PUMP AND DUMP: SEBI VS. ARSHAD WARSI

  • Home
  • PUMP AND DUMP: SEBI VS. ARSHAD WARSI
PUMP AND DUMP: SEBI VS. ARSHAD WARSI

On March 2, the market overseer Securities and Exchange Board of India (SEBI) harshly reprimanded YouTube channel owners for manipulating the stocks of listed businesses through the use of “pump and dump” tactics. The Adviser and Moneywise YouTube channels had thousands of followers, and the videos on both channels attracted millions of visitors thanks to sponsored advertising promotions, according to SEBI.

A Pump and Dump Scheme: What Is It?

Using false information, a person seeks to enhance the price of a share in a pump-and-dump scheme. The person’s statements are untrue, deceptive, inflated, and promoted for selfish reasons. A pump and dump scheme requires three steps:

  1. A person first purchases a large number of shares.
  2. They then make inflated statements about the business in an effort to get customers to pump their cash into it and make more purchases.
  3. Lastly, they dump the stock when its value increases and keep the profits. Yet once a large amount of the stock is dumped, its price drops, and other investors lose money.

Often, emails or social media platforms are used to spread false information. Using banner ads and social media communications, unsuspecting small investors are duped into purchasing small and mid-cap stocks. In this instance, YouTube videos on the channels The Adviser and Moneywise were used to propagate false information.  A misleading message disseminator, or MMD, is the individual conveying false information. Such schemes have been labeled by SEBI as unfair and deceptive business practices that threaten the integrity of the Indian capital markets. In its ruling, SEBI stated that it had been made aware of allegations alleging “price manipulation and the unloading of shares by certain companies in the scrip of television station Sadhna Broadcast.”

According to the complainants, fake YouTube videos with deceptive corporate information were posted in an effort to attract investors. These YouTube videos circulated inaccurate and deceptive information to encourage investors to purchase Sadhna stock in order to make huge gains. The regulator saw that the films misrepresented the company’s development trajectory and potential for the future. The false YouTube videos were later removed from public access.

Also, the regulator said that in July 2022, the two YouTube channels posted videos on Sadhna. Midcapcalls and ProfitYatra have posted videos in May 2022 in the instance of Sharpline. According to SEBI, the price and trading volume of the Sadhna shares increased after the YouTube videos were published. And According to the report, a sizable number of retail investors who may have been swayed by the deceptive YouTube films appear to have contributed to the volumes.

Arshad Warsi and The Case

By two separate decisions, the regulator blacklisted 55 companies from the securities market, including actors Arshad Warsi and his wife Maria Goretti, for allegedly manipulating prices through YouTube and then selling inflated shares of Sadhna Broadcast and Sharpline Broadcast. Moreover, SEBI has seized unlawful gains totaling ₹ 41.85 crores that the businesses made following the alleged fraud, and it has mandated that all 31 parties form escrow accounts with designated commercial banks and deposit the seized funds within 15 days. These 31 entities have been categorized by the market into the following groups:

  • Those who had shares of Sadhna at the beginning of the investigation period and who traded in and net sold shares during the aforementioned period are referred to as the creators of the YouTube channels as Net Sellers, promoters, and profit-makers.
  • Volume Creators, or individuals who purchased and sold shares of Sadhna over the specified period but are not Net Sellers.
  • 3 information conduits

Arshad Warsi and his wife were classified as Volume Creators since they purchased and sold shares of Sadhna during the testing period. According to the regulator, the actor in Sadhna Broadcast made a profit of ₹ 29.43 lakhs whereas his wife made a profit of ₹ 37.56 lakhs.

Order was read, Primarily, it appears that the Net Sellers and Volume Creators have conspired to increase trading activity and interest in the scrip, promote fake and deceptive YouTube videos and persuade unwary investors to purchase the Sharpline scrip at exorbitant prices—violating the SEBI Act and PFUTP Rules. Overall, this strategy has generated exceptional riches for the Net Sellers and some of the Volume Creators.

On his end, the actor has denied any misconduct. He pleaded with everyone on Twitter not to accept rumors. The popular actor clarified his version of events by claiming that he and his wife followed the advice and invested in Sharda, and like many others, lost all their hard-earned money.

Leave a Reply

Your email address will not be published. Required fields are marked *

X