The Securities and Exchange Board of India (SEBI) has taken decisive action against Bollywood actor Arshad Warsi, his wife Maria Goretti, and 57 other entities, barring them from the securities markets for periods ranging from one to five years. This action stems from their involvement in a "pump and dump" scheme concerning shares of Sadhna Broadcast Ltd (SBL), now known as Crystal Business System Ltd.
SEBI's investigation, which spanned from March 8, 2022, to November 30, 2022, revealed a meticulously planned operation to manipulate the price of Sadhna Broadcast shares. The scheme unfolded in two distinct phases. Initially, connected and promoter-linked entities engaged in collusive trading to artificially inflate the stock's price. This created a false impression of strong market interest, despite the low trading volumes.
The second phase involved the dissemination of misleading and promotional videos on YouTube channels such as Moneywise, The Advisor, and Profit Yatra, all operated by Manish Mishra. These videos presented Sadhna Broadcast as a promising investment opportunity, coinciding with the inflated trading activity to entice unsuspecting retail investors. These videos made claims that Sadhna Broadcast had a 5G license, was to be taken over by the Adani Group, and had signed a Rs 1,100 crore deal with a US company. SEBI stated that the content of the videos were false and misleading and were uploaded with the view to manipulate the share price.
SEBI's investigation revealed that Arshad Warsi and Maria Goretti had purchased shares of Sadhna Broadcast from individuals also implicated in the scheme. Specifically, on July 13, 2022, Arshad Warsi bought 1,87,500 shares from Jatin Shah and 14,241 shares from Heli Jatin Shah. On the same day, Maria Goretti purchased 2,65,004 shares from Jatin Shah and 55,200 shares from Angad Rathod. Shortly after, capitalizing on the inflated stock price driven by the deceptive videos, Arshad and Maria sold their shares, generating illicit profits. Arshad Warsi reportedly made a profit of Rs 41.70 lakh, while Maria Goretti earned Rs 50.35 lakh.
SEBI has not only banned the involved parties from the market but has also imposed significant financial penalties. Arshad Warsi and Maria Goretti have each been fined Rs 5 lakh. Furthermore, the 59 entities have been directed to return a total of Rs 58.01 crore in unlawful gains, along with a 12% annual interest from the end of the investigation period until the actual date of repayment. Penalties ranging from Rs 5 lakh to Rs 5 crore have been levied on various parties, including the promoters of Sadhna Broadcast.
SEBI identified Gaurav Gupta, Rakesh Kumar Gupta, and Manish Mishra as the masterminds behind the operation. Subhash Aggarwal, a director of the RTA of Sadhna Broadcast, acted as an intermediary between Manish Mishra and the promoters.
The investigation was initiated following complaints received by SEBI between July and September 2022, alleging price manipulation and subsequent offloading of shares in Sadhna Broadcast. The complaints highlighted the circulation of misleading YouTube videos containing false information about the company, designed to lure investors.
SEBI's whole-time member, Ashwani Bhatia, stated that the actions of those involved constituted a "classic pump-and-dump scheme." The price was systematically driven upwards through collusive trading, followed by aggressive promotional activity to attract retail investors, and finally, a coordinated sell-off by the promoters.
In addition to Arshad Warsi and Maria Goretti, SEBI has also barred Arshad's brother, Iqbal Warsi, from the securities market for one year. WhatsApp chats were discovered between Manish Mishra and Arshad Warsi, suggesting that Mishra had offered to transfer Rs 25 lakh each to the bank accounts of Arshad Warsi, his wife, and his brother.
SEBI's order imposes restrictions on accessing the securities market and prohibits buying, selling, or otherwise dealing in securities for the specified duration of the ban.
