Markets regulator SEBI on Wednesday said it has taken action against 135 entities involved in the manipulation of share prices of five small-cap companies by circulating bulk SMSs with a "buy" recommendation to public investors.
SEBI has restrained these 135 entities from accessing the securities market till further directions and issued impounding orders for Rs 126 crore towards wrongful gains made by them by indulging in such market manipulation
Markets regulator SEBI on Wednesday said it has taken action against 135 entities involved in the manipulation of share prices of five small-cap companies by circulating bulk SMSs with a "buy" recommendation to public investors.
The regulator has restrained these 135 entities from accessing the securities market till further directions and issued impounding orders for Rs 126 crore towards wrongful gains made by them by indulging in such market manipulation.
The modus operandi followed apparently under a pre-planned scheme by the entities mainly centred around the circulation of bulk SMSs with a "buy" suggestion for the shares of the five small-cap companies, SEBI said.
The five small-cap companies whose shares manipulated were -- Mauria Udyog Ltd, 7NR Retail Ltd, Darjeeling Ropeway Company Ltd, GBL Industries Ltd and Vishal Fabrics Ltd.
According to SEBI, the pre-planned scheme involved three major sets of entities PV (price volume) influencers, SMS sender and off-loaders, apart from using a large number of entities, who are mule or conduit entities to operate the fraudulent scheme in these scrips.
As per the first leg of the scheme, price volume influencers were found to have increased the price and volume of the five scrips through manipulative trades, followed by the circulation of buy recommendations through bulk SMSs in the five scrips by the prima facie SMS sender Hanif Shekh, who was prima face the mastermind behind the scheme to lure public investors to buy such shares.
In the last leg of the scheme, off-loader investors sold the shares of these five scrips (previously acquired by them) at elevated prices thereby making substantial profits, which were transferred through multiple layers and conduits to the ultimate beneficiaries of the scheme, who were identified as promoters of some of the companies and Shekh, according to the regulator.
Apart from these directions, a show cause notice has been issued to 226 entities, including numerous mule accounts, through the order for prima facie violations of SEBI rules indicating a possible requirement of disgorgement of Rs 144 crore from them.
The action was taken by SEBI following an investigation conducted by it into the alleged manipulation of shares of the five companies.
It has taken numerous steps to investigate the matter, including using digital footprints, CDRs, voluminous bank transactions, etc. to identify the SMS sender and other entities involved in such illegal activities. The action on SEBI's part has led to the discovery of crucial evidence in the matter.
Also, the regulator has cautioned the general public against such fraudulent activities being carried out through SMSs, various websites and social media like Telegram, Instagram, and YouTube. It asked investors to deal only with SEBI- registered intermediaries.