India's Securities and Exchange Board of India (SEBI) has issued its final order in the Axis Mutual Fund front-running case, banning 21 entities from the securities market for periods ranging between three and seven years. According to the latest final order, SEBI confirmed the disgorgement of over ₹30.56 crore in ill-gotten gains and imposed cumulative monetary penalties totalling ₹7.40 crore across the involved parties. The regulator's final order was passed on July 24, 2024, marking the conclusion of the case involving the leakage of sensitive trading data. The regulator had issued an interim order-cum-show-cause notice in February 2023 before passing the final order. Alongside the market ban, SEBI directed that ₹30.56 crore already impounded in the case be treated as disgorgement and transferred to the Investor Protection and Education Fund (IPEF) along with 12% annual interest calculated from the end of the investigation period until the deposit date.
The scheme, which operated between September 1, 2021, and March 31, 2022, involved former Axis Mutual Fund chief dealer Viresh Joshi abusing his position to access non-public information regarding impending large-scale institutional buy and sell orders. As reported by Economic Times, Joshi transmitted this sensitive order data through encrypted platforms, including Apple FaceTime and BOTIM, to Dubai-based co-conspirator Prijesh Kurani. Kurani then executed front-running trades using Open Dealer Integrated Network (ODIN) terminals supplied by broking firms Marfatia Stock Broking and Woodstock Broking. The illicit trades were routed through nine conduit trading accounts belonging to Kurani's close family members, an offshore entity named MKB Bespoke Audio General, and third-party mule accounts arranged through a network of intermediaries. Key facilitators Sumit Desai, Pranav Vora, and Vaibhav Pandya assisted in procuring trading accounts and enabling remote terminal access. SEBI's investigation revealed that multiple accounts were operated through common devices, internet connections and IP addresses, exposing what SEBI described as a centrally controlled trading network.
The illegal trading operation generated gains of ₹305.6 million for the participants, according to the SEBI order reported by Economic Times. SEBI calculated the total unlawful gains from the alleged scheme at ₹30.55 crore, with Visa Capital Partners accounting for the largest share of over ₹14.07 crore. The regulator has directed that the entire impounded amount be treated as final disgorgement and transferred to the Investor Protection and Education Fund (IPEF) along with 12% annual interest calculated from the end of the investigation period until the deposit date. Other significant gains included Nishil Marfatia's account seeing ₹3.08 crore, Olga Trading ₹3.01 crore, Dharini Kurani ₹2.79 crore, Bhavin Shah ₹1.98 crore, M K B Bespoke Audio General ₹1.83 crore, Rupal Shah ₹1.42 crore, Rekha Kurani ₹1.40 crore and Bharti Godaya ₹96.65 lakh. SEBI imposed total monetary penalties of ₹7.40 crore against the involved parties, with penalties ranging from ₹10 lakh to ₹1 crore for different categories of participants.
The seven-year securities market ban imposed on former chief dealer Viresh Joshi represents one of the most severe penalties in recent mutual fund regulatory cases. As reported by Economic Times, SEBI has imposed market debarments ranging from 3 to 7 years on various entities involved in the scheme. Viresh Joshi faces a 7-year market debarment and a monetary penalty of ₹3 crore. Prijesh Kurani receives a 7-year market debarment and a monetary penalty of ₹1 crore. Sumit Desai & Pranav Vora face 5-year market debarments with penalties of ₹65 lakh and ₹50 lakh, respectively. Vaibhav Pandya gets a 3-year market debarment and a ₹5 lakh penalty. Remaining 14 noticees (mule account owners and partners) face market debarments ranging from 3 to 7 years and individual penalties of ₹10 lakh each (totalling ₹1.40 crore). All penalised entities have been directed to pay their monetary penalties within 45 days. SEBI clarified that the period already undergone under the interim order will be set off against the final debarment period.
Evidence gathered during the investigation, including trade logs, call records, WhatsApp chats, statements of noticees, trading terminal data and references to coded identities such as 'Jadugar', suggested coordinated communication among the accused with coded identities such as 'jadugar' and 'asdfg', according to The Economic Times. SEBI firmly rejected arguments by mule account holders claiming passivity or lack of direct knowledge, clarifying that lending trading credentials or accounts for third-party control constitutes a direct violation of Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) regulations. The regulator also refused requests to offset disgorgement amounts against trading losses or operational costs incurred during the scheme. SEBI reaffirmed its extra-territorial jurisdiction over cross-border entities operating from Dubai under the 'effects doctrine', noting that the fraudulent scheme directly harmed domestic mutual fund investors and distorted market price discovery. SEBI's 146-page final order records that the front runners consistently placed the first leg of their trades immediately before Axis Mutual Fund's orders and squared off their positions before completion of the fund's transactions, following Buy-Buy-Sell (BBS) and Sell-Sell-Buy (SSB) patterns. The investigation was carried out after SEBI's internal alert system flagged front-running patterns connected to Axis Mutual Fund transactions.
