SEBI bars 18 entities in stock manipulation case, orders Rs 2.94 crore disgorgement, Rs 2.80 crore penalty

SEBI bars 21 entities in stock manipulation case, orders Rs 2.94 crore disgorgement, Rs 2.80 crore penalty

• SEBI banned 18 entities for manipulating Retro Green shares
• Rs 2.94 crore disgorgement and Rs 2.80 crore penalties imposed
• Market bans of 4 to 10 years issued to key noticees

Did our AI summary help?

Market regulator Securities and Exchange Board of India (SEBI) has barred 18 entities, including Sanjay Arunkumar Choksi and his associates, for allegedly manipulating the shares of Retro Green Revolution Ltd (RGRL), a company listed on the Bombay Stock Exchange. In his order, SEBI quasi-judicial authority Santosh Shukla, directed disgorgement of unlawful gains amounting to Rs 2.94 crore along with 12 percent annual interest and imposed monetary penalties totalling Rs 2.80 crore. The regulator has also imposed market bans ranging from four to ten years on the key noticees.

Retro Green Revolution Ltd (RGRL), originally incorporated as Jolly Tea India Company Ltd in 1990, was promoted by Sanjay Arunkumar Choksi and his associates. Although shareholding changed after 2012, SEBI found that the Choksi Group re-entered the scrip in 2018 and built a 42.7 percent stake by FY2019. During this period, key managerial positions were held by individuals connected to Choksi. SEBI observed that despite not being a formal promoter, Choksi continued to control the company through financial and operational influence. This was evidenced by statutory payments to exchanges and other entities being made from his accounts. The regulator held that he breached fiduciary duty by offloading shares using artificial volumes and Telegram tips to influence investors.

SEBI investigated trading in the scrip of RGRL for the period from September 1, 2020 to December 31, 2021. The probe was triggered by suspicious trading activity and the circulation of stock recommendations through Telegram channels. The investigation sought to determine whether there were violations of the SEBI Act and the Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations.

Also read: Over 4,000 NBFCs remain non-compliant with PMLA norms, yet to register on FIU-IND portal

Manipulation in the stock of RGRL

SEBI found that a group led by Sanjay Arunkumar Choksi, along with Viral Kapadia, Samir Sampat, Vishnu Sharma, Amesh Jaiswal and Vijay Pujara, orchestrated a coordinated scheme involving circular trading, funding arrangements and last traded price (LTP) manipulation to inflate RGRL’s price, with LTP contributors accounting for 48.46 percent of the positive price impact. Entities of the Choksi Group offloaded 39.48 percent of the company’s shareholding, representing 20.93 percent of traded volume, during the artificial price rise, enabling exits at elevated levels. The order noted misleading trading patterns, including small first trades to create new highs, and high counterparty concentration, with 84.8 percent of counterparties linked to connected entities. Several accounts were newly opened and traded almost exclusively in RGRL, indicating non-genuine activity.

Funding and Role of Intermediaries

The regulator also examined fund flows among entities. It found that conspirators, along with other connected parties, had funded trading activities either directly or through layered transactions. These funds were used to support trading in RGRL and sustain artificial volumes. Role of authorized persons associated with brokerage firms were found to have aided in the scheme by, using their own or client accounts for trading and funding clients or connected entities for executing trades. SEBI held that these intermediaries played a role in facilitating the manipulative activities.

Telegram Recommendations and Retail Participation

A key element of the scheme was the use of Telegram channels to disseminate stock recommendations. SEBI found that some noticees were funded for posting recommendations on Telegram. These messages promoted RGRL shares and coincided with sharp increases in trading volumes. Between December 6 and December 10, 2021, trading volumes surged by approximately 92 percent following Telegram posts. SEBI concluded that these recommendations helped generate the required liquidity for the Choksi Group to offload shares to retail investors. Regulator identified additional participants in the scheme who were found to be among the top LTP contributors and were held to have aided price manipulation. Certain entities were found to have funded or facilitated trading through layered transactions. However, SEBI assessed liability based on the role and level of involvement of each noticee.

Quasi-Judicial Authority, Santosh Shukla, in his order said, “By impeding in the natural interplay of market forces, they mislead the investors by masking the fair price and demand in the shares of RGRL”.

SEBI noted that the entities involved had family, professional, or financial connections. While some noticees argued that their trades were independent and driven by market conditions, SEBI rejected this contention.

SEBI imposed monetary penalties totalling Rs 2.80 crore on the noticees, including Rs 50 lakh each on Sanjay Arunkumar Choksi and Western Agrotech Innovative Ltd; Rs 25 lakh each on Viral Kapadia, Vishnu Sharma, Amesh Jaiswal, Vijay Pujara and Jalaj Agarwal; and Rs 5 lakh each on Sanjay Arunkumar Choksi HUF, Sagar Choksi, Jenita Jain, Trupti Choksi, Umeshkumar Shah, Vraj Shah, Sneh Chokshi, Maama Mia Retailing Pvt Ltd, Rajesh Pandey, Amit Sharma and Ganesh Bodakhe.