SEBI’s Massive Pump-And-Dump Crackdown: Over 200 Companies Likely Under Scanner | Profit Exclusive
SEBI is examining data extracted from over 150 mobile devices and more than 100 computers, people in the know told NDTV Profit.
The Securities and Exchange Board of India is intensifying its investigation into a large-scale pump-and-dump operation involving shell companies, in what is emerging as one of its biggest enforcement crackdowns, people in the know told NDTV Profit.
More than 200 privately listed companies are likely under the regulator’s scanner, with the focus on entities suspected of artificially inflating stock prices and offloading them to unsuspecting investors.
SEBI is examining data extracted from over 150 mobile devices and more than 100 computers, the people cited above said. The last tranche of searches, carried out recently, spanned across three days and covered more than 80 premises.
As first reported by NDTV Profit on June 30, SEBI is probing a suspected network of shell companies. Many of them, operating out of Ahmedabad, allegedly used to manipulate stock prices through coordinated social media campaigns and false narratives.
The probe is data-heavy and involves detailed forensic analysis of digital devices seized during multiple raids, the people said.
SEBI's Fight Against Pump And Dump
The Securities and Exchange Board of India is currently investigating a number of pump-and-dump schemes, involving revivals of defunct BSE companies operated from Ahmedabad and duping around thousands of investors, according to people familiar with the matter.
It is important to note here that SEBI is not looking into BSE in the matter, nor is the exchange's culpability in question. The focus is only on defunct old companies listed on the exchange by virtue of being the older exchange.
The regulator is keen on expediting the investigation and is planning on coming out with an order in the next three to six months, the people cited above said.
The scheme was being orchestrated through a network of shell companies, and several of the accused in the case were also related to the pump-and-dump violations of LS Industries Ltd., they said.
SEBI is treating the cases as an important development, as it believes that the investigation is likely to lead the regulator towards more such schemes, as well as to entities involved in orchestrating them, including those involved in preferential allotment-related violations.
The major issue in these violations is their volume and hence curbing becomes a daunting task, the people said.
Background
In the last year, SEBI has come out with orders against several such entities, including Pacheli Industrial Finance Ltd., Bharat Global Developers Ltd., LS Industries and more.
In January, the markets regulator banned Pacheli Industrial Finance Ltd. and six other entities from the securities market till further orders for violations, including suspicious trades during a price rise period.
SEBI acted on the case while the stock was still in the "pump" phase of the pump-and-dump transactions—an operation where manipulators artificially inflate a stock’s price through misleading promotions before selling off their shares, causing the price to crash and leaving other investors with losses.
In case of LS Industries, the regulator first observed an NDTV Profit report on Feb. 3, flagging how a company with almost negligible revenue had a valuation of Rs 5,500 crore. A subsequent investigation by the regulator uncovered suspicious trading patterns, misleading disclosures and transfers to an NRI.
Meanwhile, in March this year, the regulator brought out a confirmation order against Bharat Global Developers Ltd. for fake disclosures, preferential allotment of shares and other violations.
