Mumbai: Actor Arshad Warsi, his wife Maria Goretti and 48 others have been restrained by the Securities and Exchange Board of India (SEBI) from accessing the securities market and prohibited from buying, selling or otherwise dealing in securities for a period up to five years.
Investigation in the case began after a whistleblower’s complaint through an email against Sadhana Broadcast Limited (SBL), now known as ‘Crystal Business System Ltd’. The entity is engaged in the business of television news, films and other allied activities.
Warsi and Maria were barred from the stock market for one year and imposed a fine of Rs 5 lakh each. The couple, according to the SEBI, gained Rs 92.05 lakh through the manipulations.
There was a coordinated campaign to manipulate the price of the scrip by sharing videos with false information, the SEBI alleged in its order. It has said that the company’s promoters colluded with market operators to sell their own shares through a ‘pump and dump scheme’ between July and November 2022.
In a ‘pump and dump’ scheme, promoters inflate the price of a stock with false or misleading statements and then proceed to sell their own holdings of the stock to gain profits. Buyers are enticed with messages of ‘inside’ information that can benefit them.
“It was also stated in the complaints that YouTube videos were being uploaded with false content to lure investors and a paid marketing campaign worth crores was undertaken to make the videos reach a wider audience,” the SEBI said In its order dated 29 May.
The SEBI conducted a detailed investigation into the alleged manipulation along with searches and seizures in the case of 15 people. It took their statements and passed an interim order against 31 people in 2023. It also issued a show cause notice to 64 entities.
The notice elaborated how the price and volume of the SBL scrip was manipulated through a “coordinated scheme involving the dissemination of misleading information and structured trading among connected entities to create artificial volume and price movement.”
“Once sufficient interest was generated among retail investors, entities connected to the promoter group and the video creators offloaded their shareholdings at inflated prices,” it added.
Five YouTube channels were identified where the company’s alleged falsified videos showing a grand turnaround of the firm were broadcast, the SEBI said, adding that many of these videos used to be made private.
One of the videos, it said, claimed how the company is moving from TV production to movie production and big mutual funds have already bought the stock.
“Based on the information available on record, and the corporate announcements made by the company, it is noted that the contents of the aforesaid videos were false and misleading. These videos, it can be clearly held, were uploaded with a view to manipulate the share price of SBL,” the order reads.
The five channels were found to be operated by Manish Mishra, whom the SEBI mentioned as one of the masterminds of the alleged ‘pump and dump’ fraud.
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Charges against Warsi
The alleged manipulation happened in six patches, with the first being from 8 March to 14 July, 2022. This, the SEBI said, was the pre-video upload phase when a sharp increase was seen in trading volumes in the scrip. During this phase, the scrip’s price significantly jumped 616 percent.
Arshad Warsi and his wife Maria Goretti Warsi purchased shares of SBL during this period, it said.
Warsi, in his statement recorded 27 June 2023, stated that apart from placing trades in his own account, he was also trading from the accounts of his wife and brother. The show cause notice said that the scrips traded by Warsi were allegedly the ones manipulated by Mishra.
The SEBI order, sharing screenshots of WhatsApp chats states: “It is further noted that the transfer of funds between Manish Mishra and Arshad Warsi was accompanied by instructions for trades given by the former.”
“By trading on the instructions of Manish Mishra, he aided and abetted Manish in executing his pump and dump scheme in the scrip of SBL, which adversely impacted the integrity of the securities market and the interest of investors.”
In the second patch from 15 July to 12 August, 2022, the first phase of videos were uploaded and there was an increase in the price and volume of trading and the connected entities offloaded shares at elevated prices.
In the third patch between 16 August and 29 August, the price and volume crashed. The price in this period dropped by 40 percent. It was the connected entities that collectively accounted for 27 percent of the trading volume during the period.
The fourth patch from 30 August to 12 September saw a rise in price and increase in volume again. And on 2 September, fresh videos were uploaded on You Tube. This induced public investors to purchase the scrip. About Rs 537 crore profit was made by the noticees in the case during this period.
In the fifth patch, from 13 September to 21 October, the surge was followed by a fall in volume and prices and again, the connected entities were the main volume contributors. Price and volume increased after a renewed promotional push on YouTube in the sixth patch, the market watchdog added.
(Edited by Tony Rai)
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