SEBI bars 135 entities from securities market over stock manipulation

The capital markets regulator has barred a total of 135 entities from accessing the securities market by issuing a restraining order against them over alleged stock manipulation.

SEBI has imposed ₹126 crore fine on them for wrongful gains in the alleged manipulation of shares of five scrips. The regulator found some entities manipulated the shares of five listed companies -- Mauria Udyog Ltd., 7NR Retail Ltd., Darjeeling Ropeway Company Ltd., GBL Industries Ltd., and Vishal Fabrics Ltd.

"An investigation was conducted by SEBI into the alleged manipulation of shares of five scrips. Based on the findings of the investigation, SEBI vide order dated 19/06/2023, has issued interim directions restraining 135 entities from accessing the securities market till further orders," the SEBI's latest order said.

A show cause notice has also been issued to 226 entities, including numerous mule accounts, through the order for prima facie violations of the SEBI Act, 1992, and regulations thereunder, indicating a possible requirement of disgorgement of ₹143.79 crore.

Explaining the modus operandi, the SEBI probe found it followed apparently under a pre-planned scheme by the entities mainly centered around the circulation of bulk SMSs in five scrips with a buy recommendation to public investors. The scheme involved three major sets of entities -- PV (Price Volume) Influencers, SMS Sender and Off Loaders, apart from using a large number of entities, apparently mule or conduit ones, to operate the fraudulent scheme in these scrips, the SEBI order said.

As per the first leg of the scheme, PV influencers were found to have increased the price and volume of the five scrips through manipulative trades, followed by the circulation of buy recommendations via Bulk SMSs in the five scrips by the SMS Sender, Hanif Shekh, who was prima facie the mastermind behind the scheme to lure or induce public investors into buying such scrips. 

In the last leg of the scheme, the Off Loaders sold the shares of these five scrips (previously acquired by them) at elevated prices, thereby making substantial profits that were transferred through multiple layers and conduits to the ultimate beneficiaries identified as promoters of some of the companies and the mastermind of the scheme Hanif Shekh.

The regulator also took steps to investigate the matter, including using digital footprints, CDRs, voluminous bank transactions, etc., to identify the SMS Sender and other entities involved in the illegal activities. "The action on SEBI’s part has led to the discovery of crucial evidence in the matter," says the SEBI order.

The market regulator has cautioned people to be aware of such fraudulent activities being carried out through SMSs, various websites, and social media like Telegram, Instagram,  YouTube, etc. It has advised investors to deal only with SEBI-registered intermediaries.