The Enforcement Directorate (ED) has frozen trading accounts worth approximately ₹200 crore after conducting searches at 29 premises across six cities in connection with suspected stock market manipulation involving R M Drip and Sprinklers Systems Ltd and R&B Denims Ltd.
The searches, conducted on October 16, followed an earlier investigation by the Securities and Exchange Board of India (SEBI) into alleged pump-and-dump activities involving the two companies.
Where Did the ED Conduct Searches?
The ED’s Mumbai Zonal Office carried out searches under the Prevention of Money Laundering Act (PMLA) at locations in Mumbai, Nashik, Ahmedabad, Gandhinagar, Surat and Bhavnagar.
The premises included company offices, promoters’ residences, individuals suspected of operating promotional WhatsApp groups and entities allegedly involved in financing or acquiring shares at low prices.
How Did the Alleged Stock Manipulation Work?
According to the ED, the two companies allotted more than 3.5 crore shares and convertible warrants to selected individuals and entities between April 2023 and March 2024.
A substantial portion of the funding for these allotments allegedly originated from a small network of connected individuals, firms and lenders.
Investigators suspect that share prices were subsequently pushed higher while significant holdings remained concentrated among the same group of investors.
The agency is examining whether the allotments and subsequent trading activity formed part of a coordinated effort to influence market prices before shares were sold to retail investors.
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How Were WhatsApp Groups Used to Attract Investors?
Between late December 2025 and February 2026, WhatsApp groups, including one named ‘Multibagger Stocks’, allegedly circulated daily recommendations encouraging retail investors to purchase the shares.
The ED said the groups operated using SIM cards registered to individuals in Haryana and Mumbai, while their alleged operations were based in Bhavnagar.
As retail participation increased, individuals who had received earlier share allotments allegedly sold portions of their holdings to a wider group of investors.
Investigators are examining whether these recommendations helped generate demand and supported the suspected manipulation of share prices.
Which Companies and Entities Are Under Investigation?
Apart from R M Drip and Sprinklers Systems Ltd and R&B Denims Ltd, the ED identified several connected entities and family-linked groups.
These included Affluence Gems, Kawa HUF and Komalay Consultancy, which allegedly acquired shares at low prices through preferential warrants.
The agency suspects that these transactions were connected to the broader stock manipulation arrangement. However, the allegations remain under investigation, and no final determination of wrongdoing has been established in the available information.
What Did SEBI Find During Its Earlier Investigation?
SEBI had previously conducted searches at the premises of promoter-directors of both companies as part of its investigation into suspected pump-and-dump activities.
The regulator’s inquiry focused on allegations that stock prices were artificially inflated through coordinated trading and corporate announcements designed to attract retail investors.
Investigators suspected that operators subsequently sold their holdings after prices increased.
The searches lasted three days and resulted in the seizure of documents and digital evidence. SEBI’s investigation remains ongoing.
How Many Investors Were Drawn Into the Stocks?
The number of investors in the two companies reportedly increased from approximately 3,400 to more than one lakh within a relatively short period.
The sharp rise in participation has become an important aspect of the investigation, particularly in relation to allegations that coordinated promotional activity encouraged retail investors to purchase the shares.
Authorities are examining whether early investors benefited from selling shares after demand increased. The available information does not establish the total losses suffered by retail investors or identify how many investors may have been financially affected.
The420 Insight
The investigation highlights the risks associated with stock recommendations circulated through WhatsApp groups and other informal channels. The alleged combination of preferential share allotments, concentrated ownership and promotional messages raises questions about whether retail demand was deliberately influenced. Investors should independently examine company disclosures and avoid relying solely on unsolicited stock recommendations, particularly when shares are promoted with expectations of unusually high returns.
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