SUMMARY
The three main accused were jointly fined INR 5.68 Cr while the remaining three were penalised INR 5 Lakh each
The three main accused have been banned from markets for three years and have been directed to disgorge ill-gotten gains to the tune of INR 1.85 Cr, along with 12% interest
The accused would buy stocks before disseminating information on their Telegram channel, and would then dump the stock once the user bloated the share price
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The Securities and Exchange Board of India (SEBI) on Wednesday (April 26) slapped a fine of more than INR 5.83 Cr on as many as three administrators of a Telegram channel involved in stock manipulation, along with three other entities concerned.
Releasing its final order, the market regulator has imposed a fine of INR 5.68 Cr on the three main accused while the other three were penalised INR 5 Lakh each.
SEBI has directed the six accused – Himanshu Mahendrabhai Patel, Raj Mahendrabhai Patel, Jaydev Zala, Mahendrabhai Bechardas Patel, Kokilaben Mahendrabhai Patel and Avaniben Kirankumar Patel — to deposit the penalty in the next 45 days.
“After taking into consideration the violations by the Noticees and the observations made… , a penalty of two times the total unlawful gains made by all the Noticees i.e INR 5,68,59,896 is hereby imposed on Noticee nos .1,2 & 3(Himanshu, Raj and Jaydev),” the SEBI order read.
The orders were issued under Section 15HA of the SEBI Act.
The three main accused have also been barred from the capital markets for a period of three years, while the remaining three have been prohibited from participating in the markets for a year.
During the period, the existing holding of securities of these entities will remain frozen. The SEBI order also mandated the five persons to disgorge ill-gotten gains to the tune of INR 1.85 Cr, along with 12% interest.
Disgorgement essentially refers to an order which directs a person or an entity to repay gains made using fraudulent means.
Describing the modus operandi of the alleged culprits, SEBI said that the three main accused ran a Telegram channel — ‘@bullrun2017 (Bull Run Investment Educational Channel) — which had more than 49,000 subscribers.
As per the market regulator, the main accused would first use their trading accounts as well as their family members, who were co-accused, to buy the shares of the certain companies. The admins would then circulate messages of those specific scrips through the Telegram channel.
After luring hundreds of customers, the accused would then dump their old stock in the market at higher rates, thereby ‘booking unlawful profits’.
“The noticee numbers 1, 2 & 3 (Himanshu, Raj and Jaydev) were engaged in dissemination of false and misleading messages recommending buying specific stocks on the Telegram channel and the trading accounts of all the noticees (six individuals) were used to book profits from the resulting impact on price and volume of the recommended scrip,” the order noted.
The market regulator also noted that the Telegram channel, in question, allowed only one-way communication, ensuring that only admins could post messages while subscribers could only read such messages.
The scam came to light after SEBI received two complaints between July and October 2021, alleging that the admins of the Telegram channel were using their reach of thousands of subscribers to artificially inflate stock prices and make illegal profits.
Afterwards, SEBI initiated a probe against the six accused and found that these individuals allegedly devised and implemented manipulative schemes to make unlawful profits. Subsequently, it also passed an interim order on the matter in January last year.
SEBI Cracks Its Whip On Stock Manipulators
This is not the first time that SEBI has cracked its whip on the usage of social media platforms for stock manipulation. Last month, SEBI banned 45 entities, including actor Arshad Warsi, from participating in the securities market for allegedly employing YouTube videos to manipulate share prices.
The matter involved YouTube channels such as Moneywise, The Advisor, MidCap Calls and Profit Yatra, which used manipulation tactics and false information to drive up the scrips of Sadhna Broadcast and Sharpline Broadcast.
There have also been instances where malicious actors have used groups and videos on social media platforms such as Instagram and WhatsApp to bloat the prices of certain stocks. These players would purchase the stock prior to pushing manipulated information and then offload the stock when it reached a higher value.
In many cases, these accused even heavily marketed their videos for additional reach and once enough investors purchased enough shares, they would dump the stock.
While many lost a fortune in such instances, the accused would run scott-free without any prosecution. The crackdown is likely to assuage the retail investors who have flagged multiple such issues in the past.
Besides, SEBI also issued a flurry of guidelines in the recent months to regulate finfluencers and curb the growing instances of celebrities using online fame to manipulate stocks.
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