been imposed on individual investor Hanif Shaikh. SEBI gave this information on Wednesday.
Pump-and-dump operations are a form of securities fraud. Fraudsters first buy shares of a small or thinly traded company, artificially inflate (pump) the share price by spreading false rumors through social media or bulk messages, and then sell (dump) the shares at higher prices. This causes huge losses to retail investors.
The matter is related to pump-and-dump
In the order issued on Tuesday, SEBI said that the shares of Maurya Industries Limited, 7NR Retail, Darjeeling Ropeway Company, GBL Industries and Vishal Fabrics Limited have been manipulated by Shaikh and his associated companies. Sheikh is the alleged main conspirator in this case. This case pertains to large-scale pump-and-dump in five stocks between 2017 and 2020. SEBI, in its 394-page final order, said Hanif Shaikh hatched a well-planned fraud conspiracy involving more than 200 interconnected institutions. They were given roles like PV influencers, collaborators and offloaders, so that the illegal profits could be diverted through various channels to reach the Sheikh or the companies controlled by him.
This is how manipulation used to happen
According to SEBI, these entities artificially inflated the price and market value of shares through coordinated transactions and later defrauded investors by selling shares at higher prices. SEBI whole-time member Amarjeet Singh said in the order that the conspiracy was well-planned, widespread and operated on an industrial scale, affecting market transparency and investor confidence. According to the regulator, illegal profits of around Rs 143.79 crore were earned from this scam. SEBI banned Hanif Shaikh from the market for seven years and imposed a fine of Rs 10 crore. At the same time, five units associated with them have been banned for six years and a fine of Rs 2 crore each has been imposed. SEBI has also ordered to recover illegal earnings of Rs 143.79 crore from all the culprits along with 12 percent annual interest.
