SEBI Stock Scam: ₹144 Crore Pump-and-Dump Network Exposed

A full-fledged investigation by the Securities and Exchange Board of India (SEBI) has revealed a suspected ₹143.79 crore Stock pump and dump scheme. It is through different forms of digital evidence, including airline ticket purchases, WhatsApp messages, food delivery confirmation, hotel bookings, website ownership records and financial transactions, etc. This is one of the biggest stories in latest news on business about SEBI’s evolving investigation methods.

Evidence Is Collected Beyond Trading Activity

According to SEBI’s 394-page final order, SEBI investigators did not just rely on the trading histories or bank records. Instead, they linked 226 persons alleged to be part of the manipulated stock to 226 persons. Through the combined use of many digital footprints (like airline ticket purchase records). GoDaddy domain registrations; logs showing website management; bulk SMS digital communications; telecoms; WhatsApp messaging; and food purchase confirmations via mobile applications.

The evidence presented to SEBI indicated a highly structured stock market manipulation scheme in operation between 2017 and 2020.

The Five Stocks in Question

The Regulator’s reports relate to the alleged manipulation of five illiquid shares. It included Mauria Udyog Ltd., Vishal Fabrics Ltd., 7NR Retail Ltd., GBL Industries Ltd. and Darjeeling Ropeway Company Ltd.

SEBI is reclaiming roughly ₹143.79 crore in addition to associated interest. Fined approximately ₹47.8 crore by imposing monetary penalties on the majority of involved parties preventing them from accessing securities markets for four-to-seven years.

Enhanced Trading & Marketing Initiatives

Investigators discovered that the defendants purportedly executed synchronized trading, established circular trading patterns, modified numerous orders contemporaneously. Also, carried out low-frequency trades, thereby creating this illiquid stock which was marketed to new and naive investors.

Investigators also traced extensive marketing to generate interest in the stocks, including sending over 2.1 crore text messages to over 60,000 separate mobile phone numbers associated with the five different stocks. These developments have created a buzz in recent financial news, raising concerns regarding the protection of investors.

Employee Records And Electronic Documentation Under Review

SEBI has studied banking records, demat accounts, income tax returns, and phone records. These are related to employees to attempt to identify connections among the individuals allegedly involved in the scheme.

The regulator has analyzed food delivery application records, telecommunications records and transfers of funds to verify the ownership of mobile telephone numbers. Also, identify direct connections among the participants.

Drastic Action Taken Against Alleged Leader Of Scheme

SEBI has named Hanif Shekh as the alleged mastermind behind the scheme and took the most severe actions against him. SEBI imposed a Rs. 10-crore fine and a seven-year ban from the securities markets, as well as prohibited him from acting in relation to the securities of any company.

SEBI viewed this operation on an “industrial scale” because it involved a complex and extensive network of fund transfers to conceal the true beneficiaries. This case reflects one of SEBI’s largest enforcement actions and demonstrates their continuing use of digital forensics to combat the increasing sophistication of market manipulation.