SEBI Foils Massive Pump-and-Dump Scheme; Bars 222 Individuals and Imposes ₹47.7 Crore Penalty

The Securities and Exchange Board of India (SEBI) has uncovered a massive “pump-and-dump” stock market scam, taking stringent enforcement action against 222 individuals and five corporate entities. The market regulator established that the operators systematically manipulated the shares of five listed companies: Mauria Udyog, Vishal Fabrics, 7NR Retail, GBL Industries, and Darjeeling Ropeway.

By artificially inflating trading volumes and share prices, the syndicate successfully lured in unsuspecting retail investors. Following a comprehensive investigation, SEBI has banned the involved participants from accessing the capital markets for periods ranging from four to seven years, slapped them with an aggregate penalty of ₹47.7 crore, and ordered the disgorgement of all illegally generated profits. The exhaustive 394-page final order, which solidifies an interim directive issued in June 2023, identified Hanif Sheikh as the primary mastermind behind the elaborate scheme. Sheikh has been slammed with a maximum seven-year market ban alongside a personal fine of ₹10 crore.

Modus Operandi: Artificial Volume and Deceptive Bulk SMS Campaigns
The regulatory probe revealed that between 2017 and 2020, the stock prices and trading volumes of these five target companies witnessed anomalous spikes that were completely disconnected from their underlying business performance or any actual corporate developments.

The operators manipulated the market through a highly organized, multi-layered strategy:

Synchronized Trading: A network of interconnected front entities executed circular and synchronized trades among themselves to simulate high liquidity and create artificial trading volumes.

Misleading Stock Tips: The syndicate blasted out millions of bulk SMS alerts using deceptive sender headers that closely mimicked the names of premium, established brokerage firms.

Coordinated Dumping: Unsuspecting retail investors were directed to specific websites pushing aggressive “buy” recommendations. Once retail buying momentum successfully pumped the stock prices to artificial highs, the operators aggressively dumped their pre-accumulated holdings, pocketing massive profits while leaving everyday investors stranded with illiquid, crashing shares.

Insiders, Employees, and an NBFC Under the Scanner
The investigation unearthed deep structural collusion between the operators and corporate insiders. In the case of Mauria Udyog, SEBI exposed that the company’s own promoters and closely linked entities were the ultimate beneficiaries of the manipulation. Shockingly, 62 employees of Mauria Udyog actively participated in the fraudulent trading scheme, offloading shares at inflated prices and subsequently routing the illicit cash proceeds back to the promoters.

The regulatory order also highlighted the critical role played by Goenka Business & Finance, an NBFC registered with the Reserve Bank of India (RBI), which acted as a major structural conduit for funding and facilitating the price manipulation grid. Furthermore, in the Darjeeling Ropeway manipulation angle, promoter Himanshu Shah was found guilty of actively utilizing the artificial price pump to offload his personal equity holdings to the public at highly inflated valuations.