New Delhi: To safeguard retail investors and bring greater transparency to India’s stock markets, the Securities and Exchange Board of India (SEBI) has conducted its biggest-ever raid, busting a ₹300 crore pump and dump racket involving 15 to 20 fake companies. The operation, carried out simultaneously on June 18 in Ahmedabad, Mumbai, and Gurugram, marks a turning point in SEBI’s approach to dealing with fraudulent stock manipulation practices.
The fake companies, reportedly floated by promoters of at least two listed agro-tech firms, were being used as vehicles to artificially inflate share prices and offload them to unsuspecting retail investors. Multiple documents, including company papers, rubber stamps, and internal communications, have been seized by SEBI teams as part of the raid.
₹300 Crore Scam: A Classic Pump and Dump Playbook
According to sources, the scam revolves around classic pump and dump tactics. One of the targeted company’s share price skyrocketed from ₹1 to ₹40 in under a year, only to crash back to ₹2–₹3, despite no improvement in its financials or business performance — a clear indicator of price manipulation.
Under such schemes, manipulators purchase large volumes of penny stocks to push the price up, creating the illusion of demand. Retail investors, attracted by the rising price and momentum, begin to buy. Once the price reaches a peak, insiders and fake trading entities sell off their holdings, causing the price to collapse — often leaving retail investors with significant losses.
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SEBI is now analyzing seized trading records and bank statements to trace the money trail and establish links between the listed companies and their associated fake entities.
Promoters Created Fake Traders to Rig the Market
Investigations have revealed that the promoters of these listed companies allegedly created fake proprietary trading firms registered under different names. These fake entities were used to buy and sell shares of their own companies, creating false market volume and misleading price trends.
Such orchestrated schemes allowed promoters to book profits while passing on inflated shares to unsuspecting retail investors, many of whom invested their life savings believing in the upward momentum.
This is not the first time SEBI has acted against such malpractices, but the use of search and seizure powers in this case signals a more aggressive stance by the regulator. Previously, actions were largely limited to issuing advisories, directions, or monetary penalties — rarely escalating to physical raids.
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A Warning Signal to Market Manipulators
The latest crackdown is expected to send a strong signal to listed entities and market manipulators. While SEBI has not yet disclosed the names of the agro-tech companies involved, regulatory sources indicate that show-cause notices and prosecution proceedings could follow after forensic examination of the evidence.
Investor protection experts have lauded SEBI’s action, calling it long overdue. “The use of fake companies to rig share prices not only erodes investor confidence but threatens the integrity of our markets,” said a senior financial analyst.
Going forward, SEBI is likely to focus more intensely on mid-cap and small-cap stocks, which are often vulnerable to price rigging due to low liquidity and lack of oversight.