š¤ SEBI v/s Arshad Warsi: Was the SEBI Wrong?
Arshad Warsiās involvement in a pump and dump scheme last month made many headlines. Turns out, he may be innocent. How? ReadOn!
Beneath the surface of every story lies a complex web of untold truths.
It is only when you scratch that surface, you can see the truths unfolding.
Recently, the Arshad Warsi āscamā was scratched to unravel the hidden truths and some lies.
What was the scam all about? And what are these hidden truths that have reopened the case?
ReadOn!
š„ Arshad Warsi Case in a Nutshell
A few weeks back, Arshad Warsi and his family were making the headlines for being involved in a stock manipulation scam.
SEBI had taken strict action against them; it even froze their bank accounts.
But now it turns out, they were not completely at fault.
Yup, the Securities Appellate Tribunal (which hears cases against orders passed by the SEBI) has said that there was no evidence that Warsi or any of his family members were involved in the fraud.Ā
It has overturned SEBIās orders.
So, what really happened? Where did SEBI go wrong?
šµļøāāļø The Arshad Warsi Case Explained
It all started when SEBI received complaints stating that the share price of Sadhna Broadcast Ltd. (SBL), a television broadcasting company, was being manipulated.
Now, stock manipulation is when some people spread rumours that a stockās price is going to rise or fall soon. These rumours cause investors to react in a positive or negative way, leading the price of a stock to rise or fall artificially.
For instance, if we told you that Mukesh Ambaniās children are fighting over how his company should be split, you would probably get scared for RILās future and dump stocks. This would cause the stocks to crash. And then, we could buy these stocks for cheaper!
Something similar happened with SBL.
Two YouTube channels, Moneywise and The Advisor, started spreading rumours that SBL was going to be acquired by the Adani Group, it had received a contract from an American network, and whatnot.
Yup, YouTube creators can get super creative.
They claimed the share price of SBL would go from Rs. 19 to Rs. 340!
Here, take a look at their thumbnail:
They even spent loads on Google Adsense to reach lakhs of people.
And, they were successful.
A lot of innocent investors got excited about the stock.
They bought SBL shares in huge numbers and voila, the prices rose.
This was the pump.
The manipulators, which included promoters of SBL, had already bought stock at super low prices.
And now that they had pumped up the prices, it was time to dump the stocks and make money.
Just take a look at the stark drop in prices after all these manipulators dumped shares all at once:
This was a major injustice to the innocent retail investors.
So, SEBI heroically stepped in to protect them.
It went to right this wrong.
But it may have gone a little too far.
Now, you may be wondering: how is Arshad Warsi linked to this whole pump-and-dump scheme?Ā
Well, there are two ways of this link:
He and his family bought and sold some shares during this fiasco. He and his wife reportedly made profits of Rs. 67 lakhs.
The SEBI found call records that connected Warsi with some of the other manipulators.
Now, SEBI missed one clue.Ā
The clue that points to their possible innocence (yes, we still cannot say whoās right or wrong).
You see, when all the other manipulators were in the sell mode, Arshad, his wife and his brother bought more shares.Ā
Yup, they sold their initial shares, made profits and bought more shares at a higher price.
And essentially, they had never cheated the public. The shares they had bought and sold were to other āvolume creatorsā.Ā
What are volume creators?
Volume creators create more trading volume for a share. They create a lot of trading activity around the share. This convinces people that the rise and fall of the share price is indeed natural, and not artificial.Ā
So, chances are theyāre completely innocent.
In fact, Warsi is claiming that they have suffered major losses after investing on the advice of a third party.
Who is speaking the truth? Are there more hidden layers to this event?
We donāt know.
All we can do is learn from this case study:
Donāt believe anyone who is promising you insane gains. If quick money was a thing, we would all be billionaires.
The SEBI should be more cautious while announcing punishments. It is the stock market manipulators that should be punished, not innocent people.
Financial literacy is super important. Itās scary that we are losing our hard-earned money to such scams.
And the most important one: always scratch the surface by asking āwhyā.
Always ask āwhyā.
Thatās a value we live by, at ReadOn.Ā
And that is exactly what helps us bring out such deeply researched stories from the world of business and finance.
The revolution is on!Ā
Until next timeā¦
ReadOn.
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Why????if you know this than How is Next...what?who?whom???has its own importance....