SEBI Bars Six Individuals From Market For Stock Manipulation Through Telegram

Market regulator SEBI barred six individuals on Wednesday from the securities market in a case involving stock manipulation through social media platform Telegram.

The regulator also imposed a penalty of Rs 5.68 crore on the individuals, which is double the unlawful gain accrued to them.

According to the regulator, through a scheme of ‘scalping’, which is a variation of the pump and dump scheme, the administrators of a telegram channel called ‘@bullrun2017’ misled its followers of around 50,000. Under this scheme, they purchased stocks before making buy recommendations on their Telegram channel, only to sell them later at increased prices.

They further misled their followers by falsely representing themselves as research analysts when they had no educational background in the securities market.

The regulator had initiated a probe into the actions of several Telegram channels after receiving complaints from July to October of 2021. The individuals were given an opportunity to explain why they shouldn’t be asked to disgorge the unlawful gains of nearly Rs 3 crore earned by them in Jan 2022. The opportunity for a personal hearing was also given to them.

SEBI has explained the modus operandi undertaken by the administrators through the stock movement of Total Transport System Ltd. and Metro Global Ltd.

A buy recommendation for Total Transports’ share was made in April, May, June, and July of 2021. In Metro Global, the recommendations were made on several dates in July.

After the recommendations were made, SEBI noted a serious fluctuation in the price as well as the volume of the scrips.

For instance, In Total Transports, on one occasion, the volume traded after the recommendation was 28 times the average daily traded volume in the preceding 10 days. Similar fluctuations were also witnessed in the scrip of Metro Global whenever shares were recommended. Prior to the recommendations, the administrators made sure they purchased enough of the shares, resulting in huge profits.

According to the regulator, the recommendations were not genuine and were false and misleading, as the administrators did not believe in those recommendations and sold the scrips later.

These 'buy' suggestions had a significant impact on the prices as well as volume of the stocks, as they traded several times above the average after the recommendation was made.

This was part of a fraudulent scheme deployed by the administrators to create artificial volume and is hence in violation of SEBI's Unfair Trade Practices Regulations, the regulator has noted.

Besides restricting the administrators from the market, SEBI has also asked them to disgorge the remaining unlawful gains of nearly Rs 2 crore at 12% interest. It has also frozen their accounts until further instructions.