The Securities and Exchange Board of India (SEBI) has exposed a massive front-running scam involving the infamous stock market operator Ketan Parekh. Parekh, who was previously jailed and banned from the securities market for 14 years for the 2000 stock market scam, has once again been caught in illegal trading activities. SEBI’s investigation also uncovered the involvement of Singapore-based trader Rohit Salgaocar.
SEBI’s Interim Order
On January 2, SEBI passed an interim order detailing the scam. The investigation, which spanned over 20 locations, led to the impounding of ₹65.77 crore in illegal profits. The market regulator named 22 entities in its order, including Parekh and Salgaocar, as the primary culprits.
The order, issued by SEBI’s Whole-Time Member Kamlesh Varshney, stated, “Ketan Parekh and Rohit Salgaocar planned and executed a scheme to make illegal profits by front-running trades of a major fund house.” It further mentioned that another key player, Ashok Kumar Poddar, admitted to facilitating the fraudulent activities.
As a result, SEBI has barred Ketan Parekh, Rohit Salgaocar, and Ashok Kumar Poddar from buying, selling, or dealing in securities. They are also prohibited from associating with any SEBI-registered intermediaries.
How the Scam Worked
The scam revolved around accessing and using non-public information (NPI) about the trades of a major US fund house, referred to in the SEBI order as “Big Client.” Salgaocar, who had close ties with the fund house, received trade details before execution.
Salgaocar passed this sensitive information to Ketan Parekh. Parekh, known for his earlier manipulative trading network, used it to front-run trades and earn unlawful profits. The information was reportedly shared through WhatsApp chats and phone calls.
Parekh executed trades through a network of accounts controlled by six front-runners. These accounts, operated by associates, were used to buy or sell securities based on the NPI, generating huge profits. According to SEBI’s investigation, around 90% of the Big Client’s trades were fulfilled by Parekh alone.
Diagram and SEBI’s Findings
SEBI presented a diagram showing how information flowed from the Big Client’s traders to Salgaocar, then to Parekh, and finally to the six front-runners. The regulator highlighted the systematic execution of trades, proving the involvement of the accused.
SEBI also noted that Parekh had previously been barred from the market for 14 years, yet he continued to operate through his old network, primarily based in Kolkata.
Impact and Action
This scam has raised fresh concerns about the misuse of sensitive trading information in India’s capital markets. SEBI’s strict action, including freezing assets worth ₹65.77 crore, is a strong message to deter such practices.
Market experts have commended SEBI for unearthing the scam and taking prompt action. However, they emphasize the need for stricter surveillance to prevent recurring scams involving repeat offenders like Parekh.
A History of Scams
Ketan Parekh is no stranger to controversy. He was at the center of the infamous 2000 stock market scam, which involved manipulating share prices of small-cap companies known as K-10 stocks. Despite being debarred, his name continues to surface in financial frauds.
This case is a reminder for investors to be cautious about market manipulation. SEBI’s crackdown showcases its commitment to ensuring a fair and transparent market. For any doubts regarding investment schemes, investors can visit SEBI’s official website or use its app to verify the authenticity of financial products.
Moneyphobia advises all readers to stay informed and invest responsibly. Scams like these highlight the importance of researching thoroughly before making investment decisions.
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