3 Telegram Channel Admins Fined INR 5.68 Cr by SEBI for Stock Manipulation

• ByStartupStory     |    April 27, 2023

SEBI has imposed a fine of more than INR 5.83 crore on three administrators of a Telegram channel engaged in stock manipulation, along with three other related entities. According to the final order released by the market regulator on April 26, the three primary accused have been fined INR 5.68 crore, while the other three entities have been fined INR 5 lakh each.

SEBI has instructed six accused, including Himanshu Mahendrabhai Patel, Raj Mahendrabhai Patel, Jaydev Zala, Mahendrabhai Bechardas Patel, Kokilaben Mahendrabhai Patel, and Avaniben Kirankumar Patel, to pay the imposed penalty within the next 45 days. 

The market regulator’s order directs the three primary accused, Himanshu, Raj, and Jaydev, to pay a penalty of twice the total unlawful gains made by all the accused, which amounts to INR 5,68,59,896. The SEBI order was issued under Section 15HA of the SEBI Act, after considering the violations by the accused and relevant observations.

SEBI has banned the three main accused from the capital markets for three years, while the other three have been prohibited from participating for a year. The order mandates disgorgement of INR 1.85 Cr by the five persons, along with 12% interest. Disgorgement refers to an order that directs entities to repay gains made through fraudulent means. The SEBI order further stated that the holding of securities by these entities will remain frozen during the ban period. The accused have been given 45 days to deposit the penalty amount. The orders were issued under Section 15HA of the SEBI Act.

SEBI has alleged that the three main accused operated a Telegram channel named ‘@bullrun2017 (Bull Run Investment Educational Channel)’, which had more than 49,000 subscribers. The accused allegedly used their trading accounts and accounts of their family members to purchase shares of certain companies. They would then circulate messages of those specific stocks through the Telegram channel to lure investors. Once they had attracted enough customers, the accused would sell their old stocks in the market at higher rates, thereby generating unlawful profits. 

According to a recent order, individuals Himanshu, Raj, and Jaydev were found to be spreading false and misleading messages on a Telegram channel, resulting in the manipulation of stock prices and profits for all six individuals involved. The Telegram channel allowed only admins to post messages, and subscribers were restricted to reading them. The Securities and Exchange Board of India (SEBI) received two complaints between July and October 2021, which prompted an investigation into the admins’ illegal activities of artificially inflating stock prices to make profits.

SEBI launched an investigation into six individuals accused of using manipulative schemes to make illegal profits and issued an interim order in January of last year. This is not the first time that SEBI has taken action against stock manipulation through social media. Recently, the regulator banned 45 entities, including actor Arshad Warsi, for allegedly manipulating share prices through YouTube channels such as Moneywise, The Advisor, MidCap Calls, and Profit Yatra. 

The channels used false information and manipulative tactics to drive up the prices of Sadhna Broadcast and Sharpline Broadcast stocks. Social media platforms like Instagram and WhatsApp have also been targeted by malicious actors who purchase stocks before disseminating false information to artificially inflate prices, only to sell them when they peak.

In numerous cases, those accused of stock manipulation have promoted their videos to increase their reach, encouraging enough investors to buy shares, only to sell them once the stock price had been artificially inflated. While many investors lost significant amounts of money, the accused often evaded prosecution. 

SEBI’s recent crackdown is expected to provide relief to retail investors who have raised concerns about such activities in the past. Additionally, SEBI has released several guidelines in recent months to regulate the activities of “finfluencers” and reduce instances of celebrities using their online influence to manipulate the stock market.

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