India's market regulator, the Securities and Exchange Board of India (SEBI), has taken decisive action against what it described as an 'industrial-scale' stock manipulation network. According to SEBI's 394-page final order issued Tuesday, the regulator barred 222 entities from the securities market for up to seven years and ordered the recovery of nearly ₹144 crore in illegal gains after uncovering a years-long pump-and-dump operation spanning five listed companies. As reported by SEBI, individual investor Hanif Shekh orchestrated a sophisticated scheme between 2017 and 2020 that artificially inflated share prices and trading volumes in Mauria Udyog, 7NR Retail, Darjeeling Ropeway Company, GBL Industries and Vishal Fabrics. The operation relied on more than 200 entities performing distinct roles, with connected traders creating artificial price momentum through synchronised and circular trades before bulk SMS messages carrying 'buy' recommendations were blasted to tens of thousands of retail investors.
According to SEBI's findings, the regulator discovered that Shekh hatched a fraudulent scheme which entailed participation by over 200 seemingly disparate but intricately connected entities as 'PV Influencers, 'Collaborators' or 'Offloaders' for transferring the unlawful gains to the promoters of the companies or entities controlled by him. The entities artificially inflated prices and trading volumes through synchronised trades, circulated bulk SMS recommendations to lure unaware investors and later offloaded at elevated prices. These proceeds were routed through multiple conduit entities to conceal the ultimate beneficiaries, as reported by SEBI. The investigation found that the network initially created artificial demand through synchronised and circular trades, making the stocks appear actively traded. Once prices moved higher, promotional SMS campaigns recommending the shares were circulated widely, with some messages reportedly using sender identities resembling established brokerage firms to make the recommendations appear more credible. As retail investors entered these stocks, connected entities allegedly exited their positions at inflated prices, generating significant profits.
According to SEBI's findings, the regulator estimated unlawful gains at ₹143.79 crore and ordered disgorgement of the amount along with 12% annual interest from October 21, 2020 until payment. Calling Shekh the mastermind behind the operation, SEBI barred him from the securities market for seven years and imposed a ₹10 crore penalty. Five entities linked to him were banned for six years and fined ₹2 crore each, while other participants received market bans of up to five years and penalties ranging from ₹5 lakh to ₹1 crore. The regulator also imposed monetary penalties totalling ₹47.7 crore as part of the comprehensive enforcement action. As reported by SEBI, the fraudulent scheme was executed meticulously and on an almost industrial scale, involving 226 entities coming together to play their designated roles across five different stocks. The labyrinthine structure of fund transfers unearthed in the investigation, evidently designed to obscure the identity of the ultimate beneficiaries, lends 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.
SEBI's investigation revealed that Mauria Udyog was particularly affected, with 62 employees of the company identified as part of the scheme who later transferred their sale proceeds to promoter-linked entities. In the case of Darjeeling Ropeway Company, promoter Himanshu Shah was provided an exit from the company at an inflated price through the scheme, having taken over the company just a year before exiting through the fraudulent practice. Goenka Business Finance, an RBI-registered non-banking financial company (NBFC), was also found to have played a prominent role in price manipulation and the creation of artificial volumes. The regulator noted that prior to the commencement of the manipulation, the scrips did not have any noteworthy liquidity or major corporate announcements or improvement in performance, but during the manipulation period between 2017 and 2020, the scrips witnessed abnormal price and volume fluctuations, including significant price surges in Mauria Udyog despite losses and declining revenue. As reported by SEBI, Whole-Time Member Amarjeet Singh emphasized that a promoter using his own company to perpetrate a fraud deserves a higher quantum of penalty, noting that the case went well beyond routine market abuse because of its scale, the layered movement of funds and the coordinated participation of hundreds of entities across multiple stocks.
As reported by SEBI, the investigation pieced together the network using trading records, bank transactions, mobile phone data, WhatsApp conversations, website registrations and information obtained from telecom providers, travel companies and financial institutions to establish Shekh's role in operating the SMS campaigns and coordinating the broader scheme. The regulator's most extensive market manipulation investigation relied on airline bookings, hotel stays, food delivery records, WhatsApp chats, telecom data and banking trails to crack the alleged ₹144 crore pump-and-dump operation. Unlike conventional insider trading or market manipulation probes that rely largely on trading patterns and fund flows, SEBI widened its investigation to include records from IndiGo, MakeMyTrip, Yahoo, Swiggy, Zomato, telecom operators, banks and hotels. The investigation cross-verified information received from these independent sources with data obtained from SMS aggregators and telecom service providers to identify the individual allegedly responsible for circulating misleading stock recommendations. The regulator also analysed booking information from MakeMyTrip and hotel stays as part of its effort to verify ownership and usage of various phone numbers, while food delivery records from Swiggy and Zomato, including registered names, delivery addresses and order histories linked to specific mobile numbers, formed part of the evidence. In one instance cited in the order, SEBI noted that a food order delivered to a hotel matched records showing that the alleged mastermind had stayed at the same property on that date, using this information to counter claims that the mobile numbers belonged to someone else.
