Market regulator Securities and Exchange Board of India (SEBI) has barred eight entities from the securities market and impounded Rs4.82 of illegal gains made from front-running activities involving Gagandeep Consultancy Pvt Ltd. The primary culprits include Ashish Kirti Kothari (noticee 1), his family members, and dealer Nirav Mahendra Sapani (noticee 7), who facilitated the trades.
The other entities involved are Amit Kirti Kothari (noticee 2), Neha Ashish Kothari (noticee 3), Hetal Amit Kothari (noticee 4), Ashish Kirti Kothari Hindu undivided family (HUF) (noticee 5), Krishna Tukaram Kadam (noticee 6) and Jugmi Sapani (noticee 8).
In an interim order, cum show cause notice (SCN), Amarjeet Singh, executive director (ED) of SEBI, says, "In the interest of justice, I am of the view that the unlawful gains generated by the noticees need to be impounded on an immediate basis so that such funds are not disposed of by the noticees."
SEBI investigated alleged front-running activities concerning trades by Gagandeep Consultancy, a major client operating through the stockbroker Anvil Share & Stock Broking Pvt Ltd. The investigation spanned from 1 September 2018 to 30 September 2023 and focused on potential violations of the SEBI Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market Regulations, 2003 and the SEBI Act, 1992.
The inquiry centred on the roles of key individuals, including five entities collectively referred to as the 'Kothari group', comprising Ashish Kothari, Amit Kothari, Neha Kothari, Hetal Kothari, and Ashish Kothari HUF. These individuals were suspected of leveraging non-public information to front-run the trades of Gagandeep Consultancy, with trading orders being executed through Anvil's dealer, Nirav Sapani.
SEBI investigation revealed that Mr Sapani, who is related to both the promoter of Gagandeep Consultancy and members of the Kothari group, communicated material non-public information (MNPI) about Gagandeep Consultancy trades to the suspected front-runners.
Further investigation uncovered intricate familial and professional relationships between the parties. Mr Sapani, working as a dealer at Anvil's Mumbai office, received trade instructions from Anujkumar Anantrai Sheth and Hem Prabhakar Thakore, the individuals authorised to place trades for Gagandeep Consultancy.
SEBI discovered that Mr Sapani relayed sensitive trading information to the Kothari group using landline telephones at Anvil's office and his personal mobile phone.
The Kothari group and associated entities engaged in systematic front-running activities. Bank accounts of individuals, including Mr Kadam, a peon employed by the Kothari group, were utilised to facilitate these trades. Despite his modest salary, Mr Kadam's accounts reflected significant financial transactions, including profits from the front-running activities.
Further, funds were transferred to the accounts of Mr Sapani and his wife and other associates, totalling over Rs1.36 crore. SEBI also found evidence of cash withdrawals amounting to Rs38.65 lakh.
SEBI says the unlawful gains from these trades were partially funneled back to Mr Sapani account or his associates, including his driver. The coordinated efforts to conceal the fraudulent activities and distribute the gains underscored the premeditated nature of the scheme.
SEBI has restrained these eight entities from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever until further orders.