Securities and Exchange Board of India (SEBI) issued an interim restraining order on 135 entities accessing the securities market and fined them about ₹1.26 billion rupees for making wrongful gains from alleged stock manipulation of small-cap companies through bulk messages.
In its investigation, the capital markets regulator found a set of entities manipulating shares of five listed companies – Mauria Udyog , 7NR Retail , Darjeeling Ropeway Co, GBL Industries and Vishal Fabrics .
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The entities first pushed up stock prices by trading among themselves and followed it up by sending “buy” recommendations to the public through bulk messages via texts and websites, said SEBI. As the stocks rose, the entities booked substantial gains which were transferred back through a web of entities, SEBI added.
SEBI said the scheme involved three major sets of entities – PV (Price Volume) Influencers, SMS sender and off loaders apart from using a large number of entities who were apparently mule or conduit entities to operate the fraudulent scheme in these scrips.
As per the first leg of the scheme, price volume influencers were found to have increased the price and volume of the five scrips through manipulative trades, followed by the circulation of buy recommendations through bulk SMSs in the five scrips by the prima facie SMS sender Hanif Shekh, who was prima face the mastermind behind the scheme to lure public investors to buy such shares.
In the last leg of the scheme, off-loader investors sold the shares of these five scrips (previously acquired by them) at elevated prices thereby making substantial profits, which were transferred through multiple layers and conduits to the ultimate beneficiaries of the scheme, who were identified as promoters of some of the companies and Shekh, according to the regulator.
Apart from these directions, a show cause notice has been issued to 226 entities, including numerous mule accounts, through the order for prima facie violations of SEBI rules indicating a possible requirement of disgorgement of ₹144 crore from them.
SEBI’s interim order says the alleged entities are also asked to file their replies within 21 days. SEBI has also cautioned investors to be careful of such manipulative practices on account of this order. The regulator also issued a caution for the wider public. 
“General public is cautioned to be aware of such fraudulent activities being carried out through SMS messages, various websites, social media like Telegram, Instagram, YouTube and are further advised to deal only with SEBI registered intermediaries,” it said.
SEBI has already been cracking the whip on false stock recommendations through social media platforms, and had, in April, barred six individuals from the securities market for one to three years for passing false tips on Telegram.
The regulator also plans to strengthen its norms to prevent suspicious trading activities, typically associated with front running, insider trading and share price manipulation.
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