SAT reserves Sebi order against Arshad Warsi in pump and dump case

Hearing an appeal filed by Arshad Warsi and others against the market regulator’s interim order on manipulation in the script of Sadhna Broadcast, the Securities Appellate Tribunal (SAT) reserved its order on Friday.

In an ex-parte order issued on March 2, the Securities and Exchange Board of India (Sebi) had barred 31 entities for allegedly manipulating the stock of micro-cap firm Sadhna Broadcast via stock recommendations on YouTube channels.

Sebi had named the company’s promoters, YouTube channel operators and the Warsi couple, among others, for their alleged role in a ‘pump-and-dump’ scheme by spreading fictitious information.

Sebi had named Warsi and his wife Maria Goretti Warsi as volume creators, for allegedly pocketing profits of Rs 29.43 lakh and Rs 37.56 lakh, respectively. The regulator has also mentioned his talent manager, Aahuti Rasik Mistry, as a volume creator though not a profit maker.

The counsels for Warsi, while denying the charges, argued that they did not appear in any of the YouTube videos nor did they promote them. However, they did affirm the connection with YouTube channel operator Manish Mishra.

The counsels also requested for the defreezing of the bank accounts. Sebi had directed that no debits were to be made from the bank accounts without its permission.

Sebi argued that the appellants were a part of the entities who bought shares before the videos were published and thus participated as volume creators.

The market watchdog had directed the players to impound the unlawful gains individually. The investigation in the matter was carried out last year between April 27 and September 30.

During the investigation, Sebi had analysed call data records and transaction details to establish connection.

False information on videos created an opportunity for violators to exit, making unlawful gains to the tune of Rs 42 crore in Sadhna Broadcast.

The modus operandi involved buying the thinly-traded stocks of these two companies before publishing videos on the platform disseminating false information on possible deals, financials, growth prospects, and expansions. These trades created an unnatural rise in prices.