Arshad Warsi, wife Maria penalised for share pump-and-dump scheme on YouTube

New Delhi: Sebi on Thursday barred 45 entities, including actor Arshad Warsi, his wife Maria Goretti and others, from the securities market in cases related to manipulating the share prices of two companies through uploading misleading videos on YouTube channels.

The cases pertains to uploading misleading videos on YouTube channels and recommending investors to buy the shares of Sadhna Broadcast Ltd and Sharpline Broadcast Ltd.

Apart from the couple, some of the promoters of Sadhna Broadcast have been restrained from the securities market for their involvement.

In addition to market ban, the regulator has impounded illegal gains to the tune of Rs 54 crore made by the entities after misleading videos were uploaded on YouTube channels, according to two separate interim orders.

In the case of Sadhna Broadcast, Sebi noted that Arshad Warsi has made a profit of Rs 29.43 lakh and his wife has earned profit of Rs 37.56 lakh. Also, Iqbal Hussain Warsi has gained Rs 9.34 lakh. These three among others have been classified as volume creators by the capital markets regulator.

The two orders came after the Securities and Exchange Board of India (Sebi) received certain complaints wherein it was alleged that there was price manipulation and offloading of shares by certain entities in the scrip of television channel Sadhna Broadcast and New Delhi-based Sharpline Broadcast.

The complaints alleged that misleading YouTube videos with false content about the two companies were uploaded to lure investors.

Following this, the regulator conducted an examination during April-September 2022 and found that spurt in the price and volume of scrip of the two companies between April and mid-July 2022.

During the second half of July 2022, false and misleading videos about Sadhna were uploaded on two YouTube channels -- The Advisor and Moneywise.

Similar videos about Sharpline were also uploaded on two YouTube channels-- Midcap calls and Profit Yatra in the second half of May last year.

These YouTube videos peddled false and misleading news to recommend that investors should buy shares of Sadhna and Sharpline for extraordinary profits, Sebi said in its two separate interim orders.

Subsequent to the release of the misleading YouTube videos, there was an increase in the price and trading volume of the scrip of two firms. The volumes appear to have been contributed by a large number of retail investors likely influenced by the misleading YouTube videos.

During this period, certain promoter shareholders, key management personnel of Sadhna, and non-promoter shareholders offloaded a significant part of their holdings at inflated prices and booked profits.

One of the misleading videos on these YouTube channels was that Sadhna Broadcast Ltd is going to be taken over by Adani group and after the deal, the margins of the company will increase.

In addition, there were other videos like the company is moving from TV production to movie production and a big American corporation has entered into a contract for Rs 1,100 crore to produce four devotional movies where the money will be brought in by the American investor but the rights will remain with Sadhna and in one of the videos, apparently a pic of industrialist Gautam Adani can be seen.

Sebi has classified these entities into categories like -- creator of YouTube channels (Manish Mishra),  net sellers/ promoters and profit makers (NSs), volume creators (VCs) and information carriers (ICs).

Sebi noted, prima facie, these entities collectively helped create trading volumes and interest in the scrip, spread false and misleading YouTube videos, and hence induced investors to buy the companies scrips at elevated prices, thereby prima facie violating the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) rules.

Collectively, NSs and some of the VCs have booked extraordinary profits as a result of this scheme.

In the case of Sadhna, Sebi said that elaborate modus operandi adopted by the entities noticees including the egregious misuse of patently false and misleading YouTube videos, had led to a drastic increase in the number of small shareholders -- from 2,167 to 55,343 shareholders who ended up buying shares from the noticee net sellers and volume creators at inflated price, while small shareholders number shot up from 517 to 20,009 in the case of Sharpline.

Accordingly, the regulator has barred these 45 entities "from buying, selling or dealing in securities either directly or indirectly, in any manner whatsoever until further orders".  Some of these entities were involved in both cases.

Also, all the entities have been directed not to dispose of any assets, whether movable or immovable including money lying in bank accounts except with the prior permission of Sebi until the impounded amount is deposited in the escrow account.