Explained! Modus operandi and how Sebi cracked whip in alleged pump-and-dump scheme involving 82 stocks

Unveiling the Dark Side of Stock Market Manipulation

Recently, the Securities and Exchange Board of India (Sebi) has cracked down on a sophisticated stock manipulation network that utilized social media platforms to artificially inflate the prices of 82 stocks. The masterminds behind this scheme employed a classic pump-and-dump strategy, where they would accumulate shares of small and medium-sized enterprises (SMEs) before spreading bullish messages on platforms like Telegram, WhatsApp, and X.

Their ultimate goal was to lure retail investors into buying these overvalued stocks, only to sell them at elevated levels and reap significant profits. The Sebi investigation has led to the barring of seven individuals and the impounding of Rs 20.25 crore in unlawful gains.

How the Scheme Worked

The accused individuals would first identify SME stocks with low market capitalization and trading volumes. They would then accumulate shares of these stocks, often using multiple Demat accounts to avoid detection. Next, they would spread false and misleading information about the stocks on social media, creating a buzz around them and attracting the attention of retail investors.

As more and more investors bought into these stocks, their prices would rise, allowing the accused individuals to sell their shares at inflated prices and pocket the profits. This pump-and-dump scheme was repeatable, and the accused individuals allegedly employed it to manipulate the prices of 82 stocks.

Sebi's Crackdown

Sebi's crackdown on this stock manipulation network is a significant step towards maintaining the integrity of the Indian stock market. The regulator's swift action has sent a strong message to those who engage in such nefarious activities, and it will undoubtedly help to protect the interests of retail investors.