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2 Asked To Disgorge Rs34.26 Lakh Illegal Gains Earned from Front-running Trades
Moneylife Digital Team 29 January 2025
Investor Interest
Securities and Exchange Board of India (SEBI) has directed Mandar Ulhas Bhatkar (Noticee 1) and Vikrant Bhimrao Kadam (Noticee 2) to disgorge Rs34.26 lakh, the unlawful gains they earned through front-running trades. In addition, both individuals have been penalised Rs5 lakh each and banned from the securities market for six months. Mr Kadam worked as a dealer at Axis Securities Ltd.
 
In a detailed order, G Ramar, chief general manager (CGM) of SEBI, stated, "Section 15 HA is invoked for fraudulent and unfair trade practices involving front-running by Mr Kadam through Mr Bhatkar's account. Mr Bhatkar allowed Mr Kadam to use his account, shared one-time passcodes (OTPs), and transferred funds to facilitate and profit from the front-running trades."
 
SEBI's investigation into the trading activities of Mr Bhatkar and Mr Kadam revealed a deliberate pattern of front-running trades executed by the duo in both the cash market and equity derivatives segments on the National Stock Exchange (NSE). These trades were linked to SVI Consolidated Pvt Ltd, a high-net-worth client of Axis Securities, where Mr Kadam worked as a dealer.
 
Using his position, Mr Kadam gained access to information about the client's upcoming orders, which he shared with Mr Bhatkar. Mr Bhatkar then placed matching trades in the market to capitalise on the anticipated price movements caused by the large client transactions. 
 
Further investigation revealed that Mr Bhatkar and Mr Kadam were closely connected personally and professionally. They shared email accounts, lived in the same building and had financial transactions between their accounts. These connections, along with Mr Bhatkar trading activity mirroring that of the client, provided strong evidence of collusion. The trades aligned with the client's transactions at rates ranging from 23% to 100%, which supported SEBI's allegations of front-running.
 
SEBI also analysed IP addresses and mobile phone records, revealing that Mr Kadam used his mobile device to place trades through Mr Bhatkar's Zerodha account. The illicit profits of Rs34.26 lakh were transferred back to Mr Kadam via multiple transactions from Mr Bhatkar's bank account. 
 
Further, during the investigation period, Mr Bhatkar traded in 108 different scrips, with 26 of those trades overlapping with the client's orders. Of these overlapping trades, 20 were identified as clear instances of front-running, generating most of the illicit profits. The gross traded value (GTV) of these trades amounted to Rs7,628 lakh, with Rs16.30 lakh in profits from the front-running activities.
 
As a broker for Axis Securities, Mr Kadam played a key role in executing the front-running trades. SEBI's investigation confirmed that these orders were placed through Zerodha KITE platform, with all necessary details from Zerodha. 
 
Moreover, it was discovered that Mr Kadam also transferred funds between their accounts and their mothers' accounts to facilitate the trades. For example, Rs16,388 was transferred from Mr Bhatkar's Zerodha account to his mother's account. Similar transfers were made on other occasions, and funds were also moved from the mother's account to Mr Bhatkar's trading account, such as Rs70,000 and Rs90,000 on 4th April and 16 April 2021. Mr Kadam did not deny these transactions.
 
Both Mr Bhatkar and Mr Kadam admitted their involvement in the front-running scheme, acknowledging multiple fund transfers between their accounts. These transactions confirmed that Kadam had used insider information to direct the trades, and Bhatkar executed them.
 
As a result of these findings, SEBI imposed significant penalties on both individuals.
 
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