Sebi cracks down on stock recommendation scam on telegram

In its order, the market regulator imposed a fine ₹2.84 crore on six individuals and barred them from accessing the stock market. These individuals according to the Sebi order were given unsolicited stock recommendations using social media channels —Telegram and Twitter to artificially influence the stock prices, and make illegal profits.

Sebi has asked the individuals to disgorge the amount gained from such illegal gains in its escrow account. The market regulator has restrained the involved 6 individuals from buying, selling or dealing in securities, either directly or indirectly, in any manner whatsoever until further orders. These entities have been found violating Sebi norms for prevention of fraud and research advisor regulations considering that they were passing on stock tips without being registered with Sebi.

The market regulator has been increasingly taking cognisance of the stock tips being circulated by unregistered research analysts either on the social media or through TV channels. These entities allegedly end up passing stock tips to artificially influence the stock price and make a quick buck as the cost of the broader markets.

Sebi in its 37-page order said , these entities were indulging in the classic pump and dump scheme via Telegram.

These individuals who were actively operating through such social media channels were 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 hikes in such scrips through such social media channels, inciting others to take bullish positions in those scrips.

Consequent to the prices rise, they took the opposite position selling their previously bought shares and benefit from the trades performed under such a fraudulent scheme and device, Sebi said in its order.

The market regulator had launched an inquiry following series of complaints.

Sebi during the course of its investigations found that a Telgram channel named – Intraday Calls – “Bull Run Investment Educational Channel” where these so-called stock recommendations were circulated.

“The alleged scheme of enticing and inducing others to deal in certain securities thereby creating adverse and artificial impact on the price and volume of those scrips, has been ingenuously crafted and implemented in a manner that it was an impossible task for the common investors to identify any dubious hidden intent behind such messages and tips that were being circulated amongst them through the Telegram Channel,” said the market regulator in the order.

The channel gained 50,000 followers in a short span.

“The number of subscribers/investors in the Telegram Channel being run by the Notices has been continuously growing and undisputedly, more the number of investors/subscribers to such social

media channel, higher the percentage of profits that would likely to accrue to the persons indulged in such fraudulent and unfair activities,” said SK Mohanty, whole-time member, Sebi.

The individuals claimed that they were stock market research analysts having experience of more than 40 years. They also falsely claimed that they were in the process of getting Sebi’s Research Analyst registration, Sebi said in the order.

Based on the order, it was stated that the individuals are required to provide a complete inventory of all assets held in their names, individually or jointly, whether movable or immovable, as well as any interest, investment, or charge on any of such assets, including details of all bank accounts, demat accounts, and mutual fund investments, within 5 working days of receiving this order.

“Only on production of proof of deposit of entire amount of ₹2.84 crore either jointly or severally in the escrow account/s, Sebi shall communicate to the banks to defreeze the bank accounts of such individuals,” Sebi said.