Sebi cracks whip on actor Arshad Warsi, wife for YouTube pump-and-dump scheme

The Securities and Exchange Board of India (Sebi) has cracked down on a YouTube-run share pump-and-dump operation signalling that the regulator is keenly observing the social media space, and is intent on catching players entrapping retail investors by serving misleading information.

Bollywood actor Arshad Warsi and his wife Maria Goretti Warsi have also been penalised in relation to the case, where a nexus of players, are accused of making illegal gains worth Rs 41.85 crore.

According to the market regulator's calculation, Warsi made a profit of Rs 29.43 lakh while his wife bagged Rs 37.56 lakh. Sebi has directed the impounding and retaining of profits made by the actor couple as well as other accused in the case. These gains were made between April 27 to September 30 last year.

Further, the market regulator has barred them from further accessing the markets. The couple, along with others named in the case, have been directed to deposit the impounded amount in a scheduled bank in 15 days with a lien created in favour of Sebi. They have also been directed "not to dispose of or alienate any assets, whether movable or immovable or create any interest or charge on any of such assets held in their name".

The case involves two YouTube channels run by one Manish Mishra, who was allegedly part of a larger nexus manipulating the share prices of Sadhna Broadcast Limited and Sharpline Broadcast. The two channels- “The Advisor” and “Moneywise” are accused of peddling false and misleading news recommending investors to buy stocks of Sadhna Broadcast Limited for extraordinary profits.

Subsequent to the release of the misleading videos on these channels there was an increase in the price and trading volumes of the Sadhna scrip. The volumes appear to have been contributed by a large number of retail investors likely influenced by the misleading YouTube videos.

During this period, certain promoter shareholders, key management personnel of Sadhna and non-promoter shareholders, who held more than 1 percent of shareholding in the company, offloaded a significant part of their holdings at inflated prices and booked profits. Because of such misleading videos, the total number of retail investors in the scrip rose from 857 to 55,343.

“Fraudulent and manipulative practices distort fair price discovery thereby defeating one of the basic purposes of an organised securities market. Further, such activities cause monetary loss to investors, who have been unfairly induced to trade thereby upending confidence in the integrity of the securities market,” Sebi said in its order.

When the misleading videos caught the attention of BSE, it sought clarification from Sadhana Broadcast. The company refuted the claims made in the videos. However, small investors still fell for the outlandish claims made in the video.

The regulator, in its order, has segregated the 31 parties named in the case into three groups. In the first group is Manish Mishra, the misleading message disseminator (MMD), that is, the person running the YouTube channels. The second group includes net sellers/promoters and profit makers, that is, persons who held shares of Sadhna at the start of the examination period either as a promoter or as a shareholder, and who traded in and net sold shares.

The third category includes Volume Creators(“VCs”), or persons, outside of those classified as net sellers, who both bought and sold shares of Sadhna during the examination period, hence contributing to a rise in trading volumes and interest in the scrip. The parties were under the examination of SEBI from April 27 to September 30 last year.

The Warsi couple has been categorised as a volume creator and profit maker in the order.