SEBI Imposes Rs7.75 Crore Penalty on 11 for Operating Pump & Dump Scheme in Svarnim Trade Udyog Scrip

Moneylife Digital Team 03 June 2024

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs7.75 crore on 11 entities and also barred them from the markets for up to five years for indulging in a pump & dump scheme in the shares of Svarnim Trade Udyog Ltd (SNIM). SEBI also directed these entities to disgorge unlawful gains of Rs92.37 lakh with an interest of 12% per annum earned through the 'pump & dump' scheme.

The 11 entities are: Vinod V Sable (noticee 1), Prijesh A Kurani (noticee 2), Dharini Kurani (noticee 3), Ashish Shah (noticee 4), Jalaj Agrawal (noticee 5), Arvind Shukla (noticee 6), Priyankbhai Prajapati (noticee 7), Suraj Prajapati (noticee 8), Jigar Chaudhari (noticee 9), Piyush Patel (noticee 10 ) and Nishil Malde (noticee 11).

In an order, Ashwani Bhatia, whole time member (WTM) of SEBI, says, "The noticees have engineered a classical 'pump and dump' operation in the scrip of SNIM. The entire operation was stage managed by Prijesh Kurani, through noticees 1, 3, 4, 7 to 11. Prijesh Kurani, utilising connected entities, first manipulated the price of the scrip of SNIM and, thereafter, utilising the services of certain 'operators', off-loaded the shares of the Company at an inflated price to the unsuspecting public investors on the 1st and 2nd recommendation days."

SEBI's initial findings suggest collusion among multiple parties, primarily led by Prijesh Kurani, in a scheme involving three Telegram channels to circulate false buy recommendations for SNIM stock on 17 August 2021. This was followed by his sale of shares, primarily through Vinod Sable and subsequent manipulative trades involving connected entities (noticees 7 to 11) associated with Ashish Shah. These orchestrated activities resulted in a significant increase in SNIM stock prices, leading to profitable sales between the first and second recommendation days

Arvind Shukla was identified as the administrator of the suspected Telegram channels. Analysis of his bank account statements implicated Jalaj Agrawal and, subsequently, Ashish Shah as individuals who provided instructions for posting recommendations regarding SNIM shares on the first recommendation day.

The SEBI investigation revealed that using Telegram channels to disseminate messages to unsuspecting investors led to a significant surge in trading volume in SNIM shares on the first and second recommendation days. Before these recommendation days, the company witnessed a daily trading volume of around 2,008 shares. However, on 17 August 2021, trading volume skyrocketed to 1,20,905 shares, and a similar surge occurred on 30 November 2021, with 2,49,671 shares traded as compared to 13,315 shares before the second recommendation day.

This effectively resulted in public shareholders purchasing the scrip at an inflated price. In this regard, SEBI noted that the number of public shareholders in the company saw a marked increase during this period. The company, which only had 679 public shareholders for the quarter ended 30 June 2021, thereafter saw an increase in shareholders to 1,252 shareholders for the quarter ended 30 September 2021 and 2,358 shareholders for the quarter ended 31 December 2021.

The regulator imposed fines ranging from Rs10 lakh to Rs5 crore on these 11 entities,

Further, Vinod V Sable, Prijesh A Kurani, Dharini Kurani, Ashish Shah, Priyankbhai Prajapati, Suraj Prajapati, Jigar Chaudhari, Piyush Patel and Nishil Malde are barred from participating in the securities market, including buying, selling, or any related activity, for five years. Jalaj Agrawal and Arvind Shukla faced similar prohibitions for two years.

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