Interim Order in the matter of Stock Recommendations using Social Media channel Telegram

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 1 of 37

WTM/SKM/54/201-22

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA

CORAM: S. K. MOHANTY, WHOLE TIME MEMBER

Interim Order cum Show Cause Notice

Under Sections 11(1), 11(4), 11 (4A),11B (1) and 11B (2) of the Securities and

Exchange Board of India Act, 1992 and

Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair

Trade Practices Relating to Securities Market) Regulations, 2003 and

Securities and Exchange Board of India (Procedure for Holding Inquiry and

Imposing Penalties) Rules, 1995

In respect of:

Sr. No. Name of the Noticee PAN

1 Himanshu Mahendrabhai Patel BEHPP8092K

2 Raj Mahendrabhai Patel DDNPP8715E

3 Jaydev Zala ABTPZ5894K

4 Mahendrabhai Bechardas Patel ABNPP4581B

5 Kokilaben Mahendrabhai Patel DAUPP2977L

6 Avaniben Kirankumar Patel CQIPP0707R

(The aforesaid individuals are hereinafter individually referred to by their respective names/Noticee

no. and collectively as “Noticees”, unless the context specifies otherwise)

In the matter of Stock Recommendations using Social Media Channel (Telegram)

Background

1. The genesis of the present proceedings can be traced to two undated complaints

that were received by Securities and Exchange Board of India (hereinafter referred

to as “SEBI”) on July 30, 2021 and October 11, 2021. The said complaints alleged

that certain persons who are not having any registration with SEBI to function in

the Securities markets as an Intermediary, are using social media platforms like

Telegram and Twitter to artificially influence the stock prices, so as to make illegal

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 2 of 37

profits. The modus operandi as described in the said complaints indicated that

certain entities actively operating through such social media channels are 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 hike in such scrips through such social media channels thereby

instigating others to take bullish position in those scrips; and ultimately after the

prices go up, they take contrary positions (selling their previously acquired

shares) thereby making profits out of such trades executed under such fraudulent

scheme and device.

2. Upon examination of the contents of complaints so received, SEBI initiated an

investigation into the said allegations for the period of January 01, 2021 to

November 12, 2021 (hereinafter referred to as "the investigation period”). In

order to unearth the facts relevant to said allegations, SEBI examined the

Telegram channel “bullrun2017”/” Bull Run Investment Educational Channel”

(hereinafter referred to as the "Telegram Channel/the said Telegram Channel”),

which was inter alia, named in the aforesaid complaints to be the channel through

which the Noticees are operating their illicit activities as alleged in the said

complaints. A brief description of the said channel as noted from the material

available on record is as follows:

I. In the said Telegram Channel, it is noticed that there were 35,016 subscribers

as on July 16, 2021 and the number of subscribers was gradually increasing.

The said number of subscribers reached upto 45,867 as on October 07, 2021

and as on December 14, 2021, the number had swelled upto 51,980 subscribers

and as on date also it shows more than 49,000 subscribers:

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II. The description on the Telegram Channel reads as: “We are team of 4

Research Analysts with combined experience of 40 years. All calls are for study

purpose only. Taking any trade consultant your financial advisor. We are in the

process of getting SEBI Research Analyst Registration.” (sic.) (underline

supplied)

III. The aforesaid Telegram Channel provides recommendation to its

subscribers for trading in both Cash as well as Derivatives segments, for

both intra-day as well as positional trades. The recommendations issued

with respect to the cash segment are majorly focused on small cap scrips.

IV. The Telegram Channel further provides only one-way communication,

enabling the Administrators of the channel alone to send messages,

whereas the subscribers of such channel were only able to read such

messages.

3. In order to ascertain the identity of the administrators of the Telegram Channel,

the messages being sent through it for the consumption of the subscribers were

analyzed. Initial analysis further led the investigation into the activities of a

Whatsapp Group viz., “Stock Gujrati 3”. It was noticed that the said Whatsapp

group had three Administrators bearing the Mobile numbers 9XX86XXX58,

7XX49XXX02 and 9XX23XXX50 (Mobile numbers have been masked to maintain

privacy).

4. Based on the aforesaid Whatsapp Details as well as True Caller search made

during the investigation, the above noted three mobile numbers were identified

to be in the names of Mr. Himanshu, Mr. Raj and Mr. Jaydev, respectively.

Further, based on the information provided by the respective telecom service

providers to SEBI as well from the information gathered from the KYC details

associated with such mobile numbers, it is revealed that the said mobile numbers

are registered in the name of the Noticee nos. 1, 2 and 3, respectively.

5. Based on above, SEBI was able to gather prima facie information about the fact

that the Noticee nos. 1, 2 and 3 are the three Administrators of the aforesaid

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Whatsapp Group viz., “Stock Gujrati 3” who are also actively running the above

narrated Telegram Channel as Administrators and sending stock related

messages by using the afore-noted three mobile phone numbers. Further, in

order to gather more information/evidence especially, to obtain a first-hand

confirmation of the identities of the Administrators of the said Telegram

Channel, a search and seizure operation under Section 11 C (8) of the SEBI Act,

1992 was carried out by SEBI on December 01, 2021. The said search and seizure

activity was simultaneously carried out at two different locations; one at the

address of Noticee nos. 1 and 2 (Mahesana, Gujarat) and the other at the address

of Noticee no. 3 (Ahmedabad, Gujarat).

6. With a view to recovering detailed data/information from the mobile phones

pertaining to the above discussed activities of the three Noticees allegedly being

carried out through the medium of the Telegram Channel so as to indulge in acts

analogous to unfair practices, manipulate stock prices and derive illicit gains

therefrom, the following mobile phones and data storage devices found in the

possession of the Noticees and their relatives were seized from the aforesaid

locations:

Table no.1

Sr. No. Name of the entity

operating such mobile

Details of device seized

1. Himanshu Patel (Noticee

no.1)

One mobile (dual sim)

2. Mr. Raj Patel (Noticee

no.2)

(i) One mobile (single sim);

(ii) One mobile (dual sim)

3. Jaydev Zala (Noticee

no.3)

(i) One mobile phone (dual sim);

(ii) One mobile phone (dual sim); and

(iii) One pen-drive

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4. Sonalba Zala One mobile phone (dual sim)

5. Dhaaval Zala One mobile phone (dual sim)

6. Balvantsinh Zala One mobile phone (dual sim)

7. After the seizure of the aforesaid electronic devices during the post-search

proceedings, the said Telegram Channel was accessed from the mobile phone of

Noticee no. 1 in the presence of Noticee no.1 and 2, which revealed the Owner of

said Channel as HMP, means Noticee no.1.

8. Thereafter, the statements of Noticee no.1 were recorded under oath on December

02, 2021 while Noticee nos. 2 and 3 deposed under oath on December 03, 2021. The

relevant disclosures so made by the aforesaid three entities during their

depositions revealed various facts about their conduct & activities in the securities

markets by using the Telegram Channel which are being highlighted in the

subsequent paragraphs.

9. Depositions by Himanshu Patel (Noticee no.1)

i. That he (Noticee no. 1) is using two mobile nos. viz., 9XX86XXX58 and

9XX65XXX58.

ii. That the Telegram Channel “bullrun2017” is in operation since the year

2017. Apart from Noticee no. 1, Mr. Raj Patel (Noticee no. 2), Mr. Jaydev Zala

(Noticee no. 3) and Mr. Mahendrabhai Patel (Noticee no. 4) are also the

Administrators of the said Telegram Channel. The said Telegram Channel

has been promoted (advertised) through Facebook, Whatsapp, Instagram

etc., and also through family and friends (apparently to attract more

subscribers to their channels).

iii. That although they have claimed through the Telegram Channel that there

are 4 Research Analysts in their team, all research is actually done by him

(Noticee no.1).

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iv. That he (Noticee no.1) has an educational qualification with Masters in

Tourism Management, but does not possess any educational qualification

for pursuing a profession of a Research Analyst.

v. That the decisions with respect to the selection of shares for making

recommendations to their subscribers in the Telegram Channel are

majorly taken by him and such recommendations are made on the basis of

research of fundamental, technical, sectoral aspects etc. of the scrips.

vi. That on most of the times, he (Noticee no. 1) used to buy shares in his

trading account as well as in the trading accounts of his family members

(i.e., Noticee nos. 2, 4, 5 and 6) before issuing any recommendatory

messages on the said Telegram Channel related to those shares and after

making such recommendations in the Channel, he used to sell the shares

(previously purchased in his account and the family) either on the same

day or in following days in small tranches. The information about the

impending recommendations to be made on any specific scrips in the

Telegram Channel was also communicated to Noticee no. 3.

10. Apart from certain identical statements, as made by Noticee no. 1, Noticee nos. 2

and 3 have made the following additional statements:

Deposition by Raj Patel (Noticee no. 2)

i. That Mr. Himanshu Patel (Noticee no.1) is his brother and he (Noticee no.2)

also does not have any educational qualification for working as a Research

Analyst.

ii. That apart from him, Noticee nos. 1, 3 and 4 are also the Administrators of

the said Telegram Channel, wherein the Noticee no. 1 is the Main

Administrator (Owner) of the said Telegram Channel.

iii. That he (Noticee no. 2) is using two mobile numbers to act as the

Administrator of the said Telegram Channel since December, 2020.

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iv. That he was promoting the said Telegram Channel amongst his friends,

family members etc., and that Noticee no. 3 (Mr. Jaydev Zala) was

introduced by him to his brother, i.e., Noticee no. 1 (Mr. Himanshu).

v. That the trading in his accounts was being done by Noticee no. 1.

However, against the aforesaid deposition made by Noticee no. 2, when a

Whatsapp chat exchanged on November 30, 2021 with Noticee nos. 1 was

shown to him during recording of his statement, he has acknowledged that

sometimes he used to take decisions with respect to the quantity of shares

to be purchased in his (Noticee no. 2’s) trading account.

vi. That the recommendations in the said Telegram Channel about stocks

were being made by Noticee no.1 (Mr. Himanshu).

vii. That he used to communicate the information about the impending

recommendations to be made to the subscribers about any particular scrip,

to Noticee no. 3 before any such recommendation was made on the said

Telegram Channel.

Deposition by Jaydev Zala (Noticee no. 3)

i. That he and Noticee no. 2 are friends and they have studied together and it

was Noticee no. 2 who had introduced him to Noticee no. 1.

ii. That he is also one of the Administrators of the said Telegram Channel,

however, he is not aware exactly since when the said Channel has been in

operation.

iii. That he was promoting the said Telegram Channel with the help of Social

Media Platforms and also amongst his family and friends.

iv. That Noticee no. 1 used to recommend the shares to the subscribers of the

Telegram Channel.

v. That the information about the proposed stock recommendations before

being made in the Telegram Channel, were received by him from Noticee

nos. 1 and 2, through Whatsapp communication.

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 8 of 37

vi. That he also used to buy the shares of the particular scrip before any

recommendations about the said scrip were posted on the Telegram

Channel, and after such recommendations were issued, he used to sell the

shares on same day or in small tranches spread over next few days.

11. From the aforesaid factual details as disclosed and admitted by the Noticees in

their depositions about their own activities being conducted through the

Telegram channel and WhatsApp group, as well as from the Forensic Audit of the

Electronic Devices that were seized during search & seizure operation at the

premises of the Noticees, it is now observed with clarity that the Telegram Channel

named as “bullrun2017” was primarily being operated and managed by Noticee

nos. 1, 2 and 3 whereas trades in different scrips have been executed through the

accounts of all the six Noticees before and after making recommendations on those

scrips to thousands of subscribers of the said channel. As pointed out earlier, in

the said Telegram Channel, subscribers have been added rapidly in recent months

and the aforesaid Administrators, more particularly, Noticee no. 1 has been issuing

trade tips and recommendations in different scrips on a routine basis to all the

subscribers.

12. Apart from unearthing of the aforesaid facts, the information with respect to the

trades executed by the Noticees were also examined carefully and the said

examination further corroborated the modus operandi alleged to have been

adopted by the Noticees whereby the trading accounts of the Noticees were used to

first buy the shares of the concerned companies, followed by making positive

recommendations on those scrips through the Telegram Channel so as to induce

thousands of subscribers to deal in those shares and eventually, after making such

recommendations to the subscribers, Noticees used to sell the shares in the market

so accumulated by them in the first leg of transaction for a profit.

13. The aforesaid modus operandi is further explained in the following illustration

wherein the Noticees are seen to be engaging in such a practice, device or artifice

to allure others to trade in the scrip of M/s. Total Transport Sys Limited”

(hereinafter referred to as "Total Transport”) by making recommendations

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 9 of 37

through the Telegram Channel to invest in that scrip and thereby have made a

collective profit of INR 9 Lakh. It is seen that with respect to the said scrip,

recommendations were made on multiple days on/around April 26, 2021, May

17, 2021, June 07, 2021 and July 19, 2021, a sample of which is being reproduced

hereunder:

14. It can be seen from the aforesaid screenshot as retrieved from one of the seized

mobile phones of the Noticees that a strong recommendation under the name of

“Jackpot Delivery” has been made on July 19 2021, recommending the subscribers

to purchase 5000-7000 shares of Total Transport at a price range of INR 65-70 with

targets of INR 100, 150, 200 and a stop loss of INR 50. The message further asserts

that the buying interest in the said scrip is going to be so strong that the price

would stop only at 20% hike, which was the upper cap as per the said message.

15. It is noted from the records that the price and volume of the above-mentioned

scrip faced significant impact as soon as recommendations were made about the

said scrip of Total Transport in the said Telegram Channel. The details of such

impact on the said scrip, as captured in numbers are indicated in the following

table:

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 10 of 37

Table no. 2

Recomme

ndation

Date

Recommenda

tion Levels

Price Impact Post Recommendation Volume Impact Post

Recommendation

Entr

y

Price

(₹)

Targe

t

Price

(₹)

Daily

High/

Low

Variation

% in

precedin

g 10 days

Daily High/

Low Variation

% on date of

Recommendat

ion

Daily High/

Low Variation

% in

immediately

succeeding 10

days

Daily

Avg

Trading

Vol in

Preceedi

ng 10

days

Trading

Vol on the

day of the

Recommen

dation

Daily Avg

Trading

Vol on

succeeding

10 days

26-Apr-21 45.00 60 7.64 9.16 7.67 26297 196600 49472

17-May-21 45.50 49 7.20 11.92 4.77 54071 142487 19460

07-Jun-21 46.00 50 4.44 20.05 11.55 20091 565758 85347

20-Jul-21 66.0 75 -77 7.78 10.59 7.94 188817 1497586 98049

16. The aforesaid details of price & volume impact on the scrip of Total Transport

show that whenever recommendations were made in the said Telegram Channel,

the scrip of Total Transport witnessed an increase in price fluctuations, on a high

to low basis, as compared to the average fluctuation in its price witnessed during

the preceding as well as the succeeding 10 days. Similarly, the volume of the scrip

also witnessed an increase around the recommendation day, as compared to the

days succeeding and preceding the date on which recommendations about the

scrip were made in the said Channel.

17. Thus, the aforesaid modus operandi followed by the Noticees as unearthed during

the investigation and got corroborated by the depositions made in the statements

of Noticee nos. 1, 2 and 3 as recorded during the investigation, was seen to be used

and successfully deployed in the scrip of Total Transport, through which the

Noticees are seen to have accumulated the shares of Total Transport in large

quantities before making their recommendations on the said scrip and thereafter

eventually squaring off their position by earning a substantial profit in a quick

span. The date wise details of the said trades executed by the Noticees vis-à-vis the

timings of recommendations are being captured in the following table:

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 11 of 37

Table no. 3

D

at

e

PAN Name Trade Details Recommendatio

n

Trad

e

Buy

Qty

Trade

Buy

Limit

Price

(₹)

Trade

Buy

Start

Time

Trade

Buy End

Time

Trad

e

Sell

Qty

Trade

Sell

Limit

Price

(₹)

Trade

Sell Start

Time

Trade

Sell End

Time

Rec

om

me

nda

tion

(Yes

/

No)

Recomm

endation

Time

26-

Apr

-21

DDNPP87

15E Raj

5103

42.80 -

44.00

10:23:

26 10:27:09 5103

44.55 -

44.85 10:32:45 10:42:13 Yes

10:35:47

10:37:06

10:38:58

10:39:54

CQIPP070

7R

Avanibe

n 3000 44.00

10:28:

40 10:28:40 3000

44.20 -

44.60 10:42:23 10:51:02

17-

May

-21

DDNPP87

15E Raj

1000

43.40 -

44.20

10:55:

48 10:55:48 1000 46.00 11:04:43 11:04:43

Yes

10:58:51

ABTPZ589

4K

JaydevZ

ala 2500

45.50 -

47.00

10:58:

27 11:00:30 2500

45.80 -

46.05 11:05:01 11:06:19

CQIPP070

7R

Avanibe

n 8000

42.90 -

46.00

10:55:

40 10:58:40 8000

46.20 -

470 10:59:57 11:04:22

07-

Jun-

21

DDNPP87

15E Raj

2296 45.00

09:53:

53 09:53:53 2296

46.00 -

46.05 09:56:27 09:56:27

Yes

09:57:45

BEHPP809

2K

Himans

hu 5200

42.45 -

43.80

09:51:

32 09:52:20 5200

45.50 -

46.20 09:55:33 09:59:13

ABTPZ589

4K Jaydev

6300

45.90 -

46.20

09:56:

15 10:16:50 6300

44.45 -

46.20 09:58:13 10:17:27

CQIPP070

7R

Avanibe

n 2104

43.80 -

44.00

09:52:

43 09:52:43 2104

46.00 -

46.05 09:57:44 09:57:57

19-

Jul-

21

DDNPP87

15E Raj

4602

9

58.70 -

65.40

10:19:

40 15:44:28

3100

0

62.70 -

64.50 14:27:49 14:55:32

Yes

21:05:00

BEHPP809

2K

Himans

hu

5487

1

57.00 -

65.85

11:14:

49 15:25:38

2710

9

59.05 -

64.45 12:29:38 14:36:14

ABTPZ589

4K

JaydevZ

ala

3536

0

58.35 -

65.35

13:41:

04 15:29:50

2816

5

56.50 -

65.85 09:18:15 15:26:19

DAUPP29

77L

Kokilabe

n

2870

0

57.00 -

65.00

10:51:

49 15:28:56

1700

0

63.00 -

65.80 14:32:13 15:05:10

CQIPP070

7R

Avanibe

n 3500

63.40 -

64.95

14:35:

19 15:19:53 - - - -

20-

Jul-

21

DDNPP87

15E Raj

5750

0

68.30 -

72.95

09:18:

46 09:51:33

7252

9

69.00 -

73.50 09:06:44 09:52:53

Yes

08:07:56

BEHPP809

2K

Himans

hu 1 67.90

11:06:

53 11:06:53

4125

0

67.60 -

69.30 09:16:41 11:07:02

ABTPZ589

4K

JaydevZ

ala - - - -

2760

0

68.05 -

70.50 09:15:29 09:19:39

DAUPP29

77L

Kokilabe

n 3000 69.70

09:24:

44 09:24:44

1470

0

69.00 -

72.25 09:15:40 09:38:16

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 12 of 37

D

at

e

PAN Name Trade Details Recommendatio

n

Trad

e

Buy

Qty

Trade

Buy

Limit

Price

(₹)

Trade

Buy

Start

Time

Trade

Buy End

Time

Trad

e

Sell

Qty

Trade

Sell

Limit

Price

(₹)

Trade

Sell Start

Time

Trade

Sell End

Time

Rec

om

me

nda

tion

(Yes

/

No)

Recomm

endation

Time

CQIPP070

7R

Avanibe

n

1500

0

69.25 -

72.80

09:24:

08 09:53:17

1850

0

69.00 -

73.10 09:20:56 10:47:38

18. The details of the volumes of shares so traded by the Noticees in their respective

trading accounts and the profits made by them from such trades are also

highlighted in the following table:

Table no. 4

Date Gross Buy Vol

Gross Buy Value (₹)

Gross Sell Vol

Gross Sell

Value (₹)

Net Trade

Vol

Profit (₹) % of Clie nt

Gros s

Trad ed

Qty to

Mar ket

Volu me

% of Traded Value by the client to the

Gross Traded Value of the Client across

scrips

26/04/202 1 5103 221866.20 5103 228517 0 6,651 2.60 10.79

17/05/202 1 1000 43881.05 1000 46000 0 2,119 0.70 1.28

07/06/202 1 2296 103320.00 2296 105620 0 2,300 0.41 3.28

19/07/202 1 46029 2857858.65 31000 1967773 15029 - 4.09 80.53

20/07/202 1 57500 4077925.15 72529 5166917 -15029 155,868 4.34 74.14

07/06/202 1 5200 224466.50 5200 239820 0 15,354 0.92 16.18

16/07/202 1 82000 4434837.70 68513 3970328 13487 - 9.55 72.28

19/07/202 1 54871 3316259.40 27109 1706036 27762 - 4.35 52.24

20/07/202 1 1 68 41250 2847783 -41249 406,441 1.38 28.16

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 13 of 37

Date Gross Buy Vol

Gross Buy Value (₹)

Gross Sell Vol

Gross Sell

Value (₹)

Net Trade

Vol

Profit (₹) % of Clie nt

Gros s

Trad ed

Qty to

Mar ket

Volu me

% of Traded Value by the client to the

Gross Traded Value of the Client across

scrips

17/05/202 1 2500 115646 2500 114714 0 -932 1.75 12.14

07/06/202 1 6300 289594 6300 285803 0 -3,791 1.11 14.52

16/07/202 1 20405 1162845 0 0.00 20405 - 1.29 23.17

19/07/202 1 35360 2195482 28165 1676259 7195 - 3.37 92.77

20/07/202 1 0 0.00 27600 1905592 -27600 249,464 0.92 66.25

19/07/202 1 28700 1801645 17000 1098911 11700 - 2.42 57.11

20/07/202 1 3000 209100 14700 1034444 -11700 90,875 0.59 100.00

26/04/202 1 3000 132000 3000 133464 0 1,464 1.53 100.00

17/05/202 1 8000 352382 8000 370845 0 18,463 5.61 14.64

07/06/202 1 2104 92430 2104 96838 0 4,368 0.37 2.97

19/07/202 1 3500 224374 0 0.00 3500 - 0.19 37.35

20/07/202 1 15000 1068493 18500 1302180 -3500 9,314 1.12 73.69

Total Profit INR 957,958

19. From a conjoint reading of information provided in Table no. 3 and Table no. 4

above, it is understood that the Administrator(s) of the said Telegram Channel

were repeatedly issuing recommendations in their Channel for buying shares of

Total Transport. Such recommendations were made on April 26, 2021, May 17,

2021, June 07, 2021, July 19, 2021 and July 20, 2021, as can be seen from the Table

no. 3. Table no. 4 depicts the trades executed by the Administrators/Noticees

themselves in the said scrip prima facie with a view to earn profits. As a matter of

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 14 of 37

illustration, the screen shot of the recommendations made on July 19, 2021 has

been presented under Para no. 13 above. From the screenshot, one can notice that

a recommendatory message about the scrip of Total Transport was issued on July

19, 2021, at 09:05 pm. The trading activities of the Administrators/Noticees in this

scrip, both before and after the recommendation was made on July 19, 2021 are

found to be as follows:

Noticee no. 1

I. As can be seen from the Table no. 4 above, Noticee no. 1 on July 19, 2021 (i.e.

before issuing the said recommendation), has purchased 54,871 shares and

sold 27,109 shares, with net buying of 27,762 shares. The traded value of

the said trades of Noticee no. 1 in the scrip of Total Transport constituted

52% of his total gross traded value during that particular day. By following

the pre-mediated scheme as has been explained in the beginning of this

order, Noticee no. 1 is seen to have been successful in churning out a quick

profit of INR 4.06 Lakh (approx.), as he sold 41,249 shares of Total

Transport on the next day.

Noticee no. 2

II. Similarly, Noticee no. 2 is also seen to have purchased 15029 shares of Total

Transport on July 19, 2021 (before the recommendations were made to the

subscribers), and sold all the 15029 shares on July 20, 2021 and thereby

earned a profit of INR 1.55 Lakh (approx.).

Noticee no. 5

III. Noticee no. 4 (Mother of Noticee nos. 1 and 2) has purchased a total of 11,700

shares of Total Transport on July 19, 2021 and on the very next day, she has

sold all 11,700 shares and earned a profit of INR 90,875.

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 15 of 37

Noticee no. 6

IV. Noticee no. 6 (Sister of Noticee nos. 1 and 2) has also sold all 3,500 shares on

July 20, 2021 which she had purchased one day before, i.e., on July 19, 2021

and thus earned INR 3,500.

As regards the details of trades executed by the Noticee no. 3 in Total Transport, the

same are being discussed in later part of this order at para no. 28

20. The aforesaid illustration clearly shows how the Administrators of the said

Telegram Channel and their relatives have used the recommendation made in the

Channel to their own advantage by accumulating shares of Total Transport, just

prior to the issue of the recommendation and have disposed of the shares soon

after making the recommendation, by taking advantage of the rising market price

and in the process, they have made unlawful profits.

21. Moving on to another illustration of identical modus operandi followed by the

Noticees, where also the Noticees have prima facie taken a position in the scrip before

making their recommendation in the said Telegram Channel. In this respect, the

modus that was followed in the scrip of Metro Global on July 20, 2021 and July 28,

2021 can be appreciated from the tips/recommendations issued by the

Administrators as depicted in the following images:

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 16 of 37

22. The impact caused by the aforesaid recommendation issued by the

Administrators/Noticees through the Telegram Channel on the price variation

and the volume of the said scrip is depicted in the following table:

Table no. 5

Recomme

ndation

Date

Recommendati

on Levels

Price Impact Post Recommendation Volume Impact Post Recommendation

Entry

Price

(₹)

Targe

t Price

(₹)

Daily

High/

Low

Variation

% in

preceedin

g 10 days

Daily

High/

Low

Variation

% on date

of

Recomme

ndation

Daily High/

Low

Variation %

in

immediatel

y

succeeding

10 days

Daily

Avg

Trading

Vol in

Preceedin

g 10 days

Trading

Vol on the

day of the

Recommen

dation

Daily Avg

Trading

Vol on

succeeding

10 days

20-Jul-21 85 95 7.20 25.21 11.54 622637 11407569 8331813

26-Jul-21 90 97 9.10 19.57 10.36 2263719 3903182 7547794

27-Jul-21 112 150 10.53 24.32 8.26 2647444 23366196 5279695

28-Jul-21 113 124 11.53 8.34 7.77 4956114 37517704 1557826

23. Further, the details of the timings followed by the Noticees to execute their trades

in the scrip of Metro Global would further show that the buying transaction was

always done by them before making bullish recommendation for the said scrip in

the said Telegram Channel, as can be observed from the table below:

Table no. 6

Dat

e

PAN Name Trade Details Recommendation

Trade

Buy

Qty

Trade

Buy

Limit

Price

(₹)

Trade

Buy

Start

Time

Trade

Buy

End

Time

Trad

e Sell

Qty

Trade

Sell

Limit

Price

(₹)

Trade

Sell

Start

Time

Trade

Sell

End

Time

Reco

mmen

dation

(Yes/

No)

Recom

mendati

on Time

20/07

/2021

CQIPP0

707R

Avanibe

n 199

82.20-

86.50 15:21:14 15:21:14 199

86.50-

87.95 15:23:03

15:23:0

3 Yes

15:22:00

DDNPP

8715E Raj

5,000 83 15:20:50 15:20:50 5000

85.45-

85.95 15:22:21

15:22:2

1 Yes

26/07

/2021

DDNPP

8715E Raj

1,000

85.40-

860 10:09:52 10:09:52 1000

90.00-

90.70 10:10:49

10:10:4

9 Yes

10:11:12

27/07

/2021

ABTPZ5

894K Jaydev

8,100

84.00-

111.95 14:18:05 14:39:49 - - - - Yes

20:56:53

ABTPZ5

894K Jaydev

4,000

84.00-

111.95 14:18:05 14:39:49 - - - - Yes

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 17 of 37

Dat

e

PAN Name Trade Details Recommendation

Trade

Buy

Qty

Trade

Buy

Limit

Price

(₹)

Trade

Buy

Start

Time

Trade

Buy

End

Time

Trad

e Sell

Qty

Trade

Sell

Limit

Price

(₹)

Trade

Sell

Start

Time

Trade

Sell

End

Time

Reco

mmen

dation

(Yes/

No)

Recom

mendati

on Time

BEHPP8

092K

Himans

hu 56,933

95.00-

111.95 12:57:52 14:17:27 56933

109.80-

111.85 14:14:58

14:24:3

0 Yes

DDNPP

8715E Raj

3,225

111.10-

111.95 14:20:57

14:24:2

8 - - - - Yes

28/07

/2021

ABTPZ5

894K Jaydev

- - - - 8100

110.00-

122.80 9:06:55 9:15:38 Yes

08:15:51

ABTPZ5

894K Jaydev

- - - - 4000

110.00-

122.80 9:06:55 9:15:38 Yes

BEHPP8

092K

Himans

hu 7,200

114.15-

120.50 9:22:05 9:24:35 7200

120.30-

122.45 9:22:56 9:29:00 Yes

CQIPP0

707R

Avanibe

n 5,000

119.50-

121.00 9:21:21 9:21:27 5000

119.80-

120.50 9:24:08 9:25:04 Yes

DDNPP

8715E Raj

11,871

118.95-

122.70 9:19:35 9:29:11 15096

111.95-

122.45 9:15:00 9:48:35 Yes

24. It is noted from the aforesaid trade data that the trading pattern of the

Administrators/Noticees follow the same fraudulent and deceitful mode in the

scrip of Metro Global (as they followed in the scrip of Total Transport), and in the

similar manner, the Noticees were successful in making a cumulative profit of INR

8.21 Lakh (approx.) in the scrip of Metro Global too, break up of which is

presented herein below:

Table no. 7

Nam

e

Date Gross

Buy

Vol

Gross

Buy

Value (₹)

Gross

Sell

Vol

Gross

Sell

Value (₹)

Net

Trad

e Vol

Profit (₹) % of

Client

Gross

Trade

d Qty

to

Marke

t

% of Traded

Value by the

client to the

Gross Traded

Value of the

Client across

scrips

Jayde

v

27/07/2021 8100 906606 0 0.00 8100 - 1.83 29.17

28/07/2021 0 0.00 8100 965963 -8100 59,357 1.28 29.67

27/07/2021 4000 447800 0 0.00 4000 - 0.90 14.41

28/07/2021 0 0.00 4000 476408 -4000 28,608 0.63 14.63

Hima

nshu

27/07/2021 56933 5689301 56933 6372149 0 682,849 25.70 64.60

28/07/2021 7200 867251 7200 872790 0 5,539 2.28 18.92

Avan

iben

20/07/2021 199 16577 199 17273 0 696 0.15 1.05

28/07/2021 5000 600433 5000 604035 0 3,602 1.58 61.55

Raj 20/07/2021 5000 414750 5000 429750 0 15,000 3.66 6.77

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 18 of 37

Nam

e

Date Gross

Buy

Vol

Gross

Buy

Value (₹)

Gross

Sell

Vol

Gross

Sell

Value (₹)

Net

Trad

e Vol

Profit (₹) % of

Client

Gross

Trade

d Qty

to

Marke

t

% of Traded

Value by the

client to the

Gross Traded

Value of the

Client across

scrips

26/07/2021 1000 85959 1000 90600 0 4,641 2.40 1.78

27/07/2021 3225 361036 0 0.00 3225 - 0.73 2.91

28/07/2021 11871 1433968 15096 1816003 -3225 20,998 4.26 36.37

8,21,290

25. The investigation reveals that Noticee nos. 4, 5 and 6 are the family members of the

Noticee nos. 1 and 2 and all of them reside at the same address where search &

seizure proceedings were conducted. Further, it is revealed from the investigation

that the mobile nos. and email ids of Noticee nos. 1 and 2 have been provided in

the KYC details in respect of trading accounts of Noticee nos. 4, 5 and 6, details of

which are as under:

Table no. 8

Sr.

No

.

Name of the

account holder

Mobile

no./Noticee to

which it belongs

Email id/ Noticee to which it belongs

1. Mahendrabhai

(Noticee no. 4)

9XXX20XX24/No

ticee no. 2

patelmahendrabhaiXX@gmail.com/Noti

cee no. 2

2. Kokilaben

(Noticee no. 5)

9XXX20XX24/No ticee no. 2

patelmahendrabhaiXX@gmail.com/Noti

cee no. 2

3. Avaniben

(Noticee no. 6)

9XXX20XX24/No ticee no. 2

patelhimanshuXXX@gmail.com/Noticee

no.1

Mobile no. and email ids have been masked to maintain privacy

26. The materials collected during investigation also show that the trading accounts

of Noticee nos. 4, 5 and 6 were being managed and operated by Noticee nos. 1 and

2, and the confirmation with respect to execution of trades in those trading

accounts have also been received on the mobile nos. and email ids belonging to

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 19 of 37

the Noticee nos. 1 and 2 and these facts have been admitted by Noticee no.1 in his

statement recorded on oath before the Investigating Authority of SEBI on

December 02, 2021.

27. Insofar as the Noticee no. 3 is concerned, it is noticed from the Whatsapp Chat that

was exchanged between Noticee nos. 1 and 2 on July 19, 2021 (as retrieved from

their seized mobiles) that he (Noticee no. 3) used to receive the information about

the impending recommendation of stocks proposed to be made on the said

Telegram Channel from the Noticee no. 1. In this regard, the extract of the said

Whatsapp chat is reproduced hereunder:

[2021/07/19 13:10] Jaydev: Koi share bhai

[2021/07/19 14:01] Himanshu: TOTAL TRANSPORT BHEGA KARO

[2021/07/19 14:01] Himanshu: Jackpot ma

[2021/07/19 14:01] Himanshu: 58-59

[2021/07/19 13:10] Jaydev: kk

28. Subsequent to the above WhatsApp conversation, it is observed that he (Noticee

no. 3) has adopted and followed trading pattern similar to the trading pattern

followed by Noticee no. 1 in the scrip of Total Transport. The relevant details along

with the timings of the trades executed by the Noticee no. 3 in the scrip of Total

Transport are mentioned in the following table:

Table no. 9

Date Trade details Recommend

ation Time Buy Qty. Buy Limit

Price

Buy Start

Time

Buy End

Time

Sell Qty. Sell Limit

Price

Sell Start

Time

Sell End

Time

19/07/20

21

35360 58.35 - 65.35 13:41:04 15:29:50 28165 56.50 - 65.85 9:18:15 15:26:19 21:05:00

20/07/20

21

- - - - 27600 68.05 - 70.50 9:15:29 9:19:39 08:07:56

29. It is noted from the afore cited extract of Whatsapp Chat that the information

about the impending recommendation was conveyed to Noticee no. 3 on July 19,

2021 at 14:01. On the said day, Noticee no. 3 purchased a total of 35,360 shares, and

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 20 of 37

sold a total of 28,165 shares of Total Transport. However, almost 98% of such

purchased quantity amounting to 34,898 shares were purchased by Noticee no. 3

only after 14:01 pm, i.e., after getting the information from the Whatsapp Chat.

Further, out of 28, 165 shares sold on the said day, only 7,760 shares were sold

after the time of receipt of aforesaid information, consequently, the net buying

position in the scrip after receipt of information remained as 27,138 shares, which

he disposed of subsequently as discussed in the next para.

30. The recommendation to purchase the shares of Total Transport on the Telegram

Channel was made by Noticee no. 1 on July 19, 2021 at 21:05:00 and also at 08:07:56

on July 20, 2021. On the very next day, Noticee no. 3 successfully offloaded as much

as 27,600 shares of Total Transport in merely 4 minutes of market opening

(09:15:29 to 09:19:39), consequently netting a profit of INR 2.49 Lakh (approx.).

31. The aforesaid events which got unfolded between Noticee nos. 1 and 3 are depicted

in the following pictorial representation for better explanation:

32. It is to be noted here that the aforesaid pattern of exchange of information between

Noticee nos. 1 and 3 and the consequent profitable trades executed by Noticee no. 3

have been followed while trading in other scrips as well, like the ones indicated

in the following table:

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 21 of 37

Table no. 10

Sr.

No.

Name of

the scrip

Timing of

sharing of

information on

Whatsapp

between

Noticee No.1

and 3.

Timing of making

recommendation on

Telegram Channel

Timing of

selling

shares by

Noticee no.

3

Profit made

(in INR)

1. Metro

Global

Limited

July 27 at 14:17 (i) July 27 at 20:56:53

(ii) July 28, 2021 at

05:15:51

July 28

09:06:55 to

09:15:38

87,965.50

2. Alkali

Metals Ltd.

July 15 at 14:28 (i) July 15 at 21:47:00

(ii) July 16, 2021 at

08:55

July 16

09:07:55 to

09:17:28

18,412.90

33. As highlighted in the preceding paragraphs through illustrations, based on the

cogent material collected during the investigation including the confessional

statements recorded from the concerned persons, the trade details of the Noticees

as obtained from the trade data of the Exchanges, various information including

the WhatsApp chats as retrieved from the mobile phones etc., the following

compelling observations can be easily made:

I. A social media Channel named as “bullrun2017” was started in Telegram

and the Administrators of the said Telegram Channel at present are Noticee

nos. 1, 2 and 3

II. The said Telegram Channel was promoted amongst general public through

other Social Media Channels like Facebook, Instagram etc. The subscriber

base has always been growing since July 16, 2021 and as has been revealed

during investigation, the strength of its subscribers has risen from 35016 to

51980 till December 14, 2021.

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III. Noticee nos. 1, 2 and 3 were making recommendation in the said Telegram

Channel inducing investor to trade in various scrips following their

recommendations and the recommendatory messages so being circulated

in the said Telegram Channel projected high returns in short time by

trading in such scrips.

IV. Noticee nos. 1, 2 and 3 who are running the said social media account in the

Telegram channel have made a patently false claim of having a team of 4

experienced Research Analysts who are running the said Telegram

Channel whereas in reality, the stock specific recommendations were being

made by a person (Noticee no.1) who held an educational qualification of

Masters in Tourism Management and had some experience of working in

a Hotel and did not possess any qualification whatsoever related to the

securities market. Further, they have also made a false declaration that they

are in the process of seeking registration with SEBI as a Research Analysts.

V. The modus operandi typically being followed by the Noticees, particularly

the Noticee no. 1 to 3 was that they used to first buy shares of selected scrips

in their trading accounts (as well as trading accounts of family members of

Noticee nos. 1 and 2) and thereafter they used to circulate favorable

messages about those scrips through the Telegram Channel amongst the

thousands of subscribers enticing and inducing to purchase those shares

and afterwards the Noticees are seen to have sold their pre-acquired shares

of those specific scrips (about which they have circulated their

recommendations to the subscribers) immediately or in next few days

thereby pocketing large amounts of profits for themselves

VI. It is also noted from the texts of the messages being circulated by the

Noticees that the recommendations about the specific scrips were being

made by the Noticees in a very ingenious manner so as to create a ‘Fear of

Missing Out’ amongst the subscribers. For instance, the same is evident

from the following recommendation that was circulated to allure and

entice for buying the scrip of Metro Global on July 20, 2021:

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 23 of 37

VII. On July 20, 2021, the recommendation to buy shares of Metro Global at a

price of INR 85-86 was made with a strategy of BTST, i.e., “Buy Today-Sell

Tomorrow”. The said recommendation made at 03:22 pm also projected a

target price of above INR 95. It is observed that immediately thereafter,

within a span of one minute, the prevailing market price of the shares of

Metro Global at that point of time was intimated (in another message

circulated on the Telegram Channel) to be INR 88, followed by a symbolic

image of fire in the same message to indicate how the interest in the scrip

is heating up in the market. After a gap of 03 minutes, the market price was

disseminated to be at INR 90 and to emphasis on the prospect of a sky

rocketing growth, symbolic images of jets were used in the said message.

Finally, at 03:30 pm, the message about the scrip price hitting the buyer cap

(upper cap or a situation with a scrip having only buyers) was also

posted/circulated in the Channel followed by representative symbols

money bags in the same message prima facie to create a hype amongst the

investors/subscribers that those who have bought the said scrip will stand

to earn lots of money.

34. In the aforesaid context, at the time when the Noticees were actively circulating a

series of enticing messages about the scrip of Metro Global in their Telegram

Channel provoking and inducing subscribers to buy the shares of the said

company which is likely to follow a rising trail, else they will miss the opportunity

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 24 of 37

of making money out the said scrip, it is observed from the trades data of the

Noticees that Noticee nos. 2 and 6 have purchased the shares of Metro Global, just

few seconds before the afore cited enticing messages and recommendations which

were circulated in the said Telegram Channel. The investigation has revealed that

Noticee no. 2 had purchased 5000 shares at INR 83 at 15:20:50, whereas, Noticee no.

6 had purchased 199 shares at 15:21:14 at price range of INR 82.20-86.50, i.e., just

a few seconds before the Noticees commenced their stock recommendations about

Metro Global at 15:22:00 in the said Channel, which was seen by more than 20,000

persons (as signified by the symbol of ‘eye’ at the bottom of the message). It is also

seen that immediately thereafter Noticee no. 2 was able to sell all 5000 shares at

15:22:21 at a price range of 85.45-85.95 while Noticee no. 6 has successfully sold her

199 shares at 15:23:03 at a price range of 86.50-87.95 and earned a profit.

35. It has been noticed during the investigation that by consistently following the

aforesaid pattern of first buying shares of the specific scrips and then selling those

shares subsequently in the wake of increased demand and price rise of those

shares, preponderantly caused prima facie by the exuberance triggered by

circulation of recommendations and inducing messages as seen above in the case

of the scrip of Metro Global, the Noticees herein have been successful in raking in

large amount of profits in several scrips, details of which are mentioned herein

below:

Table no. 11

Sr.

No

Trading Accounts Profit

(in ₹ )

Accounts used by

1 Himanshu Mahendrabhai Patel (BEHPP8092K) 1,66,65,883

Himanshu and

Raj Mahendrabhai

Patel

2 Raj Mahendrabhai Patel (DDNPP8715E) 50,02,834

3 Avaniben Kirankumar Patel (CQIPP0707R) 26,85,640

4 Kokilaben Mahendrabhai Patel (DAUPP2977L) 9,72,328

5 Mahendrabhai Bechardas Patel (ABNPP4581B) 7,71,010

Sub-Total (in ₹ ) 2,60,97,695

6 Jaydev Zala(ABTPZ5894K) 23,32,253 Jaydev Zala

Grand Total (in ₹ ) 2,84,29,948

36. Based on the aforesaid factual findings, the depositions made by the concerned

entities before the Investigating Authority wherein they have confessed to their

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 25 of 37

involvement in the aforesaid manipulative acts committed through the medium

of Telegram Channel and also based on the records/information retrieved from

their mobile phones, it leaves no space for any doubt now that the Noticees have

ostensibly and knowingly devised an imaginative scheme for defrauding

innocent investors by engaging in such deceitful acts to induce thousands of

gullible subscribers to their Telegram Channel and in this process to induce the

other general investors as well, to deal in securities purely based upon misleading,

specious and unsolicited stock tips about specific scrips recommended by the

Noticees through their social media account in Telegram Channel, and such tips &

recommendations were devoid of any fundamental analysis or supporting

information and were purely speculative messages without any basis. The above

stated acts of the Noticees of trading in securities by devising a scheme where

under, after taking a buy position in certain selected scrips and then enticing other

to take similar buy positions so as to cause rise in price and volume in those

selected scrips, the Noticees have successfully off-loaded the shares so acquired by

them earlier, at inflated/manipulated prices to book substantial gains for

themselves. Such a scheme appears to have been implemented by the Noticees by

misusing their privileged position as Administrators of the said Social Media

Channel of Telegram through which they have been issuing stock specific

speculative tips/recommendations without any identifiable rationale or backing

of fundamentals for those scrips and with the sole malicious motive of extracting

profits by selling shares of such companies, which were acquired shortly before

sending such false recommendations and base-less stock tips. Commission of

such deceitful acts by the Noticees by engaging themselves in a scheme as

discussed at length above, with a dubious intent to make money at the cost of the

interest of innocent investors in the securities markets are prima facie found to be

in glaring violations of provisions of Securities and Exchange Board of India Act,

1992 (hereinafter referred to as “SEBI Act, 1992”) and the SEBI (Prohibition of

Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations,

2003 framed thereunder (hereinafter referred to as “PFUTP Regulations”). By

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 26 of 37

resorting to such a scheme as narrated above in detail, the Noticees have not only

indulged in unfair trade practices to earn illicit profit from transactions in shares

by manipulating the market but have also perpetrated frauds and deceit within

the ambit of PFUTP Regulations as the recommendations are alleged to have

containing elements potential to induce investors of the securities market. It is

observed that in this entire scheme of deceit, manipulation and fraud as conceived

by the Noticees, especially the Noticees nos. 1, 2 and 3 who are the Administrators

of the said Telegram Channel and the Noticee nos. 4, 5 and 6 being the family

members of Noticee nos. 1 and 2, have aided abetted through their willful

permission by facilitating the use of their trading accounts for execution of trades

in the securities market and thereby rendering themselves equally liable for the

collusive acts on their parts, which are seen as detrimental to the integrity and

interest of the investors of the securities market. Thus, all the Noticees herein, by

their acts of influencing through social media channel to buy shares of certain

scrips have been successful in generating artificial demands in the market having

impact on the price and volume of those scrips.

37. In addition to the above, sufficient evidence adduced in form of deposition made

by the Noticee no. 3 and his trade data as collected in the course of investigation

make it glaringly clear the prima faice complicity of Noticee no. 3 in the whole

scheme, wherein he was also one of the Adminsitraotrs of the said Telegram

Channel and has also derived personal benefit by indulging in trades in those

scrips, recemmendations of which were made through the said Telegram Channel

and the information was already received by him through Whatspp. Under the

circumstances, the investigation has come to a clear finding that Noticee nos. 1, 2

and 3 have indulged in fraudulent and unfair trade practices in the securities

market and have thus acted in violation of Section 12 A (a), (b), (c) of the SEBI Act,

1992 read with Regulation 3 (a), (b), (c), (d), 4 (1), 4 (2) (a), (d), (e), (k), (o) and (r)

of the PFUTP Regulations.

38. As regard to the acts of the Noticee nos. 4, 5 and 6 (who are the family members of

Noticee nos. 1 and 2), I find from the facts of the matter that these three Noticees

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 27 of 37

have knowingly vested the operation of their trading accounts in the hands of

Noticee nos. 1 and 2, who in turn, by resorting to the deceitful scheme as discussed

above, have utilized those accounts for indulging in fraudulent and unfair trade

practices in the scrips of various companies and thereby aided and abetted Noticee

nos. 1, 2 and 3 in carrying out their nefarious acts of deceit, fraud and

manipulation while dealing in the securities market. It has been stated above with

detail that the nefarious and deceitful acts have led to successful generation of

profits arising out of such trades executed in the accounts of Noticee nos. 4 to 6

showing that benefits of such manipulative scheme have accrued to the accounts

of the Noticee nos. 4, 5 and 6 as well. Under the circumstances, it leaves no

ambiguity in my mind that the Noticee nos. 4, 5 and 6 have also prima facie violated

Regulation 3 (a), (b), (c), (d) and 4 (1) of PFUTP Regulations.

39. I observe that in view of my aforesaid prima facie observations about the

misconduct, fraudulent acts and unfair trades executed by the Noticees, another

inevitable observation that deserve to follow, is that the profits/gains so made by

the Noticees by indulging in the aforesaid scheme of deceit, fraud and

manipulation, have to be prima facie held as unlawful/wrongful gains, that would

not have accrued to the Noticees, had the trades were not executed by them under

the said scheme/artifice devised and deployed by them as unearthed during the

investigation. To reiterate at this point, from the details of profits generated by the

Noticees by trading in certain shares as summarised earlier in this order at para-

no. 35, it seems that the Noticees have been successful in making unlawful gains

of Crore of rupees by merely making baseless speculative messages & stock

tips/recommendation to their Telegram Channel, obviously without disclosing

the ill intent behind such messages. In the process, it also observed that these

Noticees have made profit by taking advantage of the movement of price and

volume in scrips whose recommendation was made in their Channel. It is evident

that these Noticees have by taking a certain position in the scrip made

recommendation in the said Channel giving cause for others to act on the

recommendation without even realising that the persons (Administrators) giving

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Interim Order in the matter of Stock Recommendations using Social Media channel (Telegram) Page 28 of 37

such stock tips & messages are themselves taking contrary position in the same

scrips immediately after issuing the messages & recommendations pertaining to

those scrips which eventually led to unlawful enrichment of the Noticees.

40. It is a common knowledge that the market price of any share moves in tandem

with the market demand for the said scrip and at any given point of time the

actual market price of the scrip is the outcome of the demand and supply for such

scrip in the market. However, sometimes some persons/entities with dubious

motive fabricate schemes, through which they act and resort to fraudulent &

unfair trade practices which could be dangerous in distorting the price discovery

mechanism of the securities market. As a result of such fraudulent and

manipulative trades, not only such persons succeed in manipulating the price &

volumes of trades in those scrips but also unjustly enrich themselves at the cost of

other investors. I note that the foremost objective of the SEBI Act, 1992 is the

protection of the interests of investors. In this context, I strongly view that the

fraudulent and unfair trade practices as have been exhibited by the Noticees in this

case are prima facie in serious violations of provisions governing the securities

market as it directly affects the interest of small investors who do not have the

adequate wherewithal or knowledge base to ascertain the actual reasons of

price/volume movements. In the present case, I can clearly observe from their

trading in the Metro Global that by sending consecutive speculative & enticing

messages to the in the Telegram Channel, near to market closure timings therein

strongly predicting price rise of the said scrip, contains elements of inducing the

gullible investors and the contents are likely to put investors under a strong

inducement to trade based on such strong recommendation made by the Noticees.

The Noticees have chosen an opaque platform of Telegram to run their scheme of

fraud, deceit and unfair trade thereby causing manipulation in the price &

volumes of various scrips as well as undue price advantage to them, which

warranted a search and seizure operation to be conducted by SEBI to reach the

roots of such manipulation and to identify & expose the said scheme along-with

its perpetrators and also to bring on record all relevant evidence including the

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devices through which these entities were operating the scheme on the social

media platform of Telegram.

41. It is worth mentioning here that with technology growing at a fast pace, various

modes of Social Media Channels with innovative features have become an

inevitable part of everyone’s life, and as the history would suggest, any major

technological innovation brings with it the hazards of its potential mis-utilisation

by offenders who use it for performing illicit activities. As the Regulator of the

securities market, SEBI in the past has taken various steps so as to protect the

interest of the investors from such nefarious activities that are noticed using Short

Messages Services (SMS). It is noted that earlier, certain entities used to

manipulate the stock prices by sending bulk messages to large no. of people.

After noticing such a malpractice, SEBI swung into action and in order to protect

the innocent investors from such manipulative schemes, SEBI collaborated with

the Telecom Regulator viz., Telecom Regulatory Authority of India (TRAI). As a

result, TRAI vide its notification dated August 10, 2017 has issued directions to

its regulated entities to curb circulation of bulk SMS from unregistered entities

and has advised them that certain keywords as prescribed by it

(buy/sell/hold/Stop loss etc.) can be used based on which such SMS can be

blocked from circulating thereby preventing the gullible investors from falling

prey to such ill-motivated stock tips/recommendations.

42. I observe that despite taking all possible steps by SEBI like the one stated above,

the miscreants always try to create a bypass to the Regulatory fence to implement

their malicious schemes to earn unlawful gains. Like in the present case, the

application of Telegram which is essentially an application based Chat platform

has been used by the Noticees herein to implement the same strategy as was being

used by sending Bulk SMS. As part of its many novel features, Telegram allows

creation of public channels wherein large number of subscribers can be added to

be part of it, without disclosing the identity of the persons behind such channel.

Such a Channel essentially acts as a message dissemination forum where the

Administrators only are allowed to disseminate messages, the content of which

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is solely decided by them. The subscribers, on the other hand, can only

read/view such content and such subscribers do not have any option to send

messages or respond to the messages sent by the Administrators.

43. As demonstrated in the present order, this feature of Telegram has been

successfully used for illicit activities like manipulating the stock prices by

repeatedly sending unfounded stock recommendations for the personal yet

unlawful benefit of the Administrators of such Channel. The tips circulated

through the Channel create an inducing impact which are then followed by the

subscribers and ironically, such stock tips may also prove to be true, if large

number of recipients of such tips believe it and collectively act on it. Slowly and

gradually, after seeing the price of the said thinly traded scrip actually rising,

more and more subscribers start believing in the tips and start acting on it, which

further strengthens the belief of such tips being genuine, as large number of

individuals end up acting on such tips and by their collective buying actions,

convert the deceitful, specious and baseless tips to realty.

44. Consequently, when large number of investors start following and acting on the

tips issued to them on a social media platform with respect to the scrip of a small

cap company or thinly traded company, the price and volume of the said scrip

are bound to rise which again in turn would reinforce the belief of such investors

in the tips & recommendations received by them from the said social media

channel leading to more & more investors/subscribers of such channel getting

trapped in the mirage crafted by the Noticees. Such collective belief by the large

base of subscribers of the channel in the stock recommendations given by the

Noticees would lead to a bull run in the said scrips and propel the scrip

price/volume upwards, ultimately giving a golden opportunity to the Noticees to

make unlawful profits by selling their shares in the same scrip.

Nevertheless, SEBI being entrusted with the mandate of protecting the interest

of the investors cannot be a mute spectator irrespective of the technology used

by the delinquents and such delinquents need to be kept out of the walls of the

securities market.

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45. Keeping in view the foregoing discussions and the unravelling of events and

crucial evidence by the investigation conducted by SEBI, in my view a strong case

has been made out against the Noticees warranting invocation of the powers

conferred upon me under the provisions of the SEBI Act, 1992 to pass appropriate

directions including directions for impounding of such alleged unlawful gains

made by the Noticees by their fraudulent & unfair acts for the following reasons:

a) Based on the aforesaid findings and discussion, a strong prima facie case has

been built up against the Noticees which has exposed the nefarious scheme

deployed meticulously by them through which large sums of unlawful

profits have been generated by them, which otherwise would not have arisen,

had the trades were not executed under the scheme devised by them;

b) 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;

c) Even for a Regulator having all investigative tools at its disposal, it becomes

difficult to reach to the mastermind of such a scheme being deployed through

social media platforms, where encrypted messages are exchanged, without

resorting to search and seizure action which was the only way to unearth the

facts & evidence and to uncover the perpetrators of the said scheme along

with mobile phones used by them to run such scheme deceitfully to their

advantage;

d) As stated in the beginning, the number of subscribers/investors in the

Telegram Channel being run by the Noticees has been continuously growing

and undisputedly, more the number of investors/subscribers to such social

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media channel, higher the percentage of profits that would likely to accrue to

the persons indulged in such fraudulent and unfair activities;

e) Given the aforesaid contraventions, misdemeanors and fraudulent acts

alleged to have been committed by the Noticees to corner large sums of

unlawful gains, there is an urgent necessity for SEBI to take necessary

remedial measures under the provisions of SEBI Act, 1992, to ensure that the

Noticees are dispossessed of the unlawful profits earned by them by

deploying the above discussed fraudulent and unfair scheme else, there is a

strong possibility that the Noticees may attempt to divert the funds so earned

out of their acts of deceit/ fraud and unfair acts, so as to go out of the reach

of the law enforcement process. The powers vested under Section 11 (4) that

enables that impounding of the proceeds of securities in respect of such

transactions, either pending investigation or completion thereof ought to be

invoked in the present case, so that no irreparable loss is caused due to

possible diversion of such ill-gotten profits;

46. In view of the foregoing compelling facts and circumstances and after a careful

consideration of the totality of the facts surrounding the case which reveals such

blatant acts of fraud & unfair acts have been committed by the Noticees to earn

money in an unlawful manner, in my view the balance of convenience strongly

lies in favour of invocation of the aforesaid statutory powers of SEBI to pass

interim directions to the Noticees.

47. The facts of the case narrated in the preceding paragraphs place before me a

critical situation of urgency which calls for early invocation of power provided

under Section 11 of the SEBI Act, 1992 in order to insulate the securities market

from unfair and fraudulent acts like the ones perpetrated by the Noticees which

are antagonistic and detrimental to the orderly development of the securities

market. The startling revelations that came out of SEBI’s investigation which have

been already narrated in the preceding paragraphs, show how entities who do not

even possess basic minimum qualifications related to securities market have

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blatantly disclosed in the social media channel that their team comprises 4 persons

having combined experience of 40 years in the securities market and are in the

process of seeking registration with the Regulator are seen with issuing stock

recommendations. Considering the length of experiences in securities markets as

claimed by the Noticees in their channel, it is but natural for the subscribers to

strongly believe in and rely upon those speculative, and baseless stock tips &

recommendations issued by the Noticees for taking trading positions in those

scrips without knowing the true malafide intent and nefarious design crafted by

the Noticees to make quick unlawful profits from the securities market. Such

dubious acts of the Noticees are quite alarming hence, it becomes imperative to act

immediately and restrain them from perpetuating such fraudulent activities in the

securities market through any other scheme and in any other manner thereby

further threatening the integrity of the securities market.

48. I observe that the Hon’ble Courts of the country have time and again stressed

upon about the need to curb the manipulative and unfair trade practices in

securities market and in this respect, the Hon’ble Supreme Court of India in the

matter of N. Narayanan Vs. SEBI [(2013) 12 SCC 152] has observed that “if market

abuse is not properly curbed, then it would result in defeating the very object and purpose

of SEBI Act......Prevention of market abuse and preservation of market integrity is the

hallmark of Securities Law…Market manipulation is normally regarded as the

“unwarranted” interference in the operation of ordinary market forces of supply and

demand and thus undermines the “integrity” and efficiency of the market”. The Hon’ble

Supreme Court have also observed that “Section 12A read with Regulations 3 and 4

of the Regulations 2003 essentially intended to preserve ‘market integrity’ and to prevent

‘Market abuse’.” In yet another judgment passed in the matter of Kishore Ajmera

Vs. SEBI [AIR 2016 SC 1079], the Hon’ble Supreme Court has further held that:

“Investors' confidence in the Capital/Securities Market is a reflection of the effectiveness

of the regulatory mechanism in force. All such measures are intended to pre-empt

manipulative trading and check all kinds of impermissible conduct in order to boost the

investors' confidence in the Capital market. The primary purpose of the statutory

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enactments is to provide an environment conducive to increased participation and

investment in the securities market which is vital to the growth and development of the

economy.”

49. Insofar as the impounding of unlawful gains is concerned, it has already been

established by the investigation that the Noticee nos. 1, 2 and 3 were the

Administrators of the said Telegram Channel, out of which Noticee nos. 1 and 2

are brothers. Both of the said Noticees were involved in transmission of stock tips

and recommendations to the Channel as well as execution of trades in the trading

accounts of the Noticee nos. 4, 5 and 6, who are their family members. In the said

process, which apparently seems to have been initiated by Noticee nos. 1 and 2, the

other Noticees, i.e., Noticee nos. 4, 5, and 6, who are the family members of Noticee

nos. 1 and 2 and, Noticee no. 3 who is the friend of Noticee no. 2; are unequivocally

seen to have joined the illicit scheme devised by Noticee nos. 1 and 2 for their own

gains. Noticee nos. 4, 5 and 6 have provided the commands and control of their

respective trading accounts to Noticee nos. 1 and 2. Noticee no. 3, apart from being

one of the Administrator of the said Telegram Channel, is also seen to have got

the information about the impending recommendations to be made on the

Telegram Channel before -hand through Whatsapp chats from Noticee no. 1. Thus,

the deployment of the scheme and making of unlawful profits through the said

scheme have been jointly and severally undertaken by Noticee nos. 1, 2,3, 4, 5 and

6. Therefore, in the fitness of things, all the Noticee viz., Noticee nos. 1, 2, 3, 4, 5 and

6 are liable to be held jointly and severally responsible for actively colluding with

each other in devising and implementing the scheme for the unlawful profits

made through the said scheme.

50. Accordingly, as an urgent interim measure to prevent the Noticees from

continuing with such fraudulent acts, it is now warranted that an order under

Section 11 (1) read with Section 11 (4) (d) and 11B (1) be passed against the

Noticees, restraining the Noticees from being associated with the securities market

as well for impounding the unlawful profits so far made by them through their

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fraudulent acts in contravention of various provisions of SEBI Act, 1992 and

PFUTP Regulations, as pointed out above in the order.

Order

51. In view of the above, I, in exercise of the powers conferred upon me under

Sections 11, 11(4) and 11B (1) read with Section 19 of the SEBI Act, 1992 hereby

issue by way of this interim ex-parte order, the following directions, which shall be

in force until further orders:-

a) All the Noticees viz: Noticee nos. 1 to 6 are restrained from buying, selling or

dealing in securities, either directly or indirectly, in any manner whatsoever

until further orders.

b) If the Noticees have any open position in any exchange traded derivative

contracts, as on the date of the order, they can close out/square off such open

positions within 3 months from the date of order or at the expiry of such

contracts, whichever is earlier. The Noticees are permitted to settle the pay-in

and pay-out obligations in respect of transactions, if any, which have taken

place before the close of trading on the date of this order.

c) The bank accounts of the Noticees are hereby impounded jointly and severally

for an amount of INR 2,84,29,948 (alleged unlawful gains)

d) Further, the Noticees are directed to open an escrow account with a

Nationalized/Scheduled Commercial bank jointly and severally, and deposit

within 15 days from the date of service of this order, the impounded amount

as mentioned which has been prima facie found to be the proceeds of wrongful

profits/gains allegedly generated from the unfair trade practices activity as

noted above in this order. The said Escrow account/s shall be interest-

bearing escrow account and shall create a lien in favour of SEBI. Further, the

monies kept therein shall not be released without permission from SEBI.

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e) The banks where the Noticees are holding bank accounts, jointly or severally,

are directed to ensure that till further directions, except for compliance of

directions as stated above, no debits shall be made in the bank accounts of

the Noticees without the permission of SEBI. The banks are directed to ensure

that all the above directions are strictly enforced. Only on production of proof

of deposit of entire amount of INR 2,84,29,948 (either jointly or severally) in

the escrow account/s, SEBI shall communicate to the banks to defreeze the

bank accounts.

f) The Noticees are directed not to dispose of or alienate any assets, whether

movable or immovable, or any interest or investment or charge on any of

such assets held in their name, individually or jointly, including money lying

in bank accounts except with the prior permission of SEBI until the

impounded amount is deposited in the escrow/s account.

g) The Noticees are directed to provide a full inventory of all assets held in their

name, individually or jointly, whether movable or immovable, or any interest

or investment or charge on any of such assets, including details of all bank

accounts, demat accounts and mutual fund investments, immediately but not

later than 5 working days from the date of receipt of this order.

52. The foregoing observations contained in this Order, are made on the basis of the

material available on record. The prima facie findings as recorded in this order

will be treated as allegations against the respective Noticees and the present order

is to be also treated as an interim order cum show cause notice. The Noticees are

hereby called upon to show cause as to why suitable directions, including the

following, should not be issued/imposed against them under Sections 11(1),

11(4)(d) and 11B (1) of the SEBI Act, 1992:

a) Directing them to disgorge the amount equivalent to the alleged unlawful

profits made on account of the scheme, as described above; and

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b) Directing them to refrain from accessing the securities market and

prohibiting them from buying, selling or otherwise dealing in securities

for an appropriate period.

53. Further, the Noticees are called upon to show cause as to why appropriate penalty

under Section 11B (2) and 11(4A) read with Section 15HA of SEBI Act, 1992

should not be imposed on them for the alleged violations of SEBI Act, 1992 and

PFUTP Regulations, as the case may be.

54. This Order is without prejudice to the right of SEBI to take any other action that

may be initiated against the Noticees in accordance with law.

55. The Noticees may file their replies to SEBI within 45 days from the date of receipt

of this Order. They may also indicate in their replies whether they wish to avail

an opportunity of personal hearing in the matter.

56. This Order shall come into force with immediate effect and shall be in force until

further orders.

57. A copy of this order shall be served upon the Noticees, Stock Exchanges, Banks,

Registrar and Transfer Agents and Depositories for necessary action and

compliance with the above directions.

-Sd-

DATE: January 12, 2022 S. K. MOHANTY

PLACE: MUMBAI WHOLE TIME MEMBER

SECURITIES AND EXCHANGE BOARD OF INDIA