Manipulation via Youtube: Sebi penalises Arshad Warsi, wife, 29 others

The Securities and Exchange Board of India (Sebi) on Thursday barred 31 entities, including actor Arshad Warsi, his wife Maria Goretti and promoters of Sadhna Broadcast from the securities market in a case related to uploading misleading videos on YouTube channels recommending investors to buy the company's shares.

The company's promoters who have been restrained from the securities market for their involvement are Shreya Gupta, Gaurav Gupta, Saurabh Gupta, Pooja Aggarwal and Varun Media. In addition, Sebi has impounded illegal gains to the tune of Rs 41.85 crore made by the entities after misleading videos were uploaded on YouTube channels.

Sebi noted that Arshad Warsi has made a profit of Rs 29.43 lakh and his wife has earned a profit of Rs 37.56 lakh.

The order came after 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.

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

Following this, the regulator conducted an examination during April-September 2022 and found a spurt in the price and volume of scrip of Sadhna 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". These YouTube videos peddled false and misleading news to recommend that investors should buy the Sadhna stock for extraordinary profits, Sebi said in its interim order.

Subsequent to the release of the misleading YouTube videos, there was an increase in the price and trading volume of the Sadhna scrip.

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 the Adani group. 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.

Sebi has classified these 31 entities into categories -- creator of YouTube channels (Manish Mishra), net sellers/ promoters and profit makers (NSs), Volume Creators (VCs) and information carriers (ICs).

Arshad Warsi and his wife come in the category of Volume Creators.

Sebi noted that these 31 entities collectively helped create trading volumes and interest in the scrip, spread false and misleading YouTube videos, and hence induced unsuspecting investors to buy the Sadhna scrip 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.

"I note that the elaborate modus operandi adopted by the Noticees (31 entities) including the egregious misuse of patently false and misleading YouTube videos, had led to 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," Sebi Whole Time Member Ananth Narayan G said in his 58-page order.

Accordingly, the regulator has barred these 31 entities "from buying, selling or dealing in securities either directly or indirectly, in any manner whatsoever until further orders".

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.

(With agency inputs)