The Securities and Exchange Board of India (SEBI) on Thursday passed an interim order barring Bollywood actor Arshad Warsi, his wife Maria Goretti and 29 others from accessing the securities market indefinitely.
Warsi and other noticees were penalised for running a ‘pump and dump’ scheme that involved manipulating the price of a stock through misleading information to lure investors into buying it and then quickly selling the shares at an inflated price.
SEBI received information on price manipulation and offloading of shares by certain entities in the scrip of a company called Sadhna Broadcast Limited. It was alleged that YouTube videos with false content, backed by a paid marketing campaign worth crores of rupees, were being uploaded to lure people to invest in the company. Once the investors entered the scrip, the said entities offloaded their holdings at an inflated price.
This was alleged to be in violation of the SEBI Act and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003.
During the second half of July 2022, false and misleading videos about the company were uploaded on two YouTube channels called Midcap Calls and Profit Yatra, run by one Manish Mishra. Videos on these channels peddled false and misleading news to recommend that investors should buy the Sadhna stock for extraordinary profits. Among the false claims made in the videos was,
“The company has 5G license. SBL is going to be taken over by Adani group. The margins of the company will increase after the deal.”
Mishra, who was classified as misleading message disseminator (MMD) 1, was shown to have paid ₹4,72,24,967 to Google AdSense for promoting these videos uploaded on YouTube.
“The above mentioned four videos have a combined view count of 3,02,05,655. There was thus a prima facie deliberate attempt to widely disseminate the content of the videos uploaded on the Channels,” the order stated.
Mishra and other MMD, Manjari Tiwari, were found to have sold their shares in Sadhna between July and September 2022, contrary to the buy recommendations in the YouTube Channels. Thus, they took advantage of the increase in price caused by the unsuspecting retail investors entering the scrip of Sadhna to book profit at inflated prices.
“This prima facie leads to the conclusion that the videos were uploaded on YouTube were intended to mislead and induce retail investors to deal in the scrip of Sadhna Broadcast Limited,” the SEBI whole-time member said in his order.
Warsi and Goretti were classified as volume creators (VCs) in the case. VCs are the ones who both bought and sold shares of Sadhna during the Examination period, hence contributing to a rise in trading volumes and interest in the scrip. On the involvement of VCs like Warsi and Goretti, the order stated,
“It is pertinent to note that many of the Volume creators were closely linked with the Misleading Message Disseminator (MMD & VC). Further, the sale of shares by many of the Net Sellers had matched with the buy orders of the Volume Creator.”
The duo were found to have made profits of ₹29,43,649 and ₹37,56,816 from the buying and selling of shares, respectively.
On the basis of its preliminary examination, SEBI found,
“The entire modus operandi read together with the connection between the Noticees which includes the promoters and directors of the Company, leads me to the prima facie conclusion that the Noticees were engaged in a coordinated scheme to induce unsuspecting investors to acquire securities in Sadhna leading to an unnatural increase in the prices of the scrip and finally sold shares at inflated prices thereby making illegal gains at the cost of the new investors. This coordinated scheme is, prima facie a violation of Section 12A(a), (b) and (c) of the SEBI Act read with Regulation 3(a), (b), (c), (d) and Regulation 4(1) and 4(2)(a), (d), (k) and (r) of the PFUTP Regulations.”
Pending a full and final investigation by the markets regulator, the noticees were restrained from buying, selling or dealing in securities either directly or indirectly, until further orders. The proceeds in the bank accounts of the noticees, to the extent of their liability shall be impounded