The market regulator has found six individuals guilty of inducing investors to trade in scrips like MetroGlobal Ltd., Total Transport Systems Ltd. and Alkali Metals Ltd. through baseless, speculative recommendations over messaging platform Telegram.
Their acts of influencing through social media channels to buy shares of certain scrips have been successful in generating artificial demand in the market having impact on the price and volume of those scrips, the Securities and Exchange Board of India has noted in its order. The Telegram channel “bullrun2017”, the regulator said, was also promoted through other social media platforms like Facebook and Instagram.
Consequently, its subscriber base increased from 35,016 in July to 51,980 till Dec. 14, 2021, the regulator found.
The texts of the messages being circulated... the recommendations about the specific scrips were being made in a very ingenious manner so as to create a "Fear Of Missing Out" amongst the subscribers.SEBI Order
The modus operandi, which was confessed to by the six individuals to the regulator, was as follows:
Messages were exchanged on WhatsApp between the individuals about the impending recommendation of stocks on the Telegram channel.
Then shares of the concerned companies were bought.
Subsequently, positive recommendations were made on those scrips through the Telegram channel so as to induce thousands of subscribers to deal in those shares.
Shares were sold by them in the market in the first leg of transaction for a profit.
This significantly impacted the price and volume of scrips as soon as recommendations were made. For instance, the regulator has pointed out, in Total Transport, daily average trading volume 10 days prior to the stock tip was 26,297. It moved to 1,96,600 shares soon after the recommendation was made on the Telegram channel on April 26. Similar uptick was seen in the next three months with trade volume reaching 14,97,586 shares on July 20. Trades were executed by the accused at different price points over the three months—from Rs 42.80-44 in April to Rs 69.25-72.80 in July.
The regulator noted the same pattern in shares of MetroGlobal. With this approach, the individuals made unlawful gains of Rs 2.84 crore, SEBI's order points out.
It also noted that the administrators of the messaging platform made the patently false claim of having a team of four experienced research analysts. In reality, the stock-specific recommendations were being made by one of the six individuals who has a masters degree in tourism management and didn't possess any qualification related to the securities market.
The administrators also made a false declaration that they are in the process of seeking registration with SEBI as research analysts, the order notes.
Based on these findings, the regulator has passed an ex-parte interim order barring the six individuals from the securities market, directing them to close any open positions within three months and pay up Rs 2.84 crore acquired via unlawful trades.
BloombergQuint hasn't named them as it wasn't able to reach them for comment.
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