MC EXCLUSIVE Sebi likely to investigate listed companies involved in Mahadev money laundering case

SEBI has been conducting enforcement actions based on surveillance and market inputs

Several listed companies facing an ongoing money laundering probe by the Enforcement Directorate (ED) in connection with the Mahadev Betting App case may also come under the radar of capital market regulator Sebi, sources have told Moneycontrol.

The regulator is expected to launch an investigation into companies and their promoters accused of routing illicit funds generated from the betting platform into their businesses as investments, it is learnt.

A source from the regulatory domain said, “We will formally seek details from the agency and if regulatory violations are found, companies and people involved will face action.” Another source added, “Sebi has been conducting enforcement actions based on surveillance and market inputs, it’s a regular process, but if any specific modus operandi is pointed out, it will be looked into. In many recent Sebi orders, such modus operandi has been exposed, and action initiated.”

The capital market regulator is likely to focus on potential stock price manipulation, violations of the Foreign Portfolio Investment (FPI) route, and the legitimacy of corporate actions that may have been designed to facilitate manipulative practices.

Email sent to Sebi seeking a comment on the matter did not elicit a response at the time of publishing of this story.

Allegations of Money Laundering, Stock Manipulation

The Enforcement Directorate’s investigation centers around the claim that funds generated from the Mahadev Betting App were routed out of India and later re-invested into Indian shares through FPIs operating from jurisdictions like Dubai and Mauritius. The ED had conducted multiple search operations across cities, including Delhi, Mumbai, Indore, Ahmedabad, Chandigarh, Chennai, and Sambalpur, in connection with the case under anti-money laundering provisions.

According to ED officials, the alleged proceeds of crime were routed through foreign jurisdictions under the guise of FPI investments, and were used to artificially inflate the stock prices of certain listed small and medium-sized enterprises (SMEs). The intent, the ED claims, was to create an illusion of high returns to deceive common investors.

“The seizures made during the searches have also revealed the role of promoters of such listed entities, who have deployed these tainted funds in their company under the guise of preferential issue of shares, sale of promoters/promoter-controlled shares, and issuance of share warrants,” the ED has said.

During the searches, evidence was recovered suggesting that promoters collaborated with accused individuals to manipulate stock prices using illicit funds. The manipulation was reportedly facilitated with the help of agents and stockbrokers, some of whom were also involved in the searches.

ED Freezes Assets in Ongoing Investigation

As part of its investigation, the ED has frozen certain investments and seized cash amounting to Rs 3.29 crore, securities and bonds worth over Rs 573 crore, as well as various incriminating documents and electronic records. Some of the listed companies under investigation have acknowledged that ED officials visited their premises but have denied any links to the Mahadev Betting App case.

The ED’s crackdown on money laundering via the stock market began last year, when in February 2024, following searches in Kolkata and other cities, the ED froze securities worth Rs 580 crore, allegedly tied to proceeds from the Mahadev Betting App case.