The Market Regulator, Securities, and Exchange Board of India (SEBI) have cracked down on WhatsApp and Telegram groups in which stock-tips were being shared to inflate share prices.
The genesis of the present proceedings can be traced to two undated complaints that were received by the Securities and Exchange Board of India on July 30, 2021, and October 11, 2021. The said complaints alleged that certain persons who are not having any registration with SEBI to function in the Securities markets as an Intermediary are using social media platforms like Telegram and Twitter to artificially influence the stock prices, so as to make illegal profits.
The modus operandi as described in the said complaints indicated that certain entities actively operating through such social media channels are first taking a position (purchasing shares) in small-cap companies in bulk quantities; then sending baseless and fraudulent messages indicating strong possibilities of immediate price hike in such scrips through such social media channels thereby instigating others to take a bullish position in those scrips; and ultimately after the prices go up, they take contrary positions (selling their previously acquired shares) thereby making profits out of such trades executed under such fraudulent scheme and device.
The coram of S.K.Mohanty held that if the Noticees have any open position in any exchange-traded derivative contracts, as on the date of the order, they can close out/square off such open positions within 3 months from the date of order or at the expiry of such contracts, whichever is earlier. The Noticees are permitted to settle the pay-in and pay-out obligations in respect of transactions, if any, which have taken place before the close of trading on the date of this order.
The bank accounts of the Noticees are hereby impounded jointly and severally for an amount of INR 2,84,29,948 (alleged unlawful gains)
Further, the Noticees are directed to open an escrow account with a Nationalized/Scheduled Commercial bank jointly and severally, and deposit within 15 days from the date of service of this order, the impounded amount as mentioned which has been prima facie found to be the proceeds of wrongful profits/gains allegedly generated from the unfair trade practices activity as noted above in this order. The said Escrow account/s shall be an interest-bearing escrow account and shall create a lien in favor of SEBI. Further, the monies kept therein shall not be released without permission from SEBI.
The banks where the Notices are holding bank accounts, jointly or severally, are directed to ensure that till further directions, except for compliance of directions as stated above, no debts shall be made in the bank accounts of the Notices without the permission of SEBI. The banks are directed to ensure that all the above directions are strictly enforced. Only on the production of proof of deposit of the entire amount of INR 2,84,29,948 (either jointly or severally) in the escrow account/s, SEBI shall communicate to the banks to defreeze the bank accounts.
The Notices are directed not to dispose of or alienate any assets, whether movable or immovable or any interest or investment or charge on any of such assets held in their name, individually or jointly, including money lying in bank accounts except with the prior permission of SEBI until the impounded amount is deposited in the escrow/s account.
The Noticees are directed to provide a full inventory of all assets held int heir name, individually or jointly, whether movable or immovable, or any interest or investment or charge on any of such assets, including details of all bank accounts, Demat accounts, and mutual fund investments, immediately but not later than 5 working days from the date of receipt of this order.
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