India's market regulator, the Securities and Exchange Board of India (SEBI), has cracked down on what it described as an "industrial-scale" stock manipulation network, banning 221 entities from the securities market for up to seven years and ordering the recovery of nearly Rs 144 crore in illegal gains after uncovering a years-long pump-and-dump operation spanning five listed companies.
In a 394-page final order issued Tuesday, SEBI said individual investor Hanif Shekh orchestrated a sophisticated scheme between 2017 and 2020 that artificially inflated share prices and trading volumes in Mauria Udyog, 7NR Retail, Darjeeling Ropeway Company, GBL Industries and Vishal Fabrics before connected entities dumped shares on unsuspecting investors.
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The operation relied on more than 200 entities performing distinct roles. Connected traders first created artificial price momentum through synchronised and circular trades. Once liquidity and prices had been engineered higher, bulk SMS messages carrying "buy" recommendations were blasted to tens of thousands of retail investors, often using sender IDs designed to resemble well-known brokerages to enhance credibility.
As retail participation increased, another set of entities offloaded shares at inflated prices. According to SEBI, the proceeds were then routed through multiple layers of conduit companies, financiers and even foreign exchange firms before ultimately reaching company promoters or entities controlled by Shekh, masking the identity of the final beneficiaries. The regulator said the same network of conduits repeatedly surfaced across all five manipulated stocks.
SEBI estimated unlawful gains at Rs 143.79 crore and ordered disgorgement of the amount along with 12% annual interest from October 2020 until payment.
Calling Shekh the mastermind behind the operation, the regulator barred him from the securities market for seven years and imposed a Rs 10 crore penalty. Five entities linked to him were banned for six years and fined Rs 2 crore each, while other participants received market bans of up to five years and penalties ranging from Rs 5 lakh to Rs 1 crore.
SEBI said its investigation pieced together the network using trading records, bank transactions, mobile phone data, WhatsApp conversations, website registrations and information obtained from telecom providers, travel companies and financial institutions to establish Shekh's role in operating the SMS campaigns and coordinating the broader scheme.
The watchdog said the case went well beyond routine market abuse because of its scale, the layered movement of funds and the coordinated participation of hundreds of entities across multiple stocks, underscoring the risks posed by organised pump-and-dump operations to investor confidence.
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