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According to SEBI, the network artificially inflated share prices and trading volumes in selected stocks through synchronised trades.
SEBI said Hanif Shekh and over 200 entities manipulated five stocks, lured retail investors through bulk SMSes and pocketed ₹143.79 crore through an elaborate pump-and-dump scheme. (IMAGE: PTI)
Markets regulator Securities and Exchange Board of India (SEBI) has barred 221 entities, including alleged mastermind Hanif Shekh, from the securities market for up to seven years after uncovering what it described as a ₹143.79-crore pump-and-dump operation “executed meticulously and on an almost industrial scale” between 2017 and 2020.
The regulator also imposed a ₹10-crore penalty on Shekh, besides ordering disgorgement of unlawful gains and monetary penalties against more than 200 entities that it said participated in the elaborate stock manipulation racket.
How Was The Scam Carried Out?
According to SEBI, the network artificially inflated share prices and trading volumes in selected stocks through synchronised trades before circulating bulk SMS messages recommending the shares to unsuspecting retail investors.
As ordinary investors entered the market chasing the rally, entities linked to the scheme allegedly dumped their holdings at inflated prices, pocketing illegal profits while leaving later investors exposed to steep losses.
The proceeds, SEBI said, were then routed through a maze of intermediary companies and conduit entities in an apparent attempt to conceal the identity of the ultimate beneficiaries.
In its 394-page order, Whole-Time Member Amarjeet Singh said the fraud may not have been unprecedented in design but stood apart because of its scale and precision.
“The fraudulent scheme unravelled in this matter, though not novel or unprecedented in its conception, was executed meticulously and on an almost industrial scale, involving 226 entities coming together to play their designated roles across five different scrips,” Singh observed.
He said the investigation uncovered an intricate web of fund transfers deliberately structured to disguise the ultimate recipients of the illicit proceeds, making the operation significantly more sophisticated than routine market manipulation.
Who Were The Beneficiaries?
According to the order, five listed companies—Mauria Udyog Ltd, 7NR Retail Ltd, Darjeeling Ropeway Company Ltd, GBL Industries Ltd and Vishal Fabrics Ltd—were at the centre of the manipulation.
SEBI alleged that Hanif Shekh orchestrated the operation with the help of more than 200 interconnected entities that functioned as “PV Influencers”, “Collaborators” and “Offloaders”. While appearing unrelated on paper, the entities allegedly worked in concert to inflate stock prices before transferring unlawful gains to promoters of the companies or to entities controlled by Shekh.
Beyond Routine Market Misconduct
Calling the operation far more serious than ordinary market abuse, SEBI said the elaborate layering of transactions and the coordinated role played by hundreds of entities struck at the very integrity of India’s securities market.
“These characteristics lend the scheme a distinctly aggravated dimension, taking it beyond the realm of routine market misconduct and into the territory that shakes investor confidence in the integrity of the securities market,” Singh said.
According to the regulator, the entities generated unlawful gains amounting to approximately ₹143.79 crore through the alleged scheme.
Who Is Hanif Shekh?
SEBI has restrained Hanif Shekh from accessing the securities market for seven years and imposed a monetary penalty of ₹10 crore.
Five entities associated with him have been debarred from the securities market for six years and fined ₹2 crore each, while several other noticees have been prohibited from trading for periods of up to five years, with penalties ranging between ₹5 lakh and ₹1 crore.
Apart from the market bans and financial penalties, the regulator has directed all noticees to disgorge unlawful gains totalling ₹143.79 crore, along with 12 per cent annual interest calculated from October 21, 2020, until the amount is fully repaid.
The final order follows SEBI’s interim order-cum-show-cause notice issued in June 2023, when the regulator had first barred Hanif Shekh and 225 other entities from the securities market.
At the time, SEBI had also ordered the impounding of alleged unlawful gains worth ₹143.79 crore, alleging that the entities were involved in a coordinated scheme to manipulate the prices and trading volumes of five listed companies.
About the Author
Shankhyaneel Sarkar is a senior subeditor at News18. He covers international affairs, where he focuses on breaking news to in-depth analyses. He has over five years of experience during which he has c…Read More
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