In one of the more exhaustive crackdowns on manipulation in the SME segment, the market regulator Securities and Exchange Board of India (SEBI) has ordered the disgorgement of ₹98.78 lakh in unlawful gains along with the interest at the rate of 12%pa (per annum), imposed market bans ranging from one year to 30 months and levied monetary penalties aggregating nearly ₹1.85 crore against 26 entities for rigging the shares of DU Digital Technologies Ltd, now known as DU Digital Global Ltd. The price manipulation in DU Digital Global, listed on the NSE's SME platform, is a shocking revelation of how the scrip, listed at ₹12 in August 2021, jumped 2,467% to touch ₹296.05 in November 2022.
The regulator found that a tightly connected group of traders had systematically manipulated prices and volumes, creating a false and misleading appearance of trading in the stock.
The penalised entities are: Usha Devi, Jagdish Chhanabhai Vaghela, Mahendrabhai Sanghvi, Kuntal Jitendra Trivedi, Jigneshkumar Purshottamdas Patel, Girish Kantilal Parmar, Pranav Kamleshkumar Trivedi, Nikunj Sureshchandra Shah, Sagarkumar Pravinchandra Dataniya, Vidhi Nikunj Shah, Nayan Mahendrabhai Thakkar, and Manjulaben Parmar.
The remaining penalised entities are: Ankit Ajitbhai Panchal, Bhaumik Parmar, Manoj Rameshbhai Solanki, Rathod Mahendrkumar, Shvetalben Sagarbhai Dataniya, Rohit Bairwa, Madhu Kumari Bairwa, Sanjay Savjibhai Parmar, Dhaval Vinodbhai Gadani, Dhaval Girishbhai Parmar, Punjiben Babubhai Rathod, Vyas Jitendrakumar Hasmukhlal (HUF), and Jitendra Hasmukhlal Vyas.
DU Digital Global, listed on the NSE SME platform on 26 August 2021, at ₹12 per share, became a textbook example of how thinly-traded SME stocks can be exploited. Within a span of just over 14 months, the stock price surged by an astonishing 2,467%, reaching a peak of ₹296.05 on 11 November 2022. SEBI noted that this extraordinary rally bore no correlation with the company’s fundamentals, financial performance or any material corporate developments.
Alarmed by the abnormal price and volume behaviour, SEBI launched a detailed investigation covering the period up to 31 March 2023. What emerged was a carefully orchestrated scheme involving 26 interconnected entities that traded among themselves to artificially inflate prices, increase volumes, and lure unsuspecting investors into the stock.
SEBI’s order painstakingly documents how the noticees were linked through shared mobile numbers, common IP and MAC addresses, overlapping email IDs and repeated fund transfers. Call data records revealed frequent communication among key players, leaving little doubt that the trading was coordinated rather than independent.
To analyse the manipulation, SEBI divided the trading activity into four distinct phases. While the initial phase showed limited irregularities, the subsequent three phases revealed rampant abuse. During these periods, the connected entities dominated trading, placing synchronised and circular trades, often at prices higher than the prevailing market rate, thereby steadily pushing the stock upwards.
One of the most telling findings was the group’s role in setting the daily price. On a significant number of trading days, the first trade, which plays a crucial role in price discovery, was executed among connected entities. In some phases, over 90% of the first trades were intra-group transactions, enabling the operators to control the opening price and influence the day’s trading trajectory.
Volume manipulation was equally stark. On several days, nearly half of the total market volume was generated through circular trades within the group itself. SEBI observed that such trades had no economic rationale and were designed solely to create a false perception of liquidity and investor interest.
The regulator also took a dim view of the conduct of several noticees during the investigation. Multiple entities failed to comply with summons, while others attempted to downplay or conceal their roles. SEBI held that such non-cooperation further reinforced the inference of fraudulent intent.
As part of its directions, SEBI ordered 21 entities to disgorge unlawful gains totalling ₹98.78 lakh, along with interest at 12%pa calculated from 31 March 2023, until the date of the order. The amount is to be credited to the Investor Protection and Education Fund within 45 days.
Additionally, 26 entities have been barred from accessing the securities market for periods ranging from one to 30 months. The longest ban of 30 months was imposed on Pranav Kamleshkumar Trivedi, whom SEBI identified as a key participant in the scheme. Several others, including Usha Devi, Jagdish Chhanabhai Vaghela, Kuntal Jitendra Trivedi and Nayan Mahendrabhai Thakkar, face 18-month prohibitions.
SEBI has also imposed monetary penalties on 26 entities under various provisions of the SEBI Act, including Sections 15HA, 15A(a) and 15HB. Individual penalties range from ₹5 lakh to ₹20 lakh, with the total penalty amount running close to ₹2 crore. Pranav Kamleshkumar Trivedi alone has been fined ₹20 lakh, while Dhaval Vinodbhai Gadani has been penalised ₹12 lakh.
Further tightening the screws, SEBI has restrained the noticees from selling or disposing their assets, including shares and mutual fund holdings, except for the limited purpose of complying with disgorgement and penalty directions. Depositories, registrars and banks have been directed to ensure that any pay-outs or redemptions are used solely to enforce the order.
