By India Today Business DeskThe Securities and Exchange Board of India (Sebi) has taken action against actor Arshad Warsi, his wife Maria Goretti and 29 other individuals for involvement in a YouTube pump-and-dump scheme. The market regulator has banned all of them from dealing in securities following its investigation.
Sebi said it received complaints about price manipulation and offloading of shares by certain entities in the stock of Sadhna Broadcast Limited and issued an order against the individuals who were involved in providing such recommendations.
Following Sebi’s order, Arshad Warsi said in a tweet that he and his wife did not have any knowledge about stocks and lost money after investing in Sadhna Broadcast Limited. “Please do not believe everything you read in the news. Maria and my knowledge about stocks is zero, took advice and invested in Sharda [Sadhna], and like many other, lost all our hard earned money,” he said.
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But according to Sebi, the individuals named have played a role in manipulating the stock prices of Sadhna Broadcast Limited by sharing misleading information on YouTube videos. As per information shared by Sebi, the company was incorporated in 1994, and has its registered office in New Delhi. It was listed on the BSE on January 18, 2018.
Key details about the YouTube pump-and-dump scheme
The market regulator said it received complaints that misleading YouTube videos with false content, backed by paid market campaigns worth crores of rupees for additional reach, were being uploaded to “lure investors”.
“Once these unsuspecting investors entered the scrip, the said entities allegedly offloaded their holding at an inflated price,” Sebi said.
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On the basis of these complaints, Sebi conducted a preliminary examination in the matter to look into possible violations of provisions of the Securities and Exchange Board of India Act, 1992 or the SEBI Act and various regulations framed thereunder, including SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 by certain entities for the period April 27, 2022 to September 30, 2022.
Sebi noted that there was a jump in the price and volume of Sadhna’s stock between April 2022 to mid-July 2022. “A significant portion of the volume during this period was the result of the trades executed by some of the Noticees to this case,” Sebi said.
“During the second half of July 2022, false and misleading videos (“YouTube Videos”) about the company were uploaded on two YouTube channels, namely, “The Advisor” and “Moneywise” (“YouTube Channels”/ “Channels”). These YouTube videos peddled false and misleading news to recommend that investors should buy the Sadhna stock for extraordinary profits,” Sebi added.
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Both these YouTube channels had lakhs of subscribers and the misleading videos had crores of viewership aided by promotion through paid advertising campaigns. “Subsequent to the release of the misleading YouTube videos, there was an increase in the price and trading volume of the Sadhna scrip. The volumes appear to have been contributed by a large number of retail investors likely influenced by the misleading YouTube videos,” Sebi noted.
“During this period, certain promoter shareholders, key management personnel of Sadhna, and non-promoter shareholders who held more than 1 per cent of the shareholding in Sadhna offloaded a significant part of their holdings at inflated prices and booked profits,” the market regulator explained.
What is a pump-and-dump scheme?
A pump-and-dump scheme is a fraudulent strategy, commonly used in the stock market to artificially inflate the value of a particular stock or security. In such schemes, involved parties purchase a large number of shares of a particular stock at a low price and then use tactics to artificially inflate its price, such as making false or exaggerated claims about the company’s financial prospects and other favorable news.
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Once the stock price rises to a desirable level, the involved parties sell off their shares at a large profit, leaving unsuspecting retail investors with heavy losses. This is because the stock plummets as soon as a large number of shares are sold (Readdumped) by the fraudsters.
It may be noted that pump-and-dump schemes are illegal and considered as a form of securities fraud. They can be conducted through various channels, including social media, email and even phone calls. Investors planning to buy shares or securities should conduct proper research before making any decisions, especially when they come across unsolicited investment opportunities that seem too good to be true.
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