Mumbai, July 1: The Securities and Exchange Board of India (SEBI) has revealed a large-scale stock manipulation scheme involving five listed companies, leading to the ban of 221 entities from the securities market. This action comes after a lengthy investigation into the alleged ‘pump and dump’ operation.
SEBI has ordered the return of approximately ₹144 crore in illegal earnings, including interest, as part of its final order spanning 394 pages. The mastermind behind this network, identified as individual investor Hanif Sheikh, has been banned from the securities market for seven years.
According to the investigation, this alleged scam operated between 2017 and 2020, artificially inflating the prices and trading volumes of shares from companies such as Maurya Industries, 7NR Retail, Darjeeling Ropeway Company, GBL Industries, and Vishal Fabrics. These shares were then sold to retail investors at inflated prices, generating substantial profits.
SEBI noted that over 200 entities were involved in this operation, each playing a specific role in executing the scheme. Initially, interconnected traders created artificial demand for these companies’ shares through synchronized and circular trading, leading to a rapid increase in both share prices and trading activity.
Once the share prices and liquidity increased sufficiently, the network launched a large SMS campaign to encourage retail investors to purchase these shares. Thousands of investors received messages from sender IDs resembling reputable brokerage firms, which led them to trust these communications and buy shares in large quantities.
As retail investor purchases surged, other entities in the network sold their shares at high prices, reaping significant profits. SEBI’s investigation uncovered that this illegal income was funneled through a multi-layered network involving various companies, financiers, and foreign exchange traders, ultimately reaching the promoters of the companies or entities linked to Hanif Sheikh while obscuring the identities of the actual beneficiaries.
The regulator found that the same intermediary entities repeatedly appeared in the cases of all five companies, indicating that these were not isolated incidents but part of a planned and organized stock manipulation campaign.
SEBI estimates that the illegal earnings from this scam amount to ₹143.79 crore, and it has directed all involved parties to return this amount along with 12% annual interest since October 2020.
As part of the enforcement actions, Hanif Sheikh has been banned from the securities market for seven years and fined ₹10 crore. Five entities associated with Sheikh have been barred from the market for six years, each facing a fine of ₹2 crore.
Other participants in this network will face bans of up to five years and fines ranging from ₹5 lakh to ₹1 crore, depending on their roles.
SEBI stated that its investigation was based on various digital and financial evidence, including trading records, bank transactions, mobile phone data, WhatsApp chats, website registration details, and information obtained from telecom companies, travel agencies, and financial institutions.
The regulator concluded that the evidence substantiates Sheikh’s role in orchestrating the SMS campaign and operating the extensive manipulation network.
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