Rs 144 crore wrongful profit! Sebi finds stock manipulation in 5 smallcaps

The Securities and Exchange Board of India (Sebi) has issued interim order-cum-showcause notices, restraining 135 entities from accessing the securities market on alleged manipulation of shares of five smallcaps.

The five companies are Mauria Udyog Ltd, 7NR Retail Ltd, Darjeeling Ropeway Company Ltd, GBL Industries Ltd, and Vishal Fabrics Ltd.

Further, the regulator has issued show cause notices to 226 entities, including numerous mule accounts, for prima facie violations of regulations. The above mentioned entities have made gains to the tune of Rs 144 crore by manipulating prices of the five smallcap stocks.

The regulator has issued impounding orders amounting to Rs 126 crore towards wrongful gains made by the entities by indulging in stock price manipulations. The prima facie violation of regulations indicates a possible requirement of disgorgement of Rs 144 crore from them.

The entities rigged stock prices through a pre-planned scheme by circulating bulk SMSs in five stocks with a “buy” recommendation to public investors.

“PV (price volume) Influencers were found to have increased the price and volume of the five scrips through inter se manipulative trades, followed by circulation of buy recommendations
via bulk SMSs in the five scrips by the sender Hanif Shekh, who was prima facie the mastermind behind the scheme to lure/induce public investors,” SEBI said in a release.

The regulator has taken numerous steps to investigate the matter, including using digital footprints, 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, the regulator said.

In the case of Mauria Udyog shares, three sets of entities were found to have made wrongful gains by rigging prices and volumes. In Vishal Fabrics, 14 entities were held by the regulator for jointly making wrongful gains of around Rs 31 crore.

In the case of 7NR Retail, 40 entities were found to have made gains of Rs 29.6 crore. The entities can file their reply with SEBI within 21 days and avail personal hearing in the matter, if they desire, the regulator said.

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