The Securities and Exchange Board of India (SEBI) has taken strong enforcement action in a large-scale stock manipulation case, banning 221 entities from the securities market for up to seven years and ordering the recovery of nearly Rs 144 crore in alleged illegal gains. The regulator described the case as an “industrial-scale” pump-and-dump operation involving five listed companies and a complex network of traders, financiers, and intermediaries operating between 2017 and 2020.
In its 394-page final order issued on Tuesday, SEBI alleged that individual investor Hanif Shekh masterminded the scheme, which artificially inflated the share prices and trading volumes of Mauria Udyog, 7NR Retail, Darjeeling Ropeway Company, GBL Industries, and Vishal Fabrics. The investigation found that coordinated trading activity was used to create artificial price momentum, drawing unsuspecting retail investors into the market before connected entities exited their positions at inflated valuations.
According to the regulator, the manipulation involved more than 200 interconnected entities performing different roles within the operation. Initial stages of the scheme allegedly included synchronised and circular trades designed to generate false liquidity and upward price movement. This was followed by widespread dissemination of bulk SMS messages promoting stock “buy” recommendations, often using sender IDs resembling reputed brokerage firms in an attempt to mislead retail investors and increase participation.
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As retail investors entered the market, other participants in the network allegedly offloaded shares at elevated prices, generating substantial illicit gains. SEBI stated that the proceeds were layered through multiple entities, including conduit companies, financiers, and foreign exchange-linked channels, before eventually reaching the promoter group or individuals linked to Shekh. The regulator said the structure was repeatedly used across all five stocks, indicating a coordinated and recurring modus operandi.
SEBI has estimated the unlawful gains at Rs 143.79 crore and ordered disgorgement of the amount along with 12% annual interest from October 2020 until repayment. Hanif Shekh has been barred from the securities market for seven years and fined Rs 10 crore, while five associated entities have been banned for six years and penalised Rs 2 crore each. Other participants have received market bans of up to five years along with additional monetary penalties.
The regulator noted that its findings were based on extensive evidence, including trading records, banking transactions, WhatsApp communications, mobile and telecom data, website registrations, and travel and financial institution records. SEBI said the case highlighted the growing sophistication of organised market manipulation networks and underscored the risks such schemes pose to retail investor confidence and overall market integrity.
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