SEBI Slaps ₹3.1 Crore Penalty Over Alleged Telegram-Based 'Pump And Dump' Scheme In Darshan Orna Shares

The Securities and Exchange Board of India (SEBI) on Friday imposed penalties totalling ₹3.10 crore on five entities after finding that they orchestrated a “pump-and-dump” scheme in the shares of Darshan Orna Limited (DOL) through coordinated trading and stock recommendations circulated on Telegram channels.

SEBI Adjudicating Officer Amit Kapoor observed:

“I note that in the instant case, it was not merely an insular, closed-loop matched trading scheme, but rather an "Information Asymmetry" or "Pump-and-Dump" operation leveraging the massive reach of social media platforms, involving distinct phases.”

SEBI found that Aakash Doshi, Kevin Kapadia, Dilip Doshi, Richi Dilip Doshi and Kruti Kevin Kapadia manipulated the price and volume of DOL shares through coordinated trading involving connected entities and stock recommendations circulated on Telegram.

The regulator found that Aakash Doshi traded using his own account as well as the accounts of his father and brother, while Kevin Kapadia operated the account of his wife, Kruti Kevin Kapadia.

According to SEBI, the trading activity coupled with Telegram messages induced investors to purchase DOL shares, causing the number of public shareholders to rise from 1,732 to 7,536 between the quarters ending December 2021 and March 2022. During this period, the share price rose from ₹77 on January 3, 2022 to ₹146.7 on March 4, 2022.

The noticees denied the allegations, including objecting to delay in issuance of the show cause notice. Rejecting this, SEBI held:

“I note that Noticees have failed to explain how the delay had prejudiced their interest, hence their contention with respect to delay is not tenable.”

On merits, the regulator observed:

“ I note that in the instant matter, direct evidence is not forthcoming in the present matter, however, the trading behaviour of the Noticees makes it clear that aforesaid non-genuine trades could not have been possible without prior meeting of minds.”

Relying on precedent, SEBI held:

“ In view of the above, I note that trades undertaken by the Noticees, inter alia 1,3,4 and 5 were done with a view to manipulate the price and volume of scrip of DOL, which was nothing but a fraud played by them, upon other gullible investors, who were not even aware of the nexus and the manipulative intent between the said Noticees.”

SEBI held that the scheme operated in three stages: accumulation of illiquid shares, artificial inflation through bullish Telegram recommendations, and offloading of shares to unsuspecting retail investors.

It further observed:

“I note that when a manipulative scheme is designed specifically to induce innocent third parties to buy securities at artificially inflated prices, the wrongful gain/loss averted is categorically not restricted to trades matched between group members.”

“Further, I note that even the loss-making trades and, gains made from coordinated efforts can also be fraudulent, if so established, as has been done in pre-paras.”, it added.

SEBI imposed penalties of ₹90 lakh on Aakash Doshi, ₹1.40 crore on Dilip Doshi, ₹60 lakh on Richi Dilip Doshi, and ₹20 lakh jointly and severally on Kevin Kapadia and Kruti Kevin Kapadia.